Rethinking Performance Management

Executives Who Equate Performance Management with Performance Appraisals and  Human Resource Programs Are Missing A Great Opportunity to Motivate and Energize the Entire Organization to Achieve Business Objectives.

Transform a Demotivating Process into One that Energizes and Engages the Entire Workforce.

What do most of us think of when we hear the term “performance management”?  For most people, an unpleasant performance appraisal session, as a giver or receiver, first comes to mind.  The next thing that usually comes to mind is the ineffective, paper-work intensive system that gets in the way of you doing the “real work” in your company. Even if your company has a system that is an improvement over past systems or better than other systems, it is probably still not a system with which you are totally satisfied.

And yet this is an area that has been studied extensively - almost to death. Countless books and articles have been written on the subject of performance management and performance appraisal.  “New improved” systems have been launched in most companies. At the top, executives may express satisfaction with the system. But at lower levels, the same cynicism and dissatisfaction exists. In many organizations, hope for an effective system has been replaced by despair or acceptance of an imperfect system.

Is there hope for an effective performance management system, one that is motivating rather than de-motivating? I believe that there is. Some organizations are trying out approaches that are coming close. But more experimentation is needed. Sharing information about the successes may stimulate more experimentation. That is the purpose of this article.

Before discussing options, it may be helpful to establish a framework.

WHAT IS PERFORMANCE MANAGEMENT?  

Part of the problem is that there is confusion over the term, performance management.

Performance management is much broader than performance appraisal. It is the entire process of improving and sustaining human performance throughout an organization. Collectively, the performance of individuals determine the performance of teams, departments and ultimately the entire enterprise. 

How do organizations today become successful and sustain that success over time?

Many organizations have embraced a series of management fads with limited success, while other organizations have innovated with new approaches tailored to their culture and business needs. They follow some basic common sense principles about the performance of people and organizations. Leaders of these companies know that people cannot be effective unless they know what they are supposed to do, have the capability to do “it”, and receive feedback on how they are doing. These leaders may put it in different language or do it intuitively, often not  putting it down in writing. It may be a part of the culture of their firm. If they do put it in writing, it may look something like this.

Each of us functions like a human performance “system”. We receive inputs, then utilize our competencies to generate outputs. In a business setting, the inputs we receive come from our customers, internal or external. Those inputs, requirements or requests need to be accompanied by clear direction on what is required and access to the required resources.  As a performer, we need the necessary competencies (which include skills, knowledge, attitude and motivation, i.e. the mental and physical capability) to perform. 

There needs to be appropriate consequences for our output or results that we produce. We should receive positive consequences or rewards, e.g. a pat on the back for “doing it right” and negative consequences for not doing it right. The standards or criteria for evaluating performance must be consistent and sound. Is the same “benchmark” or measurement applied to each person? And finally do we receive feedback on how we did?

This same system applies to the performance of a group of individuals who make up a team or an entire organization. Only this time individuals need to work together to produce an output, and issues such as group processes, strategy, information flow and work processes must be managed in order for the team to be productive.  

If you think about it in these terms, you can probably determine the cause of most positive and negative experiences you have had in your personal and professional life. For example, think about the “consequences” component of the model. If the consequence of your being a top performer is that you are given the really critical projects that require extra work hours, you may perceive this as positive reinforcement if you like the recognition, opportunity for additional compensation,  etc., or you may see it as negative if you dislike working more hours. How we perceive the consequences of what we do will affect our performance. We avoid unpleasant consequences and seek out pleasant consequences.

Making Performance Management Work

The basic principles of performance management may seem simple, but translating these concepts into action within an organization isn’t so simple. If it was, we would have a lot more success stories to report. So, how can we make performance management work?

Our work in this area has taught us some lessons that may be helpful to others. First, we should share certain assumptions (again acquired through our experiences) about performance management that have guided us.

Six Assumptions About PERFORMANCE MANAGEMENT 

1• What you measure is what you get. If you want to improve market share, innovation, customer satisfaction, quality and people management, then measure individuals’ specific contributions and reward them based on the contribution.

People need clear direction and goals that are aligned with corporate and department goals. Appropriate consequences for performance or non-performance must happen. Unfortunately, most companies have discarded some sound MBO (that’s Management-By-Objectives for those you not in the business world 15+ years ago) principles when the poorly implemented MBO programs of the past were shelved.

2• Performance appraisal is basically a human process, no matter how hard we try to make it rational.

The process requires trust and caring plus the courage to be honest and suffer unpleasant consequences. Managers who are honest may have to deal with an upset, angry or demoralized employee. An honest employee may upset a boss or learn something he or she did not necessarily want to learn . The rational side of us wants to focus on the precision of the rating, the quality of written appraisal and goals and the fact that the feedback session was conducted in the right environment ending on a positive note. The fact remains that no one wants to sit in judgment of another human being or be judged by another. Consequently, the performance appraisal part of the performance management process remains the most difficult part of everyone’s job and is avoided whenever possible. The only time we want to know where we stand is when we believe we are performing well.

3• Appraisals cannot be made totally objective. 

As an influencer of an employee’s behavior, it is difficult for a supervisor to be an independent observer of it.  A supervisor has a great deal of influence over an employee’s goals , the support, resources consequences and feedback provided. Plus as human beings, supervisors bring their views, biases and internal standards with them to the workplace. 

4• End of the year appraisal discussions should contain no surprises.

Everyone agrees with this statement and yet surprises frequently occur. Avoiding surprises requires on-going coaching and periodic progress reviews where employees and supervisors discuss and agree on an assessment of performance for the past quarter, month or week. Posting of performance measures and results for departments, teams and individuals opens up the system and provides real-time feedback that can stimulate performance. 

5• A good system hinges on trust in the workplace.  If it is lacking, corrective action must be taken in conjunction with, or prior to, a PM effort. 

If people do not trust their supervisors or senior management, the performance management system will be viewed as not being in the best interests of employees. An analysis through interviews, focus groups or surveys can help uncover the source of distrust and possible solutions. Always remember that embracing performance management is as unnatural as embracing any form of change. Listen to concerns and respond honestly.

6• A competency-based system provides a framework that integrates development,  selection, succession planning and compensation processes.

Developing job competency models for key positions tends to cast performance management in a positive, forward looking, developmental light.  Each person knows the 7 to 12 key competencies required for superior performance in their current job and desired job, and receives coaching and guidance from others on improving one to three competencies each year. The focus is on improvement, i.e. how can I become more competent in order to reach my goals. Competencies provide a common language to discuss performance and help integrate other key human resource processes.

These assumptions have led us to try out and apply some basic principles when helping an organization evaluate and improve its performance management system.

Steps to Making PERFORMANCE MANAGEMENT Effective and Motivating

1• The system is designed by the users (managers and employees).  Technical correctness is compromised on the behalf of ownership and buy-in by the users and fit with the company’s culture and ways of doing business.

The more people involved in the design of the system the better. One option is to use a “whole systems” approach and get all users in a room at the same time to design the system.  The next best approach is a task force made up of representatives of all major employee groups with each person being responsible for getting input of the group represented. All line and staff functions should be represented. 

2• The system is flexible and dynamic, yet simple, i.e. user friendly. Goals can be easily modified. Concentrate on building a good foundation before considering incorporating enhancements such as open-book management, 360 degree feedback, and computer software. 

Many organizations have a tendency to want to design a “perfect” system with perfect forms that spell out everything that needs to be done. While the design of forms is important, it should be remembered that the forms are merely “tools” to help the process be more effective. For example, the number of rating categories are not as important as the quality of feedback provided. Some organizations have eliminated numerical ratings to prevent the focus from being shifted from coaching to rating.  Starting with job competency models help to keep the focus on improvement of specific skills and knowledge related to superior performance.

3• Emphasis is placed on coaching to help others develop new competencies and improve performance.  Opportunities to acquire the competencies needed to coach and be coached are provided.  Coaching discussions become a daily habit, done without having to plan for it or think about it.

The objective of any performance management process should be to get supervisors and subordinates talking on a routine basis about performance issues. During or after a small or large project or task, supervisors/coaches should tell employees what was done well and what could have been done better. Start by asking an employee for their own self assessment. Teach managers how to use a step-by-step coaching process. A good analogy is the kind of coaching provided to athletic teams. Athletes receive immediate feedback, both positive and negative. Can you imagine players on a basketball team only receiving feedback in writing at the end of a season? Athletes expect frequent feedback just as high performance and winning are expected. Why can’t we achieve the same kind of culture in our business? One reason is that our measures of performance in business are often vague and open to interpretation, whereas athletes are evaluated on concrete observable statistical measures - which leads to our next principle.

4• Job goals are measurable or qualifiable and competency development goals are specific and observable.

Although this principle is widely accepted, it is resisted or ignored in many organizations, especially in staff functions. Jointly establishing job and competency development goals is tough work. It is far easier to just go “do the work” assuming that the supervisor and subordinate know what is expected. 

5• Top management expresses its commitment by using the same system - in a way that is a model for others. It is viewed as a key management process, not a human resource program. 

One of the first things we look at when helping an organization with its performance management system is the process used by the senior management team. Often it is completely different than that required of the rest of the employee population. Excuses include: “Our bonus program functions as an appraisal, i.e. the amount of bonus, incentive comp, etc. tells people how well they did.” “I work closely with my people - they all know where they stand”, etc. etc. . When we interview subordinates at the senior level, we often hear a different story. “Yes, my business goals are clear, but I am unclear about how my individual performance and career potential is viewed.” “My performance review is typed and given to me with no discussion”, etc. etc.  Basically, all of the reasons for performance management not working at the middle and lower levels in an organization exist at the senior levels. Executives are uncomfortable sitting down with subordinates and providing feedback. Too often the process is seen by executives as a human resource driven program rather than as a key management process.  When executives see that performance management is the lever to implement the business strategy and business objectives, to set and review budgets and to ensure that the necessary talent will be available to meet future needs, then it will be practiced at the senior levels in a way that is a model for everyone else in the organization.

6• The functions of feedback and coaching, performance rating, performance appraisal, potential rating, succession planning, and pay determination are treated as separate, but related processes.

Yes, performance ratings may be used to help determine pay distribution. And yes, pay should be based on performance. However, discussions about pay should be not be done in the same meeting in which performance or career plans are discussed. Otherwise, the employee’s interest is centered on “how much money am I going to get”. It is a natural tendency.  Combining discussions about career plans, succession planning and potential ratings is appropriate. 

7• All employees thoroughly understand the system, their role and importance to the organization and themselves. The “what’s in it for me” question must be answered for everyone. Employees are empowered to ask for feedback and help.

The so-called “new contract” with employees places more accountability and responsibility for performance and career progress with the employee, with the organization and supervisor providing support, resources, honest feedback and coaching. This means that for performance management to be effective requires more than just training and involvement of managers. Employees must be empowered and given training on how to ask for help and feedback, to write goal statements and to understand their role in the big picture, i.e. the alignment of their goals with the organization’s goals. The “learning organization” that is espoused by so many companies requires that all employees thoroughly understand, and are committed to, improving current performance and their potential to make additional contributions.

SUMMARY

Performance management can be improved in most organizations by following some basic, common sense, principles. These same principles can also help make performance management more motivating for most employees. However, since performance management is basically a human process, following a prescribed formula will not satisfy all employees in all situations at all times. We can’t expect managers to be clinical psychologists. People do not like to give or receive bad news about performance. We can’t anticipate every ones reaction to a coaching discussion, even one done perfectly. 

Therefore, when implementing performance management, plan and implement well, but do not expect perfection. In customer service language, remember to “manage the expectations” of everyone in the organization. Position performance management as an on-going change process, one that requires routine adjustments and modifications.  Experiment by trying out new approaches in selected departments or teams. For example, if your organization is using team based structures, you need to integrate team performance measures and feedback into your process. But there are a lot of ways to do this effectively. So, innovate, experiment. You might just come up with a system that works for your organization and its culture.