Expectancy theory and performance management system

Victor Vroom proposed the expectancy theory of motivation in 1965. It is the most comprehensive and realistic, underlying other motivation theories. Expectancy theory featuring the performance management system states that the motivation of employees and their reflected behavior in the workplace depends upon the following key elements:

  • Expectancy,
  • Instrumentality and
  • Valence.

Expectancy is a belief for performing a job satisfactorily, instrumentality involves rewards for performances and valence focuses on the value of the positive rewards (Parijat & Bagga, 2014).

The process of expectancy theory

The process of expectancy theory

Motivation = Expectancy x Instrumentality x Valence

According to Vroom, this relationship indicates that higher the expectancy, instrumentality, and valence, higher are the levels of motivation. In addition, if any of these key elements are zero then the overall motivation becomes zero. For instance, the motivation will turn to be zero if an employee achieves rewards of no value even if they expect their effort to result in desired performance and rewards.

Therefore it is essential for an organization to incorporate mechanisms encountering such elements under the performance management system in order to attain the desired performance goals of employees perennial to the organizational goals. However, in the current scenario, the changing needs of both the employees and the businesses in adopting effective mechanisms proactively. There has been a transformation of a traditionally driven performance management system (Ratnawat & Jha, 2013). It failed to serve in the assessment of employees based on subjective standards recognized by managers.

Applicability of expectancy theory in performance management system (PMS)

For an overall effective performance of an organization, the Performance management system (PMS) encompasses the process of measuring and managing the performance of human resources in an organization. The measurement and management of performance should be motivating enough so that employees perform well and this is where the expectancy theory becomes applicable to PMS.

When expectancy theory is applied to PMS, it aims at current performance and focuses on motivating the employees to perform better. Therefore it is important for employees to know about their assessment process in order to examine their capability in performing a task (Lunenburg, 2011). Hereby performance appraisal is one of the most crucial key elements focusing on the evaluation of employees and their further development overtime (Ghanbarpour & Najmolhoda, 2013).

Appraisal system in contemporary times

The present appraisal method incorporates subsequent features.

  • More systematic and formal way conducted in regular and intervallic periods, generally once a year.
  • A major focus of strategic human resource management practices of talent, including developmental programs and competencies of employees.
  • Attention towards observed behaviors and solid information underlying established smart objectives.
  • Adoption of management by objectives;  the facts and figures under the objectives set as the benchmarks at the beginning of the year(Herman, 2005)
  • The assistance of a superior throughout in solving problems.
  • Feedback from employees using a self-appraisal form.
  • Psychological appraisals;  test the emotional, intellectual and motivational and other personal characteristics of employees. This includes in-depth interviews, psychological test and discussions with supervisors.
  • Assessment centers are developed, whereby the employees participate in in-basket exercises, work groups, role playing etc. so that their attributes in successful performance are recognized by managers(McCourt & Eldridge, n.d.). However, those employees who fail to succeed in these activities tend to feel demotivated in the process.
  • 360-Degree Feedback mechanism gathers performance data for a group of supervisors, team members, customers, peers immediately. Herein inter-personal skills are assessed along with customer satisfaction, and team building skills.


On application of expectancy theory to PMS, the performance appraisal methods and their correct use in an organization act as an effective tool for the betterment of the same (Pulakos, 2004). Employees tend to be motivated if acknowledged to achieve related recognition.

Using the performance management systems and tools that are helpful in identifying better-performing employees.  Thus the decision for a suitable and available reward motivates the employees to perform better. These rewards include merit pay increases, bonuses, promotions, a small celebration for the job done well, the power of independent decisions, chance to engage in leisure activities or a vacation trip  (Opu, 2008). It is important to examine and understand the appraisal management practices in organization context and size. This is because there exist different objectives and setup of an organization.

Applicability of expectancy theory

The nature and size of an organization projects diversifying ways and tools practiced with respect to its performance evaluation system. Due to fewer numbers of employees in the small-scale industry, the management is close to their employees. Thus there is no formal approach to guiding performance management. Majorly the top level management undertakes the evaluation process. However, in large firms, there are separate department as well as a systematic formal procedure to undertake the assessment process. In addition, the large organization also take notice of personal appraisal of the employee including its emotional and intellectual conduct (Gresty, 2010).

Also, it is easy to measure performance in a small-scale organization. This is because the nature of work is constant for a long time. Thus the assessment of an employee against their historic data is enough to evaluate their present status of performance. However, the performance of one individual impacts such organizations. In addition, the reward mechanism is not well written and are perceived on the supervisor’s thoughts but somewhat based on employees’ needs, unlike the process in large organizations whereby a uniform and impersonal criterion is followed that in turn could be less effective in comparison to small organizations(Ghanbarpour & Najmolhoda, 2013).

Applicability of expectancy theory in small and medium scale enterprises

High degree of job satisfaction is expected to be present in the employees of small and medium scale enterprises, even though the working conditions that are not as good as in multinational companies. The relatively close working relationships in small and medium scale enterprises to contribute to job satisfaction. Improvement in job satisfaction is also facilitated by lower employee expectations in small and medium scale enterprises when compared with multinational companies.

Thus, owing to lower levels of expectations, as per the expectancy theory, the employees can be motivated to perform better small and medium scale enterprises. This is due to limited resources, do not have formal policies in place or to monitor or review their practices in this regard. Further, the employees of the small and medium scale enterprises are the most likely to express trust in their managers. Thus, the small and medium scale enterprises should use a more formal process. By this, the employees are able to understand the increment or degradation in their performance. The trust that the employees have in their managers in small and medium scale enterprises can be  a motivator for them to perform better. Herein the managers can lure them with the rewards that are expected to be acquired if the performance is improved.

Therefore the performance management system serving different organization objectives according to the nature of the firms. It accompanies different practices though with the sole objective of enhancing the employees’ productivity. However, some unsuitable trends of practices may let organizations face undesired achievement. Ineffective PMS that can disrupt the productivity of the organization as a whole. Finally, the application of expectancy theory to PMS motivate the employees to perform better. Thus, effective performance appraisal systems motivate the employees to improve performance. 


  • Ghanbarpour, Z., & Najmolhoda, F. S. (2013). Contemporary theories of Motivation in Organizational Leadership and Behavior. International Journal of Applied and Basic Sciences, 6(1), 1–7. Retrieved from http://www.irjabs.com/files_site/paperlist/r_1641_131014000751.pdf.
  • Gresty, D. (2010). Performance Management : Assessing the Gap Between Theory and Practice in an SME. Chester Business School, (June), 1–116.
  • Herman. (2005). Performance management. Performance Management – EDINBURGH Business School – Heriot-Watt University, 2013, 48. https://doi.org/10.1016/B978-0-7506-5620-7.50013-9.
  • Lunenburg, F. C. (2011). Expectancy Theory of Motivation : Motivating by Altering Expectations. International Journal of Business Administration, 15(1), 1–6.
  • McCourt, W. &, & Eldridge, D. (n.d.). Performance Management and Appraisal. Global Human Resource Management. https://doi.org/10.4337/9781781950104.00014.
  • Opu, S. (2008). Motivation and Work Performance: Complexities in Achieving Good Performance Outcomes; A Study Focusing on Motivation Measures and Improving Workers Performance in Kitgum District Local Government. Institute of Social Studies, (December), 1–83. https://doi.org/10.1111/j.2044-8295.1969.tb01226.x.
  • Pulakos, E. D. (2004). Performance Management, 56.
  • Ratnawat, R. ., & Jha, P. . (2013). A Commentary on Effectiveness of Performance Management. International Journal of Scientific & Engineering Research, 4(3), 1–11.
Ekta Goel

Ekta Goel

Senior Research Analyst at Project Guru
Ekta is a post graduate in economics from Ambedkar University, Delhi. She has a keen interest in working in the fields of economics and statistics. She expanded her work horizon to SPSS, R, Python, SAS and STATA. In her spare time, she would indulge herself in learning classical dance and playing volleyball.
Ekta Goel

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