Aligning Employee Performance
There are quite a few mistakes that HR executives need to avoid when developing and rolling out a performance-management system. And, like with most mistakes, the intentions are often good but the impact can produce very harmful consequences.
By Michael Denisoff
It is truly amazing how few companies strategically and effectively implement a performance-management system. Studies suggest that relatively few companies have a high level of success with their programs.
In a survey in 2004, Watson Wyatt surveyed 1,190 workers and found that just 30 percent of them believed that their companies' performance-management systems actually improved their performance.
This is especially disconcerting as performance management is one of those core processes that truly help make a company successful. The performance-management process is what ultimately keeps the employees focused and aligned to organizational goals. It also is the process in which employees are provided official feedback and recognized for their contribution to the organization.
Without solid performance management, companies tend to get out of alignment faster and overall employee-engagement decreases, which ultimately impacts business performance.
A groundbreaking 11-year study entitled Corporate Culture and Performance by Kotter and Heskett, which included more that 200 companies from 22 industries, found that companies that instituted performance-enhancing cultures, including a robust and relevant performance-management system, significantly outperformed those organizations without such a culture in all of the major financial categories.
HR executives are usually both the initiators and safeguarders of effective performance management. In fact, most HR professionals rank performance management as one of the most important HR activities for a company, according to Major Issues Impacting People Management Survey by HRI.
They are responsible for removing any barriers that might hinder the process; ensuring that leadership shares organizational objectives so that individuals can set their own goals; determining the approach for connecting performance to compensation; and developing the process so that performance management gets traction in the organization.
HR leaders should keep the four following key principles and actions in mind when they design or enhance their organizations' performance-management processes. In addition, they should also be aware of the three critical mistakes that can dimish their efforts to create effective and positive implementation.
Focused on Success
With all of the anxiety that employees are feeling during this economic downturn, providing a level of stability is a critical action for organizations. Performance management is such an anchor, because it keeps employees focused on work, shows them that the company is still interested in their success and helps unify the company.
In a global survey conducted by the Kenexa Research Institute, respondents said that receiving a performance appraisal had a significant positive impact on employee engagement, as well as on the perception of a worker's immediate manager and the organization as a whole.
As with one of my clients, some organizations opt to put performance reviews on hold because they don't want employees to expect raises. While employees are smart enough to understand the rationale behind not getting raises, they, nevertheless, will be disappointed and disenfranchised when they are not given feedback on their performance and standing in the company.
On the other hand, I worked with a company that saw the downturn as an opportunity to improve its implementation of performance management. It trained managers on ways to be more effective at performance management, improved the forms and instituted a self-evaluation for employees to complete before they met with their managers for their evaluation discussion.
By engaging employees in the process, the ownership of its success became shared -- and was not only dependent on the manager. This actually improved morale and trust during the turbulent time.
In my practice, I have observed a very salient reality when it comes to performance management in organizations. It ultimately is a self-fulfilling prophecy. If the company, managers and employees view it as an annoying non-value-added process, then it certainly will actualize into that.
The good news is that the corollary is true. When employees and managers alike see it as an opportunity to clarify and fine-tune goals, receive robust feedback and ensure fair evaluations, it becomes a positive aspect of how business is done.
Unfortunately, when you mention performance management, many employees, managers and often the HR team wince because most of them have had a number of less-than-stellar experiences with the process.
Managers think it's something they have to do in addition to their "regular jobs," employees start taking writing or debating courses to get the best raise possible and HR professionals often find themselves doing damage control after a poorly conducted performance-appraisal discussion between manager and employee.
Implementing Performance Management
So when is it time to upgrade or install a new performance-management system? Sometimes, the answer is subtle, but more often than not, it's pretty obvious. It is most likely time to improve things when there is low participation in the process, employees and managers react to the process with disdain, employees are not clear on their goals or performance, and people are getting raises in their paycheck and do not know why because they never had that conversation with their managers.
Like any other HR system, one size does not fit all. What works in a traditional large firm might not work in a high-growth company with an entrepreneurial mind-set. Human resource executives must be in touch with the overall culture, management styles and learning modalities of their company.
The principles of good performance management are the same, but how they are implemented will be different. Being in tune with the subtleties and responding to them makes all the difference in an effective implementation. Careful consideration must be given to foundational questions such as choosing the rating system, incorporating competencies or values into the expectations, and the physical layout of the tool itself.
Principle 1: Letting Go
In some organizations, the current performance-management system has such a bad reputation that it is necessary to re-educate the business as a whole on the value of the process. For example, I worked with a company that had such a bad and poorly executed PM system that there was a strong negative association whenever the phrase "performance management" was uttered.
In preparing to develop an effective system, step one in that case was to provide opportunities for the organization to purge itself of the old system, laugh a little and let go of the old baggage.
Principle 2: Individual Performance is Tied to Organizational Results
Best practices show that the most effective performance systems are well connected to the objectives of the organization. In other words, there is a cascading effect from organizational goals to each individual's goals through the system.
Employees must readily see how their performance impacts the success of the company. If this is not the case, performance management becomes more or less an arbitrary exercise.
HR executives can help ensure this by working with the CEO or executive team to share a detailed review of the company's objectives for the year with the entire organization prior to the individual goal-setting meetings of the employees.
Then, HR can coach operational managers to determine what finite contributions their team will make toward the company's overall objectives and how they break down for each employee. This helps to ensure that employees are aware that they do not just get paid for working hard, but for how their performance impacts organizational results.
Principle 3: Compensation Connection
Best practices also link compensation to performance-management systems so employees are able to see how their performance not only impacts overall company success, but their pay as well. The best systems are highly synchronized with yearly raises and bonuses.
It is important to connect the employee's final rating from the appraisal to a specific percentage range for potential raises and bonus potential.
Performance management must also be synched with other HR systems such as succession planning and career development. One very successful pharmaceutical company actually has mapped out visually how these HR systems impact each other. For example, the feedback from the performance appraisal dovetails into, not only compensation, but into the career-development processes, which also influence succession planning.
Principle 4: Compliance and Consistency
Companies often struggle with compliance to ensure that yearly goal setting and end-of-the-year evaluations occur. But this can be a tricky situation. If this effort is only about hard compliance, then people will only go through the motions and you will be better off not having any system in place.
To ensure the process is fully adopted into the organization, operational leaders and their management staff should be in charge of compliance. HR should not be the ones policing this effort but should offer support, such as creating metrics and reporting such measures to the executive team.
One client of mine elected to identify performance-appraisal participation as one of the key metrics on the company's dashboard as well as made the effective execution of performance management a mandatory goal for anyone with reports.
Critical Mistakes
There are quite a few ways HR leaders can ambush their own goals when developing and rolling out a performance-management system. And like with most mistakes, the intentions are probably good, but the impact can produce very harmful consequences.
No. 1. The "Whole Tamale" Syndrome
It is important to avoid what I call the "whole tamale" syndrome. Sometimes in their zealous approach, HR executives want to create the most perfect, comprehensive and sophisticated performance-management system.
But, if an organization does not have the requisite discipline of good PM behaviors in place, this approach makes no sense. Although the proposed system might be a paragon of performance management, it simply is just too much for the organization to digest.
In my practice, it has been a much better approach for an organization that has a less-than-perfect track record with PM to start with a simple system that everyone can understand and easily use. In time, employees will ask for the next levels of sophistication when they are ready for it, not when HR wants to give it to them. Iteration then becomes a part of the change management plan.
No. 2. Failure to Train on the Requisite Disciplines
It is important to remember that the tools and forms are secondary to the behaviors and skills needed for effective performance management. Therefore, it is imperative to develop the required discipline and behavior by training both managers and employees alike.
Too often, training concentrates only on the mechanics of forms or how to use the tool. In reality, effective performance management can be done on a napkin if there is quality of the dialogue, robust feedback and clarity of expectations between manager and reports.
Training must be focused on the principles of good performance management, not merely the instrument. The sessions should focus on the concept as a day-to-day process with formal sessions to document daily interactions and activities.
The key here is to build the requisite discipline and behaviors needed for good performance management, which will ultimately be recorded by the formal process. The forms or technology solution are secondary to the quality of relationship between manager and reports.
No. 3. Failure to Ensure Consistency
Unfortunately, as is often the case when a new system is rolled out, there is little attention paid to follow-up. Although compliance and policing should be done by the functional leaders, consistency of implementation and quality control should be done by HR. Human resource leaders have the ability to see the whole of the organization and surface any potential misalignments.
As soon as word gets out that a manger is generously giving away "exceeds expectations," while another manager will only award an "exceeds" if someone walks on water, the validity of the process is diminished.
If one manager diligently sets goals with their reports while another does not, a perception of lack of fairness will develop. HR needs to put a process in place to ensure there is a consistent application of evaluation and ratings.
This can be done in a variety of ways, but the outcome is to ensure that there is fairness and consistency across the organization. A simple way is by simply holding a series of roundtable discussions with managers to see if there are any scores or scoring tendencies that are not in line with the process.
The same goes for the quality control of the conversations and the forms being filled out. Sometimes, managers either need an extra level of support or need to have their work reviewed. This approach sends the message that the organization is serious about the process and will help to minimize sub-par execution.
Ensuring effective performance-management programs are in place is one way HR executives can have a tremendous impact on their organizations, especially during these tough economic times.
If a PM system is done well, everyone can easily use it and see the benefit. Managers and employees will be trained and retrained on the principles of good performance management and HR will act as the final employee advocate for a fair and consistent application of the system throughout the organization.
Ultimately, effective performance management has the ability to influence the overall success of an organization by aligning daily employee performance to the objectives of the organization, increasing employee engagement and cultivating a superb culture.
Michael Denisoff
is the founder and CEO of Denisoff Consulting Group, a management and HR consulting firm headquartered in Los Angeles, as well as a highly sought executive coach and inspirational speaker. He has helped many organizations, including Fortune 500 companies, develop and implement enterprise-wide performance management systems.
June 2, 2010 Copyright 2010© LRP Publications
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