Performance Management: A Discussion

Definition

Performance management is a management process that supports a company in the achievement of strategic goals and objectives. It assists managers in setting clear performance expectations for all employees that are aligned with the strategic goals. It provides a structure for employees to develop the skills they need to achieve the company’s strategic goals. By focusing employees’ effort on activities that impact results, providing ways to measure those results, establishing accountability for those results, and providing development that enables success, the potential of each employee is maximized. This ultimately leads to company success.

Performance development is a management process that supports employee development in alignment with the strategic and current goals and objectives of the organization and the individual or team performance requirements. It is driven by individual and team assessment against performance standards. This assessment is followed by a gap analysis that results in an identification of prioritized needs. Development plans are constructed to address the gaps. Development activities including on the job experiences, training courses, formal education and self-directed learning are implemented, recorded and measured.

Key Ideas

Performance management and development are management processes. They are the means by which employee and/or team performance is developed and aligned with organizational goals.
Performance development is a subset of performance management.
Both processes can be used to communicate organizational requirements.
Both processes measure employee’s performance. Performance management measures results and provides development opportunities. Performance development measures development needs and also provides opportunities for development.

A Management Process

Performance management is a management process. Managing, directing and developing the performance of employees is the role of all those who supervise. This process includes setting performance expectations in alignment to organizational goals, measuring employee capability in relation to expected performance, ensuring effective feedback/coaching and training/development, effective resource allocation and coordination. This encourages employee motivation and enables them to succeed in meeting expectations. The outcome of this process is optimal employee productivity and performance.

Many organizations choose to make the methods, practices and expectations of performance management explicit and systematic through the design and use of a Performance Management or a Performance Development System. The drivers for doing this include:

Improve the communication of strategy and goals of the organization to staff
Speed up the development of required skills in the workforce
Ensure that all employees receive the required level of development
Increase the taking of personal responsibility for results
More fairly distribute rewards based on performance
Provide documentation for recognition, rewards, discipline and termination
Provide data for succession planning and leadership development
Reinforce organization expectations e.g. loss control, customer service, health, safety and environment.
Improve employee morale
Improve performance and productivity
Create the capacity for learning, innovation and organizational change

Since performance development is a subset of performance management the information in this discussion will address the features of a Performance Management System.

Purpose and Goals of Performance Management

The purpose of Performance Management is to align employee performance with business strategy, goals and objectives, increasing the skills, motivation and productivity of individuals and teams.

The following are typical goals of a Performance Management System:

Effectively communicate organizational strategy, goals, and objectives to individual employees and teams.
Communicate the performance expectations of employees in relation to work (the what), behaviors (the how) and to what result.
Align employee and team development with the current and strategic needs of the business.
Increase the learning capability and performance of employees and teams.
Increase individual and team accountability for results.
Effectively tie employee and team rewards to performance.

Methods

This process of managing performance has been made explicit and systematic through the use of specific methods and tools. The following have become widely accepted features of Performance Management Systems.

The system cycle begins with performance planning. This usually includes the setting of expectations for the results to be achieved. These are frequently framed as objectives. This step can also include the review and acceptance of broader performance expectations that can include strategic competencies. Job responsibilities are also discussed and clarified.
Training and development that is required to enable the employee to meet the expectations is identified. A development plan is developed. This may include plans for on the job coaching as well as formal training and other learning focussed activities.
Performance is then monitored and coached and feedback is given on a regular and “as needed” basis.
At the end of the cycle performance is evaluated in relation to the performance plan and summary feedback given. This may be recorded for use in other systems e.g. succession planning, staffing
Performance throughout the cycle is documented.
Employee motivation is addressed, frequently through the compensation system.

The Challenges

The ability of individual supervisors to align employee performance to organization strategy and goals requires their ability to understand and translate these into employee performance requirements. Organizational goals are often not clearly communicated to supervisors and the setting of performance expectations is a skill that is largely untrained and undeveloped. Alignment is affected.
Because of the compensation component, the system is often “owned” by HR departments. This has meant that line management sees the system as administrative rather than as a core business process.
The emphasis on the achievement of results and increasing employee accountability for results has frequently meant that how results are achieved is ignored. Employees who obtain the required results at the expense of other individuals and groups are rewarded setting an ineffective standard of behavior.
Measuring employee results also requires skills in measurement. Poor or non-existent measures often mean that employees are frequently held responsible for results whose quality has been affected by factors outside of their control.
As training is frequently seen as an expense rather than as a necessary investment, promised employee development is neglected. This results in a decrease in morale and a distrust of management.
Supervisors are rarely measured on the ability to coach and are rarely held accountable for the development of their employees. Performance management activities are then seen as an add-on and time waster by many supervisors.
Research has indicated that rewards approaching 15% of salary are required to motivate performance. Rarely is this amount available for performance bonuses. Many employees feel that the “pay for performance” assessment is “much ado about very little”. The process is punishing rather than rewarding.
For many organizations results are achieved in teams or groups, often in the absence of direct supervision. Performance Management systems that are designed to reward individual performance as assessed by individual supervisors can work against business objectives in a team based organization.
When assessment is done for distributing performance pay, employee may not be honest about development needs. Development planning activities in this situation are rarely effective.

The Remedies

Build the system as a management process not as an HR administrative system. Analyze the existing management practices of business planning, communication, and performance management.
Identify existing performance management practice and skills. Develop the purpose, goals and measures of the performance management system. These should build on the existing management practice strengths and develop the areas where effective practice is non-existent or weak. For example, if management already focuses on and creates accountability for results but does not communicate individual performance expectations clearly, use the same process for results but strengthen it by adding a practice around setting expectations. If results are being obtained and rewarded but ineffective behaviors are being used, include behavioral competencies as part of performance assessment activities. If supervisors do not have the ability to coach and develop, focus the entire system on development (creating a performance development system).
Design the practices that will become standard throughout the organization. These include what will be done, when it will be done, who will do it, what will be documented and how it will be measured.
Develop the tools that will be required to use, manage and measure the effectiveness of the system. This may include forms, instruction booklets, on line databases etc. Pilot test these tools and methods.
Communicate to the organization the purpose, goals and methods of the performance management system. Ensure that doing performance management activities are part of supervisory performance expectations. Sponsorship and modeling by senior management is key.
Train both supervisors and employees in how to conduct and participate in performance management activities. Remove other obstacles. E.g. other competencies, development assessments, information systems
Manage the process of change throughout implementation providing coaching, support and consistent expectations.
Measure the effectiveness of the implementation and make adjustments where necessary.

Some Design Options

Behavioral competencies to reinforce strategically required behaviors, to measure the “how” of result’s achievement and/or identify development needs.
Multi rater or 360 feedback as part of assessment
A system that focuses primarily on development
Employee initiated development activities
Development planning activities conducted in team setting.
Performance assessment in a team setting
Team-based performance rewards
Standardized assessment criteria for routine jobs
Employee self assessment
On-line tools and information support
Alignment with selection, career development, succession planning systems, competency based pay

Some Questions to Consider

How is employee performance currently being managed and developed?
What improvements need to be made to increase productivity and profit?
How will improvements in employee performance management affect your business? E.g. more strategic skills, improved learning ability leading to increased flexibility, improved employee motivation and commitment, improved management/ employee relationships etc.
What is the company’s past experience with performance management activities and systems? Any “baggage” to get rid of?
What is the level of trust and communication between management and employees?
Is the company strategy, goals and objectives clear to all?
Are organizational and team results planned, communicated and measured effectively?
Are both quantitative and qualitative measures used?
What resources are available to “manage” the performance management system, its activities and outputs?
How committed are leaders to “walk the talk” by using the system and holding others accountable for its use?
How skilled are supervisors at coaching and communicating?
What experience does the organization have with learning, training and development?
How committed is the company to develop employee skills?
Is there an existing “pay for performance” program in place? If so, what is the perception of this system?
How skilled are supervisors and employees at measurement?
How heavy is the workload of supervisors? Will performance management be seen as an add-on activity?
Is the organization team centered?
Are jobs mainly routine or are they project or objective based?

Summary

All organizations manage and develop employee performance. Most companies could do this more effectively, releasing more employee potential. How performance management and development expectations are made explicit, systematic and measurable must be designed to meet the specific needs of the organization. The system must consider current management practice, the improvement goals of the company and the features of the culture and operating environment.

Creating employee buy-in and enabling people with the skills and resources to participate effectively in the process requires the use of quality design skills and top-notch change management. The outcomes of increased employee motivation, learning, development, productivity and alignment are worth the effort.