The results-management system is not a variant of commonly used appraisal systems. It is a holistic management system to improve individual and collective productivity.

Appraisals, rewards, and talent management are important parts of the results-management system, but relative to the establishment of performance measures and managing of performance, they need less time to learn.

If measures are established well and performance is well-managed, very often performers can make their own self-appraisals objectively, comparing the results achieved against the results expected. This reduces the need for much training in interpreting descriptors in different functional contexts, conducting appraisal interviews, achieving understanding and acceptance on ratings, and handling disagreements on ratings.

The people who need to know the details of the why, what, and how of compensation and talent-management systems are the HR professionals, who have to design, develop, and maintain the systems for line managers to operate within.

The results-management system is designed for line managers to help their direct reports achieve greater individual productivity. Appraisals alone cannot achieve this. An appraisal is the summative evaluation of a year's work and the results achieved against results expected or desired. Most of the work is done at the beginning (when results expected are established) and during the year (to make sure results are on track).

Different professional groups use the words "appraisal," "assessment," and "evaluation" for different purposes and in different contexts. Since line managers are not interested in the semantic differentiation of the three words and concepts elsewhere, we would use them in the context of performance measurement and management in business organizations and not-for-profit organizations.

In the context of an organization such as Resu Co., we use the word "appraisal" as in "performance appraisal," which is to make a summative evaluation of all the actual results achieved by a performer against targets set at the beginning of the year, or (as circumstance dictates) revised during the year.

"Assessment" is usually associated with talent assessment or the assessment of potential.

The word "evaluation" as in "training evaluation" is used to measure the effectiveness of training in the acquisition of attitudes, skills, and knowledge to apply on the job to achieve results. Evaluation therefore looks at variances and their causes between the actual and the prescribed. It is part of the management-control process, which compares work in progress and the interim results achieved and work completed against targets set. It is also about determining the cause(s) of any variances.

The gist of the management-control process described below is based on the work of Louis A. Allen, a management guru whose fundamental concepts and principles on management are as valid today as when I started on my management career in the early 1970s.

An evaluation of periodic results reviews undertaken during the year are known as diagnostic evaluation. That is, it sets out to find the cause of a problem of work in progress. This is different from the end-of-year appraisal, which is stock-taking or summative evaluation.

Making a balanced performance-appraisal rating with objective measures is not merely a matter of comparing whether targets were met or not met. It is not an entirely computational exercise to be left to a computer after input from the periodic results reviews. A certain degree of judgment is needed, based on the data presented, to arrive at a final rating that will be understood and accepted.

If it is not a straightforward computation, how then does it differ from the behavior-anchored rating scales that require moderation or forced ranking to arrive at a normal distribution?

There are three levels of judgment, or decision making, about the overall evaluation of an individual's performance, as outlined in Figure 4.1, below.

Figure 4.1. Evaluating Individual Performance

At a totally objective level, all that is needed is inputting the actual results achieved, comparing them against the expected results on a spreadsheet, and computing the overall rating. Little or no judgment or decision-making is required by anyone. The computer is the evaluator, not the manager or the performer.

However, during the assessment year, there could be circumstances beyond the control of the performer. These could be factors that affect results, such as epidemics, natural disasters, power outages, material shortages, lost shipments, armed conflicts, and so on. A performer may not meet his targets because of these or he may meet his targets despite them.

There could also be instances where a target is missed by a day or a single unit. These situations require refinement after the quantitative evaluation, because, to be fair, these are not normal circumstances.

Subjective judgment can be fairly accurate with experienced evaluators, just as an experienced mother will be able to diagnose a crying baby's ailment fairly correctly without going to a physician to verify with test results.

Similarly, an experienced physician can do accurate impressionistic evaluations. Along the same reasoning, judging panels for beauty contests, music contests, debates, gymnastics competitions, diving and other performance areas use experienced people to judge.

However, such ability with impressionistic evaluations is usually confined to a small percentage of managers within an organization. For the majority, without objective results on which to base judgments, the probability of error will be higher.

There is also the performer's reaction to consider, and this includes the understanding and acceptance of the evaluation, especially when the emotive element of pay is involved.

A balanced judgment—based on results and taking mitigating factors into account—reduces the probability of error in judgment. It also gives the countersigning manager a basis for endorsing or not endorsing the immediate superior's judgment or evaluation.

For this, a five-point rating scale can be used, as follows:

With a three-point scale, the ratings would be restrictive, and there may be a tendency to add in a plus or minus in deference to the feelings of the person being appraised. This would result in a lack of consistency and rigor. A seven-point rating would give too wide a spread and may weaken the consistency among raters.

The specifications for each rating are left to individual organizations to define according to its corporate values and the performance standards desired. These ratings must be understood, accepted and applied throughout the organization for consistency of practice.

To illustrate the need for balanced judgment in refining evaluations, I presented the workshop participants at Resu Co. with the following case involving the Service Manager of a consumer-electronics distributor to consider.

The Service Manager's job was to provide after-sales service in equipment repairs and parts supply. These were his Professional/Technical Functions (Key Results Areas) for which targets were set:

These were his Managerial Functions (Key Results Areas) for which targets were set:

Using Sales Revenue from the Professional/Technical Functions area as an example, the groups were asked to arrive at a balanced performance rating on the basis of the following information.

Functional Results Area: Sales Revenue

The groups discussed this in their groups. These were their evaluations:

Functional Results Area: Sales Revenue

From the same set of facts the groups produced quite different final ratings. For the Engineering Group it was "a straightforward matter of two Above Targets and two Below Targets. On balance, the overall result is On Target."

For the Production Group, however, "the renewal of maintenance contracts is very important. That's why we rated that performance as Far Below Target. As for re-dos, it is only one percent off target, and we rated it Below Target, giving an overall rating of Below Target."

The Sales and Marketing Group's reasoning for their rating for an area within their area of concern and expertise was as follows: "We gave Target 1.0 a Far Above Target rating, as it's very difficult to average $200, 000 sales per month under current economic conditions. As for achieving 10 percent more in parts sales, we rated it Far Above too, because most people prefer to go elsewhere for non-original parts, which are less costly. It is actually a hard target to achieve and to exceed it is really commendable. As for maintenance contracts, we agree with the Engineers that it is Below Target. As for re-dos, we think this has great impact on customer perception and may affect our future product sales. Therefore, we rated it Far Below Target. The overall rating is sort of averaged out to Above Target."

The Facilities Group reported that, like the Engineering Group, they had done the ratings in a straightforward and logical manner, thus arriving at the same conclusion.

The Finance Group explained that they agreed with the Sales and Marketing group's rating for monthly sales and sale of parts. However, they rated renewal of maintenance contracts as Far Below Target because this had long-term impact on future revenue. Also, having heard the Sales and Marketing group discussing the impact of re-dos on customer perception, they revised their rating from Below Target to Far Below Target, giving them an overall rating that was still Above Target.

The HR Group agreed that exceeding the average monthly sales revenue in the current economic climate deserved be rated Far Above Target. They rated sale of parts Above Target, and gave a Below Target rating to the renewal of maintenance contracts, which they said "should be a routine process for us to stay in business, as most of the other services are part of our warranty commitments." Taking into consideration the "inconveniences and irritations" caused to customers by re-dos, they rated this factor Far Below Target. This made their overall rating On Target.

From all of this it is clear that while some managers will take the results at face value and arrive at the overall results accordingly, others may consider the level of importance of the targets, or the difficulty entailed in achieving them.

We must not forget the implications of these evaluation considerations and ratings on the performer, especially if they affect bonuses and increments when these results are used for deciding compensation and rewards. That being the case, should we take into account the relative importance and the difficulty level of each target, besides looking at Efficiency (Quantity and Time) and Effectiveness (Quality, Cost, and Human Impact or Reaction)? Possible objections to doing so might be that this would make the process more subjective and might be seen as giving excuses for not achieving the targets. Is it not the case, as Eugene from the Engineering Group asserted in the discussion that followed, that "results are results, no matter what the causes are"?

When an organization sets its targets at the beginning of the year it makes them challenging and achievable in the context of the conditions that prevail then. The level of difficulty should only be considered perhaps when conditions change to make it easier or more challenging. It is this factor that underscores the value of periodic results reviews, in that they provide a better idea of what is happening at ground level and in the market place during the year. The information they provide throws light on those who have performed well under difficult circumstances, as well as those who have not met their targets. Talented performers can be recognized and rewarded, making it more likely that the organization will retain their talents.

Conversely, there may be others who exceed their targets but only because conditions became less challenging than when the targets were set. For example, a competitor closes down and you are the only supplier in that location. Or political conditions may change to make things easier, as when during the Gulf War former colleagues in a dry-cell battery company found that they did not have to leave their desks to go the Middle East to sell, as the orders just kept pouring in. In such situations, the level of difficulty becomes lower and this too should be taken into account during evaluation, so that there is fairness and no unnecessary envy.

Again the value of periodic results reviews is apparent: they help us to understand how ongoing conditions are affecting targets, whether they are being met, not met, or exceeded, and the difficulties that have to be overcome. They also serve as recognition of effort put in.

I then listed on the flipchart the usefulness of the periodic results reviews in helping appraisers to arrive at balanced performance ratings:

The Periodic Results Review Record for four quarters from our example above might look as shown in Figure 4.2. Such records would be used to provide a summary of the whole year's results.

From all of this, we can conclude that the following factors must be considered if we are to make a balanced performance-appraisal rating:

The level of difficulty (high, medium, or low) can only be ascertained over the year, depending on conditions affecting the achievement of the targets.

It is vital that the performer understands what the superior's expectations are and where the areas of focus should be. These have to be understood and agreed on when targets are set at the beginning of the year.

Considering level of importance and level of difficulty also serves another purpose. Some targets cannot be exceeded, such as achieving zero accidents. If a plant is able to achieve zero accidents after a defined period of operation, then this target is very well achieved, and should be rated Far Exceeds, taking into account the level of importance and level of difficulty.

Let's say the relative weighting between professional/technical work and managerial work for the Service Manager is 50/50, and these are the following overall results for each results area.

How do we arrive at the overall performance rating in this case? Should we accord the Service Manager an overall performance rating of Exceeds Expected Results or Fully Meets Targets? I put these questions to the workshop participants. The following is a summary of their deliberations.

Figure 4.2. Periodic Results Review Record

In Eugene's view: "If we were to use points and ranges to depict each rating level, then whether there are three results areas above target or just one above target, with the rest on target, the overall rating will be Exceeds Expected Results. Of course, we can adjust our point ranges to reflect the type of performance standards and corporate values that we cherish, as you said earlier on. Using an impressionistic evaluation, I would also rate Exceeds Expected Results for Z, except that the contrast with X may appear stark and unfair."

Sally added: "The results would be different if you had specified Sales Revenue and Customer Service or Staff Communications as being more important than the others. I suppose if we want to accord Z the same rating as X and Y, we could add in another fine-tuning factor, maybe Teamwork, to reflect our corporate values. If Z has displayed great teamwork, then we can comfortably rate that as Exceeds Expected Results. This is one way of building teamwork into the work culture, as part of our value system. Of course measures have to be established for teamwork too so that there is measurability."

All of these suggestions can be used as guiding concepts to establish an evaluation system that is applicable throughout the company for consistency and fairness. They can incorporate the organization's corporate values, the expectations of each superior, the performance standards required within each department, and so on.

But there has to be a basic framework to use these factors on, so that there is at least perceived reliability and validity in the summative evaluations. The steering committee set up to implement the results-management system will need to establish the guidelines and framework for the evaluation system to capture the organization's values.

Rather than simply appraising Professional/Technical and Managerial Performance, a comprehensive performance appraisal system could include the upholding of the organization's values such as teamwork and also competencies gained during the year.

It could be in three parts:

The results could be used to compensate accordingly, such as:

The steps involved in an annual performance-appraisal discussion are set out in Figure 4.3.

Using this process does not guarantee that the discussion will be contention-free, especially when monetary rewards are related to the appraisal rating. However, because the system is results-based, it makes it possible for the performer to do a self-appraisal that reduces the need for defensiveness. As mentioned in the chapters on Performance Measurement and Performance Management, ownership of the results and acceptance of accountability as though the performer were conducting a business-within-a business will increase the likelihood of a business-like conduct of this sensitive phase in results management.

Figure 4.3. Annual Performance Appraisal

Key Points to Ponder

• Performance appraising is only one aspect of a results-management system.

• We appraise performance, assess potential, and evaluate results achieved against results expected to ascertain causal factors for variances.

• Evaluating results for work in progress is diagnostic evaluation done during periodic results reviews.

• Evaluating results for work completed is summative evaluations which is done at the end of a year in the form of a performance appraisal.

• There is an element of informed judgment involved in making balanced appraisal ratings, and making such ratings is not a mechanical or computerized process.

• A balanced performance appraisal takes into account not only results achieved, but also the level of difficulty experienced in achieving them.

• Some key results areas are more critical than others and carry greater weight so that performers know what to focus on.

• A comprehensive appraisal system should take into account:

  • appraisal of past contributions;

  • appraisal of present adherence to corporate values; and

  • appraisal of competency development for the future viability of the enterprise.