This post is number 3 of 3 in a series of illuminating thoughts on Performance Management by Steve Farmer of Illuminet.
I have run hundreds of Performance Management “best practice” workshops over the 14 years I have been a facilitator. Before I work with any business I ensure I spend time understanding the business and as part of that I always ask a fair number of questions about the Performance Management systems and processes that are in place, including the links from such to “reward”. Something that comes up time and time again is that a significant percentage of businesses (both private and public sector) either: –
- Exclude any form of “assessment”
- Don’t link any assessment they do include to any form of reward
- Include assessment and link it to reward but do so in a way that employees view as either somewhat arbitrary or simply “unfair”
I see too many Performance Management policies and processes that fail to achieve what surely should be the point, namely to improve the performance of employees and thus, ultimately, drive up the overall performance of the business.
I also see a large percentage of processes that are entirely future facing. Typically the process being called Performance Development and the form sets known as “PDP” or “PDR” with the focus in appraisals being on “what we need you to do/improve next year” but with no “marker” as to how you actually did in the previous year. I also often see the term “Performance Management” as one negatively tainted as to what happens when employees don’t perform to a satisfactory standard – the phrase “I’m going to have to performance manage” this individual, being one that is heard far too often.
So my view as to “best practice” is formed from a combination of my own business insights from being a manager in the past, those businesses I have worked with who have Performance Management processes that work effectively to drive performance up, and whose employees think the process is largely fair, and numerous articles written by people widely regarded as “business gurus” and goes like this: –
- The process and form sets should be straightforward, understood, fair and applied consistently
- Line managers and employees should have received training that allows them to be effective and efficient in working with the process
- Assessment is a crucial part of the process – we don’t have a strong view on the “rating” system used but something simple like 1-5, 1-10, A-E, or even use of wording such as Fail/Fall Short/Met/Good/Exceed are all fine
- Assessment outcomes should absolutely link to reward – whether that is a performance bonus %, a pay rise %, promotion escalation, talent pool, weekend events, boxes of wine etc. – is for each business to decide.
- Reward linked to individual performance is independent of any “profit share scheme”, however the best processes link the two together i.e. overall business performance establishes a “bonus pot” and then that “pot “ is divided out according to individual (and sometimes “team”) performance
- Failure to give “assessment” and link that to “reward” results in a low/average performance culture as there is no incentive for people to want to perform really well.
- Assessment must be based not only on the “what” (the extent to which someone delivers on their “tasks”) but also on the “how” (the extent to which they have delivered on such tasks utilising behaviours that promote business values)
- To be “fair”, organisations must help their managers by giving guidelines as to what level of performance a basic salary is paid for (we call this “calibration”) and managers must work together to ensure they are not being unfair in relative terms to another manager (we call this “equalisation”).
Getting all the above in place and working well is not easy, but my view is that it is a crucial aspect to attend to in order to even have a chance of harnessing a high performance culture and one which drives business performance up.
I hope you have found this short series of articles interesting and informative. Certainly the feedback and comments I have received confirm my view that management performance in the area of performance management is not always satisfactory.