Managing employee performance in transition economies: A study of Vietnamese public organizations

Public employees’ poor performance has been cited as one of the leading factors in the failure of reform programmes in developing countries. Although previous employee performance reforms have targeted selection, training, appraisal and compensation, agreement exists that these problems persist. Improving employee performance has proven difficult in developing and developed countries alike. Motivated by the New Public Management (NPM), employee performance management (PM) has been widely introduced by developed and developing countries as a public sector reform. Employee PM supposedly furthers development objectives by improving performance, enhancing accountability and aligning employee efforts with organisational goals. Unfortunately, the literature has reported many failed PM reforms. Arguably, employee PM in the public sector usually faces several difficulties, including the diversity of stakeholders, bounded delegated authority, ambiguous organisational and job goals, as well as the inherent complexity of employee PM activities. The situation is even more challenging for developing countries due to contextual problems of weak institutions, weak capacity and traditional cultures. There are perspectives that employee PM may not be compatible in developing contexts. Although there is no shortage of research on employee PM, most is theoretical research or conducted in developed countries. Empirical research in developing countries, particularly in the public sector, remains sparse. To address this gap, this research investigates whether employee PM is applicable or effective in the developing context, as well as exploring which contextual factors affect its development. To answer these research questions, a mixed methods approach guided by the research philosophy of pragmatism was adopted. The data for this research was gathered from 30 interviews and a survey of 322 respondents from 29 different organisations across five central Ministries and two provinces in Vietnam as a transitional economy with a strong effect of Confucian culture. This study contributes to the literature by providing some key findings. Firstly, it confirms that if well designed and implemented, PM can work in the public sector in developing countries. This finding supports the perspective that the failure of PM schemes is mostly because of implementation shortcomings rather than theory defects. Secondly, it proposes a formula for the effective implementation of PM in the developing context. Specifically, it is a combination of five PM practices, including goal-based appraisal, feedback, reward-for-performance, addressing poor performers and employee participation. Thirdly, the development of employee PM in developing countries is driven by three contextual factors: agency accountability, HR autonomy, and entrepreneurial leadership. Fourthly, PM is not only a tool to improve organisational performance, but also an important mediation agent to transmit the effect of other reform activities on desirable outcomes. Finally, the effect of the contextual factors on development of employee PM is weakened by interpersonal relationships and nepotism while being strengthened by communication and training. Based on these findings, this research proposes strategic solutions for policy-makers while providing specific suggestions for practitioners to develop effective PM systems. It also discusses some implications and identifies gaps for researchers in the future.