Expert Opinion

Performance Management Overview

People are motivated by different things e.g. admiration and respect from others, knowledge, money, power, promotion, recognition, status, or self-esteem. Ken Fracaro of SuperVision journal writes [1] that determining what motivates an employee is the first step towards transforming an average performer into an excellent one.  The best way to discover what motivates individual employees is to talk to them directly and to listen carefully to their responses. Performance measurements and ratings are then needed to track improvements. The employee's role also needs to be clearly understood and his/her duties carefully designed to support the goals of the organisation. Performance improvement becomes possible by gaining an employee's commitment to strive for excellence. Key priorities towards achieving excellence include [1] :

• Identifying employee duties which have previously been rated average or lower and then working to improve these ratings as a priority.
• Prioritising obstacles by choosing one job duty at a time and listing the obstacles that stand in the way of acquiring an excellent rating.
• Prioritising the agreed changes for each job duty to overcome the obstacles identified.
• Listing all of the actions  required to support the employee,  and creating action plans with start/finish dates for overcoming each obstacle 
• Implementing the action plans and tracking ongoing progress on at least a monthly basis. Progress should be measured using numbers, ratios, or dollar amounts, and target dates. Measurements which indicate success need to be specific and understandable. Continuing feedback is most important for reinforcing and encouraging positive responses.
• Promptly rewarding excellent performance. Rewards should be based on the employee's motivators e.g. if recognition is an important component then the employee could perhaps be given a plaque for excellent service at a meeting attended by his/her peers.

Jim Kochanski and Aaron Sorensen of Sibson Consulting write [2] that performance management systems exhibit a number of problems which range from disinterested managers through to those who use the processes carelessly and with little participant engagement. Some organisations continually adjust their performance rating systems in the hope of striking an optimal combination. For others the process takes up too much time. More seriously poorly executed performance management processes are at the root of a number of problems which include:

1. Not being able to identify poor performance
2. Failure to recognise and reward high performers
3. Ineffective succession planning
4. Inequitable distribution of rewards
5. Lower levels of employee satisfaction and engagement because of their perception of bias in the performance management processes.

Organisations realise that they can't give up on performance management because it forms a necessary foundation for talent management and, when effectively executed, forms a key driver towards improving organisational effectiveness. According to Kochanski and Sorensen, performance management systems (PM) can be improved by addressing the following critical success factors:

1. Aligning PM systems with the actual culture of the organisation. Leadership's goals should be tightly aligned with the strategic intent of the PM system and they should remain determined to implement it. As an example, organisations having strong and individualistic cultures could implement a Forced Ranking system and thereby provide a large differentiation in rewards, however in a team-based culture Forced Ranking is unlikely to be a good fit.
2. Aligning employee and organisational goals. The reinforcement of individual priorities, behaviours, and performance measures to fit with what is most critical for achieving business success will ensure alignment with the organisation's strategic goals and objectives.
3. Creating Stretch Goals. Organisations often set their performance goals to ensure that a majority of employees will achieve performance targets. This however rewards mediocrity rather than motivating high performance. Stretch goals on the other hand can help to drive high performance.
4. Increasing the visibility of PM processes. Calibration sessions, during which managers share their assessments with peers, can improve goal alignment, reduce bias, and enhance the reliability of ratings.
5. Using simple forms and simple technology  that make the overall system more efficient and effective. A complex system can cripple PM processes.
6. Engaging in high quality conversations. The greatest benefit gained from PM systems is found when managers and employees engage in high quality conversations concerning expectations, performance information, and consequences.
7. Differentiating performance and consequences. Performance ratings are often used to allocate pay increases and bonuses, but when the range of money is small the PM processes is seen as not being worth the time spent on it. An alternative approach involves rewarding high performers with substantial payouts, and giving the bulk of employee's average increases.

Employee Development Plans

Organisations that place a high priority on employee development tend to stay fresher and remain flexible despite changing business conditions. David Putrich, consultant and an adjunct professor at Concordia University Minnesota, cites [3] a study by Lominger Limited Inc., which found that some 70% of what we learn as adults comes directly from our work experiences, 20% from a coach, and 10% from classes, workshops, books and articles. Given these findings it makes sense that the bulk of an employee's development plans ought to consist of work experience. Putrich suggests the following collaborative steps for building employee development plans:

1. Discuss career goals and potential roles within the organisation. (A mentor relationship may also be found to help with formulating long-term goals.)
2. Discuss both the employee's short and long-term development needs which lead toward meeting defined career goals.
3. Outline the skills that are needed within the organisation.
4. Develop an understanding of current skill levels set against the desired level.
5. Suggest possible courses or workshops. Identify specific work activities, community volunteer activities that would be beneficial, and include the participation in these activities as part of the employee's formal performance goals.
6. Stress that skill development comes in small, day-to-day steps, and reflect this in the employee's development plan. Suggest a peer who could become a coach/role model.
7. Provide constructive feedback and encouragement as changes in behaviour are made and as growth occurs.

Job rotation and employee development

Job rotation is a systematic process of moving selected internal candidates into targeted positions which it is believed will benefit their development. Judy Orr, principal of Change Journeys, Coaching & Consulting in Toronto, writes [4] that job rotation can be used as a leadership and employee development strategy. Job rotation can build up a breadth of experience and help to develop key leadership competencies and enlarge the skill set of the employee. Job rotation can help to break down "silo-thinking" and encourage the development of stronger networks which foster cross-functional idea sharing and solutions. Importantly, as employees learn about other parts of an organisation, their strategic orientation is likely to increase, and they can feel more valued because of the investment that has been put into their growth and development.

Job Evaluation

Job evaluation forms a central plank of all performance management systems. The international Labour Organization (ILO) defines job evaluation as an attempt to determine, and compare, the demands that normal performance in a particular job makes on an average worker. Job evaluation enables the relative ranking of positions and this ranking is the basis for the definition of salary ranges.

Fred Hilling president of Sander Salary Systems, Canada, describes [5] job evaluation as "the systematic analysis of the relative demands that work places on an employee". Job evaluation, according to Hilling, requires considerable skill and experience.  In the public sector, and also in many private-sector organisations, job evaluation is essential for an authoritative salary administration program. Job evaluation is a practical necessity which requires wrestling with job definitions, job evaluation committees, upset managers, and anxious employees. However the increased legitimacy resulting from effective job evaluation reviews is believed to be well worth the time and effort needed to define, understand and rate job content. Hilling noted that there was a continuing tension between (a) the practical interest of gaining acceptance of a job evaluation programme, and (b) defining a competitive salary for a given position. It was believed that it is possible to integrate these two factors if attention is paid to the limits of effective participation in job evaluation plan design, and also if the practical knowledge built up over many years of job evaluation experience was put to good use.

Sandra Weeks managing director of Canadian Human Resources Partners Inc., a rewards and compensation consultant states [6] that  job evaluation programmes remain very relevant in today's workplace as systems become much more flexible and more aligned to business needs and strategies. Job evaluation has an important place particularly within total rewards frameworks. Good Job evaluation processes can ensure that fair and competitive base salaries are struck providing a balance between internal equity and external benchmarks. Job evaluation techniques range from point factor, ranking, slotting, through to job families/career level analysis, and also include a combination of these applications. The following chart derived from [6] outlines recent changes in job evaluation requirements.

Competencies – Core and Individual

Competencies are the characteristics of individuals which govern their performance and the levels of achievement expected in a given job. Carri Baca, compensation administrator at WorldatWork journal, and Gary Starzmann, global compensation solutions architect at U.S.ACS Inc., write [7] that individual competencies should be aligned with the competencies that an organisation needs for the achievement of business success. Core competencies must link with the central purposes of the organisation and reflect its mission, values, and business strategies. Contrastingly, individual competencies are largely behavioural based, and should ideally form a sub-set of the organisation's core competencies. Well described competencies help employees to understand the aims of the organisation which they serve, also sound competency models can help managers drive the most appropriate behaviours which will lead to organisational success. The competencies Iceberg model adapted from [7] depicts both the derivation, and the development of individual competencies.

Performance Appraisals – Performance Reviews

Effective performance management systems are underpinned by good performance measurement tools and processes. Dick Grote president of Grote Consulting Corporation writes [8] that performance appraisal systems may be utilised as a means for mobilising the energy of employees to achieve strategic goals. For this degree of effectiveness to be realised employee performance appraisals need to be done very well. The following four phases can be found in excellent performance appraisal systems:

1. Performance Planning  involving a meeting of approximately one hour with individual employees in which managers discuss:
1. How they will actually accomplish their jobs in particularly in regard to behaviours and competencies,  and;
2. What results they will achieve in regards to key responsibilities, projects, and goals, along with any proposed personal development plans.
2. Performance Execution. Over the course of the year managers should provide coaching and feedback, to create conditions that will both motivate and resolve employee performance issues. Each quarter the employee's performance would be reviewed against agreed plans and goals.
3. Performance Assessment, as the appraisal anniversary date approaches the manager reflects upon how the employee has performed and updates the appropriate documentation. At this point recommendations could possibly be made regarding compensation changes based on the quality of the employee's work.
4. Performance Review in which the employee compares the manager's appraisal documentation with his own self-appraisal of job performance. The objective of the review process being to talk honestly about performance: strengths, weaknesses, successes, failures, and improvement needs. This process is intended to create an on-going cycle which tightly links the employee's performance with the mission and values of the organisation, and of course to positively influence day-to-day behaviour. [8]

Feed back or Feed forward?

Performance reviews can be made more effective by focussing on future potential rather than on past performance. The Accounting Office Management & Administration Report cites Marshall Goldsmith [9] who offered the following 10 reasons for incorporating "feed-forward" in preference to "feed-back" at performance reviews:

360 Degree Feedback

As a performance appraisal methodology 360 degree feedback has become increasingly prevalent. It is a powerful tool however it also requires careful use. 360 degree feedback processes can be disruptive if they are not well managed, they also needs to be applied to a stable organisation e.g. not during times of restructuring.

Deborah Tarrant from Intheblack magazine states [10] that 360 degree feedback , also called multi-source feedback, usually involves a formal, confidential written interview process  which incorporates peers, subordinates, supervisors and sometimes clients or customers. The process encourages candid comments about an individual's behavioural strengths and weaknesses at work. 360 degree feedback can boost performance and team spirit, harmonise organisational cultures, increase motivation and reduce employee turnover.

A study supervised by Professor Geoffrey Prideaux of Swinburne University's Graduate School of Entrepreneurship, involving some 350 people from an anonymous organisation found 360 degree feedback to be "a powerful catalyst for organisational change by contributing to better all-round management. Reported effects included improved interaction with staff, greater accessibility, friendlier attitudes, less aggressiveness and the desire to seek personal development opportunities".

A vital component of 360 degree feedback processes is the credibility of the person undertaking the rating, for this reason only a person known well by the individual being rated should be invited to give feedback. When delivering the overall results from a 360 degree feedback exercise it may be wise to use an independent person. An external person is often better placed to hear true concerns.  An ideal environment for delivering feedback is in workshops over several days thus enabling those receiving feedback to have time to accept, interpret and consider positive improvements.
[10]

Appraisal Forms

An ideal performance appraisal form should help to focus an employee's energy on those activities which are of the highest priority to an organisation. Carla Joinson of HR Magazine recommends [11] the following are considered when designing appraisal forms: 

• A list of specific competencies or skills being measured along with examples of successful behaviours;
• A ratings scale appropriate to the organisation;
• Space for the employee's self-appraisal;
• Space for supervisor's appraisal;
• A section for comments by the supervisor concerning the employee's performance;
• Some suggestions for the employee's development;
• Notes concerning specific objectives to be met by the next appraisal date. 
  [11]

Forced Ranking Systems

While traditional performance appraisal systems tend to focus on the past year, forced ranking systems focus exclusively on the future. The central issue for assessment in the forced-ranking process is the potential talent a person possesses to lead people into the future. Dick Grote, president of Grote Consulting, writes [12] that organisations using forced-ranking systems require managers to assign staff into categories based on past performance along with their future leadership potential. For example General Electric: Employees were sorted into the following three groups:

• The top 20% who were rewarded with promotions and 'stock options',
• The high-performing middle 70% with 'futures', and
• The bottom 10% who were not likely to be retained by the organisation.

Annual performance appraisal systems can be classed as "person to standard" comparisons. They encourage the setting of meaningful goals, inform about desired competencies, and promote a contribution towards achieving the organisation's mission. They also identify outcomes, goals, key job responsibilities, and the standards and measures used to assess performance. Forced ranking processes on the other hand are "person-to-person" comparisons which arrange talent into specific pools with the highest performers at the top.
[12]

Termination

Mangers tend to delay engaging in discussions about the termination of an employee for as long as possible; this however may not be in the best interests of either party. Carolyn Cohen who operates a training and human resources consulting practice states [13] that it cannot be stressed too strongly that discussions concerning unacceptable performance need to take place as early as possible. A description of the issues should be provided using specific examples and outlining how this is affecting the performance of the organisation and other employees. A clear statement as what is expected; along with a plan for improvement with follow up steps should be furnished. If after a follow up period no progress has been made the reasons why should be explored with the employee. Cohen outlines the following responsibilities concerning discipline:

1. The manger should:
• Initiate discussions at each stage
• Be clear about what the problem is
• Be clear about what is expected
• Offer to help with improvement
• Be clear about the consequences if no improvement occurs
2. The employee should:
• Participate in conversations regarding poor performance and offer explanations for difficulties and provide suggestions for improvement
• Make a serious attempt to correct problems or report promptly if correction is not possible

If such a process is followed the eventual termination of employment will not come as a surprise. The employee should ideally have already signed a document stating that if by a set date things had not improved then employment would be terminated. The remaining employees will also need to be reassured that a competent replacement is being sought, and they need to see that the whole process has been carried out with dignity and respect. [13]

Jim Levine, division HR manager for Church & Dwight Co. Inc. U.S. has developed [14] the following Net Contribution Matrix which compares work output with organisational impact. Employees falling below and to the right the diagonal line are good employees. For employees near to the line and whose performance drops then prompt action is required. Those above the line need to be helped to change or to be moved on.

_________________________________________________________

You are reading a Management Brief Report in html-format. Become a member of the BPIR to receive a new report in PDF-format every month (see examples: Benchmarking & Business Excellence). PDF-format can be saved on your hard drive, emailed to work colleagues, and are much easier to read and print out!.. For BPIR updates and best practices sign up to our FREE newsletter.