How to... Manage Performance

A recent survey of performance management in the U.S. serves to confirm what many of us have known for some time. That is, the process can be time-consuming, stressful, unproductive and often irrelevant. According to Adobe’s survey of 1,500 American office workers, performance reviews also stir unhealthy competition amongst co-workers, increase personal stress levels and can result in dramatic reactions, such as crying and quitting. Ultimately, according to Adobe’s V.P. Donna Morris, the process is ‘demotivating’.

Nothing New

Of course, there is nothing new about these findings. Performance management or appraisal has long had its detractors. As far back as 1957 the motivation guru Douglas McGregor called into question the value of such assessments, whilst by the 1980s the ‘total quality’ champion W.E. Deming was describing appraisals as the ‘third deadly disease’ of management. At the same time surveys of personnel professionals in both the U.S. and Britain had found that less than 20 per cent were satisfied with the effectiveness of their systems. In the same decade Allied Irish Bank was not pleased to discover that less than a quarter of respondents to their in-house survey agreed with the statement:   ‘I receive good feedback on how I’m doing’. Nor was the bank encouraged by the fact that more than half of the surveyed staff felt that the system was ‘not useful’ in regard to either their future career development or their current work responsibilities.

The dubious merit of the practice was also highlighted in the 1990s by Professor Keith Grint at Oxford University, concluding that ‘rarely in the history of business can such a system have promised so much and delivered so little’. Toward the end of that decade the Chartered Institute of Personnel and Development (C.I.P.D.) reported that a third of survey respondents believed that performance management was time consuming, bureaucratic and had little or no impact on performance. Further reflecting the questionable merit of the practice, at the start of the new millennium Professor David Guest at King’s College, London recorded that – from a survey of 835 private sector companies – only 14 per cent of Managing Directors adjudged it to be ‘highly effective’, whilst only 34 per cent considered it to be ‘quite effective’.

The suspect status of the practice was still evident in 2015 when almost 9 out of 10 Irish Civil Servants couldn’t agree with the statement that ‘poor performance is effectively addressed’, whilst only 8 per cent of those working in the Taoiseach’s dept. agreed that ‘ratings are fairly allocated’. Related thereto, pouring more cold water on the practice, the Harvard Business Review (H.B.R.) recently went so far as to conclude that ‘ratings reveal more about the rater than the ratee’!

Drop The Practice

Against this backdrop it is not surprising that Professor Gary Dessler at Florida International University should conclude that ‘a vast array of studies’ reveal that traditional performance appraisals are ‘often not just useless but counterproductive’. Hence, it has long been suspected that managers might drop the practice entirely if they didn’t have to make decisions about development needs, promotions, pay rises, terminations, transfers and admission to training programmes.

Making matters much worse, the Ford Motor Co., Goodyear, 3M and Microsoft have all recently reached multi-million dollar out-of-court settlements with employees who were disgruntled about the outcome of their review meetings. Even Google got caught for the relatively modest sum of €110,000 before the Irish courts in 2014, arising from allegations about an inaccurate employee assessment.

The Case For Retention

Despite this barrage of criticism, there is also extensive evidence to support the case for proper performance management. Beyond the fact that the practice continues to enjoy wide scale use, much of the current criticism focuses on the ‘rank and yank’ version. Popularised by Jack Welch at General Electric, ‘rank and yank’ is a term used to describe the performance management process by which an organisation ranks its employees against each other, and terminates the employment of those at the lowest end of the ranking (that's the yank). However, Willis Towers Watson’s 2015 Irish survey confirms that only 10 per cent of organisations here are ‘ratingless’ and fewer still are going ‘rating less’ across the EMEA.

The value of performance management was also evident from Saville and Holdsworth’s 1995 survey of large organisations across Britain, which found sizeable majorities in agreement that such systems are  ‘very good\good’ for reviewing past performance, setting individual objectives, improving current performance, determining bonuses, identifying training and development needs and motivating staff. A decade later the C.I.P.D. found that 62 per cent of line managers found performance management to be useful and that 75 per cent of surveyed companies agreed that the practice motivated staff.

Notably, successive studies indicate that firms with effective performance management processes in place outperform those without such systems on several critical measures, including profits, cash flow and stock market ratings. For example, in 2003 U.S.-based Development Dimensions International established that organisations with strong performance management systems are 51 per cent more likely to outperform their competitors on financial measures and 41 per cent more likely to outperform them on non-financial measures, such as customer satisfaction, employee retention, and quality of products or services. At around the same time the Henley and Hay Group survey of top F.T.S.E. companies and public sector respondents reported that 68 per cent of organisations rated their performance management system’s effectiveness as ‘excellent’.

Of course, there is also a large and consistent body of research which confirms that setting targets – an integral part of the performance management process - is a powerful way of increasing motivation and performance. Several studies indicate that effective objective-setting type appraisals increase goal achievement by as much as 30 per cent. The value of the approach was also underlined in one extensive review which discovered that organisations introducing an appraisal cum Management-By-Objectives system, with a high level of senior management commitment, achieved average productivity gains of over 56 per cent, compared with average gains of just over 6 per cent in the case of organisations where such commitment was lacking.

Hence, in the face of such contrasting conclusions and the indications that performance management will be with us for the foreseeable future, it would seem to make good sense for the H.R. dept. to apply ‘best practice’ to the operation of their performance management system. The following 6 step process enables them to do just that:

1. Review the System

It's nonsensical to expect performance management systems devised years ago to remain effective. Would you expect it of your IT, marketing or financial management systems? Given the current emphasis on such practices as coaching, mentoring, competencies, strengths-based appraisal, 360-degree feedback etc., systems should not be allowed to remain static and become ritualistic, as they will quickly fall into disrepute and be neglected. A full formal evaluation exercise, enabling key constituents to revamp or redesign an ailing system, is central to its success.

2. Engage the Managers

The support of management is crucial to a successful system. This can be secured by involving managers in the system's (re)design process and ensuring that they are reviewed on their performance management responsibilities. It also helps to secure feedback on the system's effectiveness, making sure that the process and any associated training is conducive to upward feedback to identify where it's not being prioritised.

3. Address Interpersonal and Interviewing Skills

Human judgements, subjectivity/bias, personality and interpersonal skills are all inherent to the process of performance management. Hence, many managers are petrified about - and unsure as to how to - provide (positive and constructively critical) feedback. Appropriate training, incorporating coaching and interviewing techniques, help here. Reviews should be part of an ongoing process, with the formal review meetings addressing the jointly agreed objectives, factual performance and personal development data, with an emphasis on self-assessment rather than style or personality. They should also provide an appeal mechanism.

4. Define the Objectives

Performance management encounters difficulties when addressing a number of objectives. For example, when used for reward-related decisions, any developmental impetus it is intended to have is threatened. Playing judge and counsellor at the same time is highly problematic. It is best to opt for a combination of agreed, consistent and compatible objectives. Where this is not feasible, some organisations opt to conduct separate interviews at separate times of the year for the separate purposes. Furthermore, many organisations are now concentrating just as much on ‘how’ goals were achieved (i.e. competencies), rather than relying solely on ‘what’ was achieved.

5. Remember to Follow Up

The manager who promises to provide additional resources or some form of personal development option is unlikely to enhance the system's reputation (or their own) by persistently failing to deliver. In the long run, the system is judged by the extent to which recommendations arising from review meetings actually materialise. This is a concrete way of showing that the process has inherent merit, as opposed to the ‘tail wagging the dog’ - where it’s undertaken just to keep the HR department off people’s backs.

6. Minimise Paperwork

Many managers already feel inundated with paperwork and so resent the additional and often extensive form filling associated with these systems. This is exacerbated by the fact that the forms are rarely ‘living documents’, but remain stored in the files\archives of the HR department. So it is important to remember that the purpose of performance management is to motivate the employee for the purpose of improving organisational performance -- not to generate more paperwork or computer files. So it is important to live the ‘Keep It Simple’ (K.I.S.) maxim. That is, the purpose of every performance management system is to MOTIVATE the employee for the purpose of improving organisational performance – not to generate more paperwork (i.e. the less paperwork the better).

Key Points

• The main objective of performance management is to motivate staff to higher levels of performance.
• Don't destroy your credibility and the system by making false promises.
• Keep the paperwork short and simple.
• Evaluate the system's effectiveness periodically – and if it needs to be re-designed, do so.

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Source: McMahon, G. (2016), Successful Performance Management: Effective Strategy, Best Practice And Key Skills, Liffey Press, Dublin. 

Dr. Gerry McMahon is delivering two of Legal-Island's practical workshop events in May:

Successful Negotiating Skills: Getting to Yes (3rd May 2018, Radisson Blu Hotel, Dublin Airport)

Successful Selection Interviewing (30th May 2018, Radisson Blu Hotel, Dublin Airport)