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Leading a Virtual Organization: Conclusions
Program Transcript
CRAIG MARSH, PHD: Right. So what I'm going to do in this
final section, is talk
about some of the effects, or impacts, of those changes that I've
described in the
case, so far, and then talk a bit about were I to have my time
again, what I would
have done differently. Because of course, nothing is a complete

success. And
there are some things I think that didn't go so well as I
originally intended, or had
different consequences. So I'll talk a little bit about those. And
then you can
reflect on them yourself, and what you would have done in my
situation.
So one of the things we did, as I mentioned, was we measured
our performance
in a number of different ways. And I had some key indicators on
my dashboard
that I was looking at to see that things were moving in the right
direction. So we
measured the engagement of our customers. And we measured
them through
something that you may be familiar with, a Net Promoter Score.
And that simply
means, when you ask them the question, would you promote us
as an
organization, and our product, outside to others, or not? The
difference between
those who say they would promote you, and those who wouldn't,
can be
expressed as a score.
And of course, by and large, a positive score means that more
people are
prepared to promote you than those who aren't. And our Net
Promoter Score
increased from a negative score, to a score of plus 33, over the
18 months that
this project was being implemented. So that was really, for me,
a critical measure
of our success, that things were moving in the right direction,
and one I was very

pleased with.
Now what may be called somewhat more input measures, I think
also moved in
the right direction. So one is productivity of the staff that I was
managing. Now
one measure of productivity was, how many service
interventions. Remember,
they were contracted staff. So how many service interventions
were they making
over an annual period, over a year, at the beginning of this
process, versus 18
months into this process? Now at the beginning of this process,
actually, in this
case, two years.
At the beginning of this process, they were making on average,
something like
1.2 service interventions per year. So it was a very dispersed,
very sparsely
organized, and actually relatively disconnected organization. By
the end of two
years, that number had gone up to 5.2. So we had a far more
engaged workforce
than we had at the start of the process. So that for me, was also
very satisfying,
and a very large increase, and a very great success, I think, in
that case.
And the third thing that I measured, was one that I'm sure
everyone will be
familiar with, which is length of service. Now length of service
is normally talked
about in employee terms. These were not employees. But I was
measuring how

© 2016 Laureate Education, Inc. 1
long they were staying with us, as an example of their loyalty,
and their
engagement with us as an organization.
So the length of service of these employees went up from, in the
region of 1 and
1/2 years on average, at the start of this process. And over two

years, that
increased dramatically. Now over two years, it increased to 2.7
years length of
service. When I left this organization, the end of last year, had
it increased to
over 4 years average length of service. So that was a dramatic
increase.
So those were three indicators that showed that on the whole,
things were
moving very much in the direction that I had intended What I
will now do is talk
about some of the things that perhaps went less well, or that I
would want to do
slightly differently, were I to go through the whole process
again. Because there
were elements that didn't work as well as I expected them.
So the first element was, I mentioned my idea of having a vision
or a galvanizing
idea as a really critical part of the way we engage with our
frontline service
professionals. That, I think, proved very difficult. I had the
idea. It was, I think,
quite clearly communicated at the outset. I worked hard with my
leadership
structure to make sure they bought into the idea.
We put it into our discussions. We talked a lot about how we
would implement it,
practically. Because having an idea is one thing. But actually
doing it is
something else. We had a lot of discussions when we first came
up with the idea.
And I think what happened, we didn't revisit it enough. It wasn't

really at the
forefront of everything that we did, in all of our
communications. It really didn't
operate as the galvanizing idea for all of our work, and all of
our interactions with
our service professionals.
So I think what I would have preferred to have done, is to spend
more time
thinking, not just about the idea itself and how we
communicated it, but how we
sustained that vision, or that idea, over a much longer period,
such that it
affected everything that we did. So that's the first thing I think
that I would have
reconsidered, if I had my time over again.
I think the second thing that I would have reconsidered over
that period, was the
training and development of my front line leaders. I already
mentioned to you that
I felt that was a really critical component of the leadership
challenge that I was
faced. But I think there were some elements where people didn't
quite get that
coaching idea that I've referred to already. So I think I would
have probably put
more time and resources, and perhaps more measures in place,
to make sure
that those coaching ideals in my frontline staff, which I really
believed in at the
time, and still firmly believe in, were really integral created,
and really translated
into the behavior of those front line leaders.

I had some examples, where I think people were still being a
little too directive,
and a little too authoritarian, at the front end of the
organization. And that's
something that I would have liked to have corrected sooner.
And the third thing is, I think touches on a really interesting
principle, as a leader,
about how you go about implementing and developing these

things. And really,
there are two slightly different aspects to it. So the first aspect
of this, is when
you're putting in place, particularly structures, almost by
definition, they're very
static, now particularly performance management structures or
key performance
indicators.
What I would prefer to have done, is rather than building what I
thought was an
effective, but nevertheless static structure, is to build in a
process of continuous
improvement of that performance management structure, and of
those KPIs.
Such that, we were effectively doing what, in research terms,
would be called AB
testing.
So we would try something. We would put it in place. We would
get the feedback
of our frontline staff. And then we would adjust and improve
those indicators
based on that feedback. So I didn't build in that process of
continuous
improvements and feedback, into the structures that I had
created.
And that meant that there were occasions when they became out
of date. And I
was seeing indicators that really were less useful, because of the
fact that the
organization had moved on. But the structure itself had stayed
the same.
And the other aspect of that third part, in terms of the

performance indicators, is
the involvement, to the extent possible, of the people who will
be affected by
them. And that is your frontline service professionals, and your
employees. And I
think the extent to which you can have those people build, work
with you, to build
create develop and manage those structures, the better they are
in actually doing
what you want them to do, which is to managing their
performance. So to
essentially own them, much more than if you simply impose
them on.
Now I did that to some extent, but I think I could have worked
harder to make
sure that my people and my customers were involved in the very
structures that I
was putting in place themselves. That was I think something
else that I learned
from, and is also, if you like, a theory in use, which I had at the
time. But I reflect
on probably I didn't work on as much as I should have done.
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Leading a Virtual Organization: Performance Management
Program Transcript
CRAIG MARSH, PHD: So the third thing that I'd like to share
with you is
performance management. Now as you'll appreciate on a large,
relatively large
structure of around 500 individuals who are all over the world,
one of my key
challenges was really knowing how well they were doing. Now I
did put in, as I
mentioned, a leadership structure.
So I was getting feedback from-- informal feedback and
qualitative feedback from
my leaders about how things were going generally. But that
really wasn't enough.

In order to provide a really excellent service across all of those
global areas,
what I really needed was something that allowed me quickly to
capture how
things were going in those contact areas, in those service
interventions. And to
be able to use those data for business decisions.
And by the way, I'll mention that there are a number of issues
with data driven or
metrics driven performance management systems, which you'll
probably
appreciate. I mean, one of the critical ones is unintended
consequences that
you'll motivate behavior, or you'll incentivize behavior in a way
which is quite
crude. And which way results actually, in people doing the
opposite things to
what you really want them to do. But they meet your metrics. So
I was very much
aware and I was somewhat skeptical about how effective
performance metrics
could be. So these were the sorts of things that I was thinking
through when
establishing this system that I really needed to know what was
happening.
So the first thing I did was to establish a system that would
operate for me at,
what I would call organizational level. Now, the organizational
level system was
essentially a dashboard. So I was able to collect an enormous
amount of data
from those service interventions of my front-line professionals.
And what I did
was to create a one page process with seven or eight of those

key metrics
summarized from right across the organization. That dashboard
was used by me
to keep up to date weekly on what was happening.
I developed a system which was very straightforward. A traffic
light system red,
yellow, and green. So that once indicators moved to a certain
level, I could see at
a glance whether something was working really well, moving in
the direction that
I needed. Whether it was something that really where there was
a problem, that
needed immediate attention. Or whether there was something
that looked like it
was, perhaps just trending in the wrong direction and was going
to need some
attention fairly soon. And what we did was establish a process
of executive
review of that.
So I was monitoring them weekly. But, three times a year we
had the entire
executive team in, where we would review those high level
dashboards in order
to see how the organization was progressing generally. And
more importantly, to

make decisions which were based on some of those indicators
that we were
seeing.
And the second part of the structure was where we were able to
be a little bit
more nimble or reactive to some of the indicators. And that was
the business unit
level. So in each service area, we were able to create a slightly
more
sophisticated report, more detailed report. Based on a similar
sort of structure,
based on the same data but where business unit leaders could
actually use
those data in response to them a little more quickly. Now what

was critical about
that response wasn't that when they saw something red that it
was going wrong.
Because, the way I phrased it to them was, that simply raises a
question that you
need to answer. It doesn't present the answer itself. And that's
really critical in
terms of managing these data driven performance systems. That
when you see
an indicator like that you don't think that something has gone
wrong, but simply
that it may be telling you that something is heading in the
wrong direction, which
you then need to investigate.
And the investigation really, was the third part of the structure
which is the
individual level. So each of those service professionals, for
every service
intervention they made with our customers, they were able to
see pretty quickly
after the intervention a report which told them how they'd done
in that particular
circumstance. And that was comprised of data from the IT
systems. It was
comprised of data which was a collection of feedback from our
customers. So we
were able to quantify that feedback and put it into the system.
And it actually was
based on some of their own feedback, so they were able to
contribute to it
themselves.
And of course what that information also provided was for those
first-line leaders
that I had appointed to be able to see how their teams were

doing. And that was
where, really, the final and critical part came in the
performance management
system. What I'd done was train these first-line leaders as
coaches. And what
that means is that you don't direct. When you see some data that
seems to be
going wrong in your team, what you do is you use that data for
a coaching
intervention. To investigate, first of all. See what's happening.
Gain the feedback
of that service professional. And then work with them to take
actions and develop
solutions to whatever it is that you overcome. So it's a
combination. It's not
simply using the data on its own. It's a combination of those
data and the
leadership, or coaching function, of those front line leaders.
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Leading a Virtual Organization: Leadership
Program Transcript
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CRAIG MARSH: So the next thing that I wanted to discuss with
you which clearly
is central to this case is leadership. Now as you know the
challenge was in the
context of a global organization, a virtual organization. And
people who are not
directly employed by the company, they're contracting
employees, I've already
mentioned a little bit about engagement. Well, for me, one of
the critical
challenges was leadership. So this was in a sense one of my
biggest challenges,
to try and work out for myself what I felt effective leadership
was. And then to
understand how I would deliver that in the context of this
somewhat unique
structure that I was managing.

So the first thing I did is I decided that the context of the
remote organization, of
the remotely contracted people was in some ways only an
indirect problem. That
actually at the heart of leadership are some very basic ideas
which I felt should
be effective regardless of the particular situation that the
leadership has
demonstrated. And I was thinking of leadership in three very
particular ways. And
those ways are leadership as individual or leadership as
personal qualities or
characteristics. Leadership as a particular role. And leadership
as a structure. Let
me take first of all leadership as a role.
I felt that in order to achieve effective engagement of my front
line service
professionals I really needed to concentrate very had on what I
called operational
or what might be termed first line of leadership. So in other
words, the people
who were actually leading the service professionals in their
tasks. For me, an
absolutely critical level of leadership in the organization. One
that is regularly
neglected. So one of the things I did was to make sure that I
concentrated hard
on finding, recruiting, training, and developing a card of
operational leaderships
on the ratio of about one leader to every 10 service
professionals. And what I
didn't do was make a classic error of organizations which is to
promote people
who are simply good at their jobs. Because the qualities of an
effective leader at

that level are actually very different from the qualities of an
expert in a particular
discipline or role, which I'm sure you'll appreciate from your
own organizations.
The second thing I did was think about leadership as a structure.
Now I've
already mentioned that I spent some time working on those as
individuals. Well, I
more or less bypassed the rest of my organizational structure. I
had department
heads and division heads. But what I did was concentrate on
those leaders on
recruiting them and treating them as one group or team. So I
created structures
whereby they could compare notes. They could share resources.
And they could
develop their own card or feeling of teamwork, remember,
across the world. So I
didn't worry about where they were located. I didn't worry about
necessarily
where I recruited them from as long as they were effective in
that particular role.

The third aspect was the personal aspect of leadership. And this
is the one that's
written about most, I think, in leadership studies. So let me
spend a little bit of
time on that because I think it's critical. So what was I actually
looking for in
developing amongst those first line leaders? And in a word that
skill was
coaching. Now coaching is both a process, a method for the way
that you go
about leading your people, but it's also a principle or a
particular style or culture
of leadership. And what I mean by that is coaching is about
making sure that
you're not telling people what to do, making sure that you're not
directing or at
least you're minimizing the direction. But what you are doing is
making sure that
your people themselves are the ones who are coming up with the
solutions to the

challenges and the problems that they're faced with every day.
And that's
culturally and, from a perspective of principle for me, a really
critical aspect of
effective leadership.
And I simply decided that everything that I've read about
cultures, about virtual
organizations, about leadership itself boil down to that as being
the most effective
style of leadership that I needed. So I spent a lot of time making
sure that my
leaders were effective coaches. In order, as I've been saying
earlier, to make
sure the front line people were engaged and indulging in what I
described earlier
as discretionary effort with our customers.
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Leading a Virtual Organization: Introduction
Program Transcript
NARRATOR: Dr. Craig Marsh is a business executive with over
25 years of

experience in organizational leadership, development, and
change across a
number of industries. In this case study, Craig will present a
real world leadership
challenge based on his professional experience that will allow
you to place
yourself in the same situation and to explore in-depth some of
the questions that
inevitably arise. Would you have made the same decisions?
What does the case
tell you about the nature of the modern organization and its
opportunities for
value creation, as well as its limits? And what are the questions
it raises for both
senior and front-line leadership in the 21st century?
DR. CRAIG MARSH: Hello, I'm Dr. Craig Marsh. And I'm here
to introduce you to
a real leadership challenge that I was faced with four or five
years ago. This
leadership challenge was based on a structure, which was a
virtual organization
of an organization that was globally dispersed and an
organization which I was
taking over at the time.
At the heart of this situation were two critical constructs. And
by constructs I
mean an idea that has different meanings to it where the
meanings themselves
aren't entirely understood or established. And that'll become
important in a
couple of minutes to you. Those two ideas, or constructs, were
employee
engagement and also the idea of performance management.

Now, what's really important is that you read, in your
classroom, the case study
guide. What the case study guide will give you are my thoughts
and my own
research on these ideas that are going to present to you in the
case. What it will
also give you are some of the facts about the case because what
I'm not going to
do is spend my time talking to you about all of the details of the
situation that I
was presented with.
So once you've read those, you'll get an idea of what I call my
own theory and
use. So what I do is not only do I lead organizations, but I've
also researched,
read, and written about them. So I've developed my ideas and
my constructs
about what we mean by employee engagement, performance
management, and
leadership. And it's really important that you, as doctoral
candidates, do the same
such that when you're confronted with a situation you've formed
your own ideas
about what subjects such as leadership, performance
management, and
engagement really mean.
Four years ago, I took over a business unit that consisted almost
entirely of
people working virtually. I had nearly 500 people working for
me, who lived all
over the world and worked remotely. They were all directly
customer facing. And
most significant, they were not employed directly by my
organization, but were

contracted to us, mostly on a part-time basis.
To provide some context, our organization had grown rapidly
over the previous
four or five years and was confronting a classic consequence of
that growth, a
start-up culture now requiring scalable structures and processes

to ensure that
growth and service standards were maintained consistently. As a
leader, I
inherited very little structure other than some early attempts at
putting in place
performance indicators and some quality standards, as well as
some established
central units that supported me for monitoring service quality. I
also had a small
group of divisional directors reporting to me, each of whom
were in charge of
sub-unit of my structure with specific and differentiated
customer value
propositions.
So one of my biggest challenges was the very loose structure of
contracted
service professionals who provided the main value work to our
customers. These
service professionals were highly educated and experienced,
multinational, and
worked remotely from anywhere in the world. There were also
mainly part-time
and had a tenuous connection to the company. Legally, there
were strict
constraints on treating them as employees for fear of violating
local tax laws.
Because of this, it was very challenging to promote employee
engagement and
build trust across the team, accurately evaluate performance for
all staff, and
establish an appropriate leadership structure for this unique
situation. I faced a
number of questions and set myself the following three key
challenges. First of

all, how do I introduce a culture of engagement? Secondly, how
do I create an
effective process for performance management? And then,
thirdly, how do I build
a leadership structure appropriate for my particular
circumstances?
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© 2016 Laureate Education, Inc. Page 1 of 9
DDBA 8151 Case Study Guide
Part 1: Theoretical Foundations
Employee Engagement: Researchers’ Perspective
Kahn (1990) approached the issue of employee engagement by
drawing on theory of
self and how different selves interact with the roles people need
to play at their
workplace. He postulated that “People can use varying degrees
of their selves,
physically, cognitively, and emotionally, in the roles they
perform, even as they maintain
the integrity of the boundaries between who they are and the
roles they occupy.
Presumably, the more people draw on their selves to perform
their roles within those
boundaries, the more stirring are their performances and the
more content they are with
the fit of the costumes they don” (p. 692). Kahn drew on
research from various
perspectives, such as interpersonal, group, intergroup, and
organizational research, and
combined them with the job-design perspective developed by
Hackman and Oldham

(1980). Kahn’s assumption was that as job design determined
the roles individuals need
to play within a work setting, it was a key determinant of the
“self” elicited from the
employees who play those roles. Job design was hypothesized to
be instrumental in
determining whether an employee will use an engaged or
disengaged self in role. He
defined the two opposite types of engagement as follows:
“Personal engagement [is]
the harnessing of organization members' selves to their work
roles; in engagement,
people employ and express themselves physically, cognitively,
and emotionally during
role performances. . . . Personal disengagement [is] the
uncoupling of selves from work
roles; in disengagement, people withdraw and defend
themselves physically,
cognitively, or emotionally during role performances” (1990, p.
694). Thus, according to
Kahn, engagement is a psychological reaction to the job role
people are required to play
in their work, and it comprises three aspects of such a reaction:
cognitive, affective, and
behavioral.
Rothbard (2001) had a more focused take on the issue of
employee engagement and
proposed two critical components that distinguish an engaged
from a disengaged
employee: attention and absorption. Specifically, attention was
defined as “cognitive
availability and the amount of time one spends thinking about a
role”; while absorption
“means being engrossed in a role and refers to the intensity of
one’s focus on a role” (p.

656). This perspective lays more emphasis on the cognitive
component of engagement
and is more akin to the concept of psychological presence,
dedicated focus on the job,
and being away from any mental distractions that may lower job
performance.
Maslach, Schaufeli, and Leiter (2001) had a different take on
the concept of
engagement and viewed it as the positive end of a continuum,
with job burnout on the
negative end. According to them, as burnout is characterized by
exhaustion, cynicism,
and inefficacy, engagement is its polar opposite with
characteristics of energy,
involvement, and efficacy. Schaufeli, Salanova, Gonzalez-
Roma, and Bakker (2002)
went on to define engagement as “a positive, fulfilling, work-
related state of mind that is
characterized by vigor, dedication, and absorption” (p. 74). To
them, such a heightened
state of vigor, dedication, and absorption is neither a
momentary high, nor target
specific, but a highly persistent and pervasive affective
cognitive state.
Thus, we see that besides the obvious similarities there are
slight but extremely
significant differences in which the above-mentioned
researchers have conceptualized

the construct of engagement. For Kahn (1990), job engagement
is pretty role specific,
and it is in fact the role that determines what type of self will be
elicited (engaged versus
disengaged). The state of engagement or burnout is pretty
diffuse and long lasting
(pervasive and not targeted) according to Schaufeli et al.
(2002). However, they agree
on the belief that bad job design may be the contributing factor
for disengagement
(according to Kahn) or burnout (according to Maslach et al.,
2001).
To compound the problem, various definitions of engagement
do not take enough care
to distinguish the concept from other similar constructs such as
job involvement, job
commitment, and organizational citizenship behavior (OCB).
There are questions
regarding whether engagement is an attitude (having three
components of cognition,
affect, and behavior and similar to the concept of job
satisfaction) or whether it is more
akin to motivation (a heightened state of goal-directed behavior
as in vigor).
Practitioners do not have too much problem with the issue as
long as the construct can
be reliably used to predict and manage team or organizational
performance. In the
following section, we will see how some of the practitioners in
this field have defined
and used the construct of engagement.
Employee Engagement: Practitioners’ Perspective

When it comes to measuring and defining engagement, the
foremost name in the
practitioners’ world is Gallup, Inc., which developed the Gallup
Workplace Audit (GWA,
popularly known as the Q12), a questionnaire used to measure
employee engagement.
It comprises 12 questions, plus an overall satisfaction question
making it a 13-item
questionnaire. The questionnaire items were found to have a
highly significant relation
to unit-level measures of a company’s performance (Harter,
Schmidt, & Hayes, 2002).
Thus, rather than being driven by theory, Gallup’s approach has
been more empirical.
The items in the questionnaire are a measure of attitudinal
outcomes (satisfaction,
loyalty, pride, customer service intent, and intent to stay with
the company) and
measure issues that are within the remit of a supervisor in
charge of a given business
unit. Gallup compiled rich data of employee surveys for over 30
years, and based on
their understanding of employee behavior that had maximal
impact on a firm’s
performance, they defined engagement as “the individual’s
involvement and satisfaction
with as well as enthusiasm for work” (2002, p. 269).
Based on their national survey of U.S. workers using their
engagement questionnaire,
Gallup put forward three types of employees (Krueger &
Killham, 2006):
connection to their
company. They drive innovation and move the company

forward.
-engaged employees are essentially “checked out.” They
are sleepwalking
through their workday, putting time—but not energy or
passion—into their work.
they are busy acting
out their unhappiness. Every day, these workers undermine what
their engaged
coworkers accomplish.
Perrin (2007) has also preferred to rely on survey data and
define employee
engagement in terms of the preferred characteristics that
engaged employees exhibit as
different from the non-engaged employees. Perrin highlights
three key features of an
engaged workforce:
ing of the organization’s
strategic goals, values,
and their “fit” within it (also known as the “Think” sector)
goals, values, and
their “fit” within it (also known as the “Feel” sector)

in their role (i.e.,
willingness to invest discretionary effort, to “go the extra
mile”) for the
organization (also known as the “Act” sector)
Perrin’s view of employee engagement is similar to that of
Gallup in one major way:
aspects of employee characteristics (cognitive, affective, or
behavioral) that have been
found to enhance the performance of a given business unit.
Some other well-known research and consultancy organizations
too have defined
engagement along similar lines and emphasized the importance
of discretionary effort
as the key outcome or distinguishing feature of an engaged
employee. The Institute of
Employment Studies defined engagement as follows:
A positive attitude held by the employee toward the
organization and its values.
An engaged employee is aware of business context, and works
with colleagues
to improve performance within the job for the benefit of the
organization. The
organization must work to develop and nurture engagement,
which requires a
two-way relationship between employer and employee.
(Robinson, Perryman, &
Hayday, 2004, p. 2)
The Conference Board offers a synthesized definition that sees
employee engagement
as "a heightened emotional connection that an employee feels

for his or her
organization that influences him or her to exert greater
discretionary effort to his or her
work" (Gibbons, 2006, p. 5). This definition of engagement is
derived from the common
scale items used by its various clients to measure the
engagement level of their
employees.
The Chartered Institute of Personnel and Development (n.d.)
holds similar views on
employee engagement and refers to it as “a combination of
commitment to the
organization and its values, plus a willingness to help out
colleagues (organizational
citizenship). It goes beyond job satisfaction and is not simply
motivation. Engagement is
something the employee has to offer: it cannot be 'required' as
part of the employment
contract.”
We may say that all the practitioner and consultancy views on
engagement are largely
driven from their respective survey data and are much more
empirical when compared
with how the researchers have approached the construct. The
practitioners look for key
differences in employee surveys between high- and low-
performing business units, and
the items that significantly related to performance form the core

of what they call
engagement. There are two major problems with this approach:
1. Most of these survey-based research tend to infer causality
from their survey
data in a way that their engagement items are presumed to
“cause” performance,
not merely correlated with it. However, there is very little in
their research design
to make such a strong assertion.
2. There is little “construct validity” behind these items being
clubbed under a single
name of engagement as the scale items are not embedded in
theory in the first
place. So, though all the above-mentioned consultancies use
slightly different
items in their measures, they all label it as “engagement.”
Performance Management
Performance management has been regarded for several years
now as a core
management best practice (Osterman, 1994; Pfeffer, 1998). Den
Hartog, Boselie, and
Paauwe (2004) define it thus, making clear the relevance of an
integrated approach to
performance:
“Performance management” has come to signify more than a list
of singular
practices aimed at measuring and adapting employee
performance. Rather, it is

seen as an integrated process in which managers work with their
employees to
set expectations, measure and review results, and reward
performance, in order
to improve employee performance, with the ultimate aim of
positively affecting
organizational success. (p. 556)
It is remarkable, however, how little is still known of the
effects of performance
management techniques on the individual employee (Farndale &
Kelliher, 2013). This
has been a space often referred to in the literature over the years
as the “black box” of
the HR/organization performance relationship (Legge, 2001).
One reason for this
relative dearth of information is the limited amount of research
directed at understanding
implementation of performance management techniques (Guest,
2011). Boselie, Dietz,
and Boon (2005) argued that most studies of the impact of
performance management
practice orient toward the macro, or “managerialist,”
perspective, with a dearth of
studies of the role of the immediate line manager or supervisor
“in the enactment
process” (p. 74). They recommended research oriented
increasingly toward micro
analyses which seek to understand in much greater depth
“employees’ actual
experiences of performance management” (2005, p. 82).
It has also become increasingly recognized that the role of the
first-line manager is
crucial in successful implementation of performance

management practices (Nehles et
al., 2006) or “unlocking the black box” as these practices are
increasingly delegated to
line managers to implement in the modern organization (Purcell
& Hutchinson, 2007).
One such technique of performance management is performance
appraisal, one in
which first-line managers have a central role to play, and one
which is a constant source
of dissatisfaction among managers and employees, despite its
widespread use
(Dusterhoff, Cunningham, & MacGregor, 2014).
Employees' perceptions of fairness and procedural justice play a
key role in employee
outcomes considered crucial to organization success, such as
decision making (Goksoy
& Alayoglu, 2013) and commitment and engagement (Cheng,
2014). The immediate
supervisor of the employee is a key factor in the success of the
process of performance
appraisal, and a critical influence on employee perceptions of
fairness and justice
(Byrne et al., 2012; Sumelius et al., 2014).
Part 2: Leading a Virtual Organization
Dr. Craig Marsh is a business executive with over 25 years of

experience in
organizational leadership, development, and change, across a
number of industries. In
this case study, Craig will present a real-world leadership
challenge based on his
professional experience that will allow you to place yourself in
the same situation and to
explore in-depth some of the questions that inevitably arise:
Would you have made the
same decisions? What does the case tell you about the nature of
the modern
organization and its opportunities for value creation, as well as
its limits? And what are
the questions it raises for both senior and frontline leadership in
the 21st century?
The Case
Five years ago, I took over a business unit that consisted almost
entirely of people
working virtually. I had nearly 500 people working for me who
lived all over the world
and worked remotely. They were all directly customer facing,
and—most significantly—
they were not employed directly by my organization, but were
contracted to us, mostly
on a part-time basis.
To provide some context, our organization had grown rapidly
over the previous 4–5
years and was confronting a classic consequence of that
growth—a start-up culture now
requiring scalable structures and processes to ensure that
growth and service
standards were maintained consistently. As a leader, I inherited
very little structure,

other than some early attempts at putting in place performance
indicators and quality
standards, as well as established central units for monitoring
service quality. I also had
a small group of divisional directors reporting to me, each of
whom were in charge of a
subunit of my structure with specific and differentiated
customer value propositions.
One of my biggest challenges, however, was the very “loose”
structure of contracted
service professionals who provided the main value work to our
customers. These
service professionals were highly educated and experienced,
multinational, working
remotely from anywhere in the world, were mainly part time,
and had a tenuous
connection to the company. Legally, there were strict
constraints on treating them as
employees, for fear of violating local tax laws. Because of this,
it was very challenging to
promote employee engagement and build trust across the team,
accurately evaluate
performance for all staff, and establish an appropriate
leadership structure for this
unique situation. I faced a number of questions and set myself
the following three key
challenges:
1. How do I introduce a culture of engagement?

2. How do I create an effective process for performance
management?
3. How do I build a leadership structure appropriate for my
particular
circumstances?
References
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contradictions in HRM and
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15(3), 67–94.
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(2012). Trusting the fair
supervisor: The role of supervisory support in performance
appraisals. Human
Resource Management Journal, 22(2), 129–147.
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CIPD—Championing better
work and working lives. Retrieved from http://www.cipd.co.uk/

Cheng, S. Y. (2014). The mediating role of organizational
justice on the relationship
between administrative performance appraisal practices and
organizational
commitment. International Journal of Human Resource
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1131–1148.
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569.
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and
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273.
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appraisal: Exploring the
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current research and its
implications. New York, NY: The Conference Board.
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performance appraisal
and distributive justice fairness on employees' ethical decision
making in
paternalist organizational culture. Performance Improvement
Quarterly, 26(1),
57–79.
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performance: Still searching for
some answers. Human Resource Management Journal, 21(1), 3–
13.
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Wesley.
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putting people first. Boston,
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