Repairing Performance Management

Editor's Note:  I am pleased to feature today's post from guest contributor Howard Risher.

Last week I received one of those email messages telling me “performance appraisals can be painful”.  This organization claims to have surveyed X thousands of managers and employees and learned that only 6% of CEOs and 13% of managers “find [appraisals] useful.” 

How many times have we read something similar?

That message stood out because the same week I was working on a soon to be published article by Ed Lawler and two colleagues on best practices in performance management.  Ed has been one of the ‘gurus’ in pay and performance now for 40 years.  The article summarizes the findings from a survey of 100 large companies, focusing on the practices that contribute to effective performance management.

As editor of Compensation and Benefits Review, I invite the best thinkers to publish, but was particularly pleased to receive this manuscript from Ed and his two colleagues. I recommend the article as a must read.  I am not about to give away their conclusions, however; the article will be available in a couple of weeks.

Their analysis shows clearly that the effectiveness of an organization’s approach to performance management does not ride on the ‘system’ design or on the use of technology. This finding should not be surprising to anyone who has followed the research.

The survey results demonstrate that far more important than the system is the leadership by senior management – they need to make it a priority -- and the ownership and accountability of managers. Lawler’s conclusion is consistent with my experience: Line managers are the keys to success. HR has virtually no involvement in the day-to-day management of performance.

One of Ed’s recommended practices is: “Develop measures of the effectiveness of the system.” Their survey finds that few companies have developed these types of measures, but in those companies that have, the practice has “the highest correlation with the effectiveness of the system of any survey item.”  It’s also highly correlated with the perceived effectiveness of the HR function itself.

That came together with the strategy adopted by one of the country’s intelligence agencies. They have a highly successful pay for performance system. They conduct an annual audit of their experience based on employee surveys, targeted interviews, and focus groups. They also created small teams of high performing specialists – ‘Professional Advisory Boards’ is their name--  to identify performance criteria for the major occupations. The HR staff analyzes performance ratings and financial rewards. A summary of these findings and planned changes are provided to the workforce.

Each year they use the information collected to refine and improve their pay and performance practices. It is effectively a commitment to continuous improvement. No one knows more about the best way to plan and evaluate performance than experienced managers and job incumbents. With guidance, they are completely capable of identifying solidly defensible performance criteria.

It is completely logical to ask managers and employees each year to assess how well the system’s working. After all, if the ‘system’ is a tool for managers, they will know if it’s meeting their needs. They will also know its strengths and weaknesses.

Reporting that a performance management system is not “useful” is hardly surprisingly or helpful. This federal agency essentially takes those surveys one step further, asking – “OK, if our system is not as effective as it should be, how can we improve it?”

It should be obvious by this point – the Holy Grail of performance management is a myth. Conducting an annual audit and committing to employees that problems will be addressed will be considerably less disruptive and less costly than investing in an entirely new system.

Howard Risher is a private consultant who focuses on pay and performance. His career extends over 40 years and includes years managing consulting practices for two national firms. He recently became the editor of the journal Compensation and Benefits Review. He also has an MBA and Ph.D from the Wharton School of the University of Pennsylvania. Contact him at [email protected].

 

Creative Commons image: "Hard Hat with Hand Tools Inside" by toolstop

Comments

[John A Bushfield]

Ann - Looking at this topic in a systematic way makes perfect sense, and goes a long way towards making the exercise both useful and effective. As an evolutionary matter, however, continuing to describe it as 'performance management' is a barrier that needs to be overcome to make the measurement of organizational success relevant to those who contribute towards it. In the new world 'managing' performance is a misnomer; in fact, the term 'management', and all of its derivatives, will become increasingly obsolete. In the old command and control model management defined and evaluated what workers were supposed to do and how they were supposed to do it; thus performance management was coined as describing a management driven task. This is, or will be very soon, no longer the case. Technology and demographics are driving rapid, radical change in the way work is defined, and all the old metrics will no longer apply. In fact, the nature of compensation and rewards will need to be re-thought in the context of new business models that are evolving in the marketplace. As long as hierarchical thought drives business practices those practices will not be effective in obtaining desired results. As the old saying goes: you can put lipstick on a pig, but it's still a pig.

[Ann Bares]

John:

Thanks for your comments - I've brought them to the attention of our guest contributor in the hopes that he'll share his thoughts in response as well.

For my part, I would agree that some of our old ideas about management, at least in the Frederick Taylor sense, no longer fit the way work is done in many places today. Ultimately, compensation and rewards will have to adapt. Although I'm inclined to think that while there are many elements about our pay approaches that no longer fit today's world of work, there are also many principles about effective rewards that are timeless and must always be given their due. These include a clear and defined purpose, thoughtful balance, and clarity - among others.

As always, I appreciate your stopping in to the Cafe and sharing your take on the conversation!

[Howard Risher]

Ann invited me to respond. I agree with Ann.

John, no one would accuse me of defending old ideas. Nor does Ed Lawler who triggered the blog.

But it will be some time before you can sell your idea to senior management. Yes, the old command and control approach is or should be buried. However, as long as groups have leaders, they will want to have the final word on what needs to be accomplished and to decide at some point if it was.

I think you will find the term 'performance management' is not as old as you suggest.

Performance appraisal was the phrase used for years and is still frequently and unfortunately still used.

I first worked with self-managed teams in the 1970's, fully support the idea, but even then they do not decide what they want to accomplish without input and guidance from management.

[E. James (Jim) Brennan]

Change is not binary but additive. Trends overlap and concatenate, so that every new alternative simply increases the number of viable options and extends the complexity of the observation universe. New waves rarely totally eliminate all predecessors. New technology will not completely displace all prior paradigms. Not all workers will be virtual even twenty years from now. Brick & mortar working environments familiar to the 16th Century will still remain somewhere.

[Earl Sweatshirt]

Agree with John. Performance management is an outdated concept, at least where I work. We eliminated it a long time ago, as well as the idea of management in general. We found out that people don't need to be managed, they can manage themselves and know instinctively what to do. "Top management" stays out of our lives and we have little contact with them. We come and ago as we please and work on many projects that have questionable benefit to the company. We used to know what the company's objectives were through the PM process, but we found that it didn't matter much if we knew them or not. We don't consider it as coming to work, as much as doing our thing. As John implies, this is the wave of the future in a management free organzation.