25

Performance Management

Michelangelo is often quoted as having said that inside every block of stone is a beautiful statue. One need only remove the excess material to reveal the work of art. Applying the concept to education (or performance management), it would be pointless to make comparisons among children (or employees). Rather, the energy would be on chipping away at the stone to remove whatever was in the way of mastery. Give everyone an A—a possibility to live into and not an expectation to live up to.¹

The purpose of any performance management system should be to ensure that individual employees and the organization are producing their best: their best work, their best products or services. Managing performance for each individual employee is a process that starts with having a clear and documented description of the job’s roles and responsibilities. On the first day of employment, managers should set the framework for success, explaining job duties, expectations, and job-related behaviors. Employees should receive a copy of the job description. Goals and objectives should be discussed. Finally, employees should be briefed on company culture so they can gain an understanding of what success looks like in the new organization.

Performance management requires continual attention to each employee, monitoring and evaluating his or her performance against the job’s requirements and standards for success. This includes noting and acknowledging all incidents throughout the year, both positive and negative, and addressing situations that need adjustment or improvement when they occur. This ongoing approach assures that performance management is a process, not an event.

Performance management is under scrutiny and performance appraisals, which have traditionally been an integral part of performance management systems, are being carefully studied and reconsidered. Some organizations are abandoning them in favor of more flexible approaches. Understanding the traditional approach helps explain the emerging trends and future direction of performance management

Appraisals and Traditional Approach

There are varying methods of performance appraisals. Many of these methods have existed for a long time and were developed during the industrial era. Whichever method an organization may use, it should ensure that it aligns with its mission, values, and strategic objectives. These methods include:

    Category Rating Methods include different types. The most common and frequently used is a graphic scale, which rates the employee for each performance factor and for overall performance. Two other types of category ratings are the checklist with words or statements best describing the employee’s performance that can be weighted for quantifiable results, and forced choice with statements that best/least describes the employee’s characteristics and performance.

    Comparative Methods compare employee performance against others. Whereas these may be useful for some types of decisions, such as when organizations are faced with reductions in force, companies are abandoning these methods. There are three types of comparative methods: ranking, which lists employees in a work group from highest to lowest without considering the degree of difference between each; paired comparisons, which pairs and compares each employee with every other peer, one at a time, using the same scale for performance; and force distribution, in which a manager must place a certain percentage of employees into each of several categories based on overall performance without considering the degree of differences.

    Narrative Methods are particularly time consuming for use on an ongoing basis. There are two types of narratives. The first is essays, which reviews personal, job, or organization characteristics relative to the employee’s behavior and contributions. The second is critical incident, which describes behavior that makes a difference in the success or failure of a work situation. Incidents must be recorded as soon as possible after events. Documenting such incidents has value for any organization regardless of the method of performance appraisal in use.

    Special Methods include behaviorally anchored rating scales, which are numerical scales anchored by specific narrative examples of behavior that rate an employee’s performance of a specific task and management by objectives, which allows employees and managers to set objectives for the coming year.

A performance appraisal instrument or form has been an established part of the overall performance management process. Indeed, there are many sample performance appraisals forms to which organizations can refer when developing their own instrument. Review several examples and gather ideas, but be wary of defaulting to just one of these samples. If you wish to use such an instrument, design one that is right for your organization.

Typically, a performance appraisal form will list a number of performance factors. These factors have to make sense for your organization otherwise they have no relevance. If you are measuring something, make sure it reflects the needs of your organization. The number of factors used should be reasonable for the organization’s size and culture, somewhere between five and 10. The factors should also be defined.

    Appendix: Sample Performance Factors.

The aspect of performance appraisals most recently being debated is the rating system; for example, the graphic scale type of category rating method described above. If this approach is taken, an organization should ensure that the factors it has chosen are quantifiable. For instance, factors related to quality, output, or safety are objective and can be quantified. A factor such as strategic or independent thinking is subjective and may say more about the rater than it says about the employee being evaluated. If a rating scale is used, the organization must decide which rating style best suits its needs and how it will define each of the ratings. For example:

Rating Style	Advantages	Disadvantages
Three Ratings: Exceeds Expectations, Meets Expectations, Below Expectations	Simple, consistent, pass/fail	Too black and white, no judgment, no variation
Four Ratings: Exceeds Expectations, Meets Expectations, Below Expectations, Does Not Meet	No middle, forces decision, rewards the positive	Reduces judgment, skew to higher level, no average
Five Ratings: Outstanding, Exceeds Expectations, Meets Expectations, Below Expectations, Unacceptable	Bell curve, familiar, separates the exceptional	“C” grade for someone who meets expectations, manager vs. employee perspective

    Appendix: Sample Performance Ratings and Definitions.

    Appendix: Sample Performance Evaluation.

Beware of Rating Errors

Ratings are not fail-safe. A research study of what ratings actually measure revealed that 62 percent of the variance in the ratings could be accounted for by individual raters’ peculiarities of perception. Actual performance accounted for only 21 percent of the variance.³ Managers need to guard against these common rating errors, which distort objectivity either favorably or unfavorably. They include:

Error	Description
Halo/Horn Effect	One outstanding quality/negative dimension becomes the basis of the whole evaluation.
Critical Incident	A single episode, whether positive or negative, is given undue emphasis.
Contrast	Employees are compared to one other individual rather than against an established standard. The good performer might suffer if compared against a stellar performer.
Similar-to-Me	One employee who is similar to the manager is evaluated more favorable than others with different attitudes and backgrounds.
First Impression/Recency	An employee is evaluated based on performance early in the year/immediately preceding the performance appraisal rather than performance throughout the year.
Past Anchoring	The manager rates performance based on prior years’ performance evaluations instead of taking a fresh look.
Central Tendency	The manager rates all employees as average failing to distinguish among performance levels.

Although most of these errors are subconscious, managers should be aware of them and recognize those to which they may be susceptible so that objectivity is not impaired.

Emerging Trends

Why has this disillusionment with the traditional approach to performance appraisals evolved? The existing methods and approach are rigid and embody the following:

    Idiosyncratic rater effect.

    Form-focused, not people-focused.

    Judgmental, not supportive or developmental.

    Time-consuming.

    Rating-focused, not future-focused.

    Fuel anxiety, not engagement.

    Less meaningful in today’s fast-paced, service-oriented institutions.

    Forced to coincide with conceptual pay models as opposed to true performance.⁴

The way we work and the nature of the work performed in today’s organizations have changed. Organizations are becoming less hierarchical in their management structure. There is more of a focus on teams, which means that feedback and input about performance—individual performance and team performance—may be sought and given from more than one person and not just an employee’s manager who has formal managerial authority. In addition, organizations are finding that the traditional process of an annual performance review is time-consuming and expensive.

Do these criticisms mean that all organizations should abandon the traditional approach? That is something each must decide for itself. Some are totally embracing a new approach whereas others are making incremental changes. What an organization should consider is its industry and the nature of the work its employees perform. There are many types of jobs that may still align with the traditional approach, such as jobs in manufacturing or some jobs in call centers—jobs in which the work may be of a repetitive nature with little room for creativity and in which the tasks being performed are highly quantifiable.

An example of a new method can be found in the sweeping changes the consulting firm Deloitte made to its performance management system in 2015. It moved to an approach that was nimbler, real-time, and more individualized for the employee. Deloitte was adopting a focus that would fuel future performance rather than assessing what occurred in the past. The objectives of this new system are to recognize performance, to see performance clearly, and to fuel individual performance.⁶

To achieve the second objective, team leaders are asked to answer—on a periodic basis, not just once a year—four future-focused questions regarding what they would do with each team member, rather than what they think of the person. Two questions use a five-point scale from “strongly agree” to “strongly disagree” to measure:

1.    Overall performance and unique value to the organization: Given what I know of this person’s performance, and if it were my money, I would award this person the highest possible compensation increase and bonus.

2.    Ability to work well with others: Given what I know of this person’s performance, I would always want him or her on my team.

The remaining questions use yes-or-no responses to identify:

3.    Problems that might harm the customer or team: This person is at risk for low performance.

4.    Potential: This person is ready for promotion today.⁷

To support the last objective of Deloitte’s system—fueling performance—frequent conversations or check-ins between employees and team leaders are an integral part of the process.

Common Elements

Whether an organization wants to embrace the traditional or seek a new approach, there are a number of elements to consider—namely, developing objectives, assessing performance, providing feedback, documentation and data, and fueling future performance.

Developing Objectives

Objectives establish direction for the future and help to identify expected results. To be effective, they must align with team, departmental, and organizational objectives. Objectives should be flexible, taking into consideration changes in business conditions or plans. Changes in the business environment occur at a faster pace than they did in the past. Organizations today are reviewing and revising goals on a quarterly basis to ensure that employees stay focused on what matters most throughout the year.

Well-written objectives:

    Use action verbs, clearly stating what will be done and the expected results.

    Have results that are quantifiable, observable, or verifiable.

    Include activities and results that are within the employee’s control.

    Assure that targets are realistic yet challenging.

    Support business goals.

    Involve assignments that contribute to job responsibilities or address a developmental need.

    Use time lines or milestones by which to assess progress.

Finally, well-written objectives are SMART, meaning they are:

S—Specific.

M—Measurable.

A—Attainable.

R—Relevant.

T—Trackable.

    Appendix: Setting Performance Objectives.

Performance Assessment

Performance assessment is an analytic or evaluative process that determines how an employee is doing in the particular role or job he or she performs for an organization. Results will vary depending on the nature of the job. For example, sales employees may be evaluated on reaching a certain volume or dollar amount, a customer service representative may be evaluated on reaching a certain level of customer satisfaction, or a technical advisor may be evaluated for developing and implementing a new system successfully.

    Evaluate the employee against his or her job—that is, the specific requirements of position. Determine to what extent the employee met the position’s requirements using measurable, job-related criteria.

    Evaluate the employee against his or her accomplishments.

    Evaluate the employee against objectives and expectations.

If there are gaps between what is expected and what the employee achieved, those gaps should be identified, documented, and discussed. A plan to address those gaps should be developed, and that plan should identify any actions for improvement, including developmental needs. Of course, the employee’s performance may have gone beyond what was expected. In either case, that is where fueling future performance plays a role in performance management.

In the traditional approach, performance assessment is usually associated with giving ratings to performance factors. With the emerging approach, performance assessment can be more of a reflection of the organization’s values. Just because a performance factor is not quantifiable, does not mean that is not important. Rather than giving a rating or score to a factor (or value), the performance assessment is an opportunity to explain how an employee exemplifies a certain factor or lives the organization’s values. For example: “Creative thinking is an important part of your job as a designer, and you demonstrated your abilities in creativity with the new product line you developed. Through the prototype, you showed innovation and the ability to produce the products in a cost-effective manner.”

If there are behavioral expectations associated with a job, it is important that those expectations are clearly written and communicated for the particular role. If performance ratings are being used, standards that match those ratings should also be clearly defined. This will facilitate an objective evaluation that minimizes any bias and provide meaningful information to the employee. For example:

Performance Feedback and Conversations

Performance appraisals answer an important, fundamental question for employees: “How am I doing?” People want feedback, some more frequently than others, because feedback provides:⁸

    Reassurances that they are contributing and doing the right things.

    Awareness of the impact of performance on desired results, such as customer satisfaction.

    A measure of the adequacy of performance (quality, quantity, speed, etc.).

    Recognition of the importance of and value of their performance to the organization.

During the feedback stage, the manager is asking and answering the following questions:

    What?

    What is the behavior that is not working?

    What is working?

    What is the expectation that is not being met?

    What is the expectation that is being met?

    So what?

    What is the impact?

    Why is it a problem? Why is it great?

    Now what?

    What can the individual do differently to achieve the desired results?

    If not, what is the consequence?

Feedback should be ongoing. Frequent feedback lets employees know they are making a contribution and that their contributions are valued. That’s what motivates and retains people. Providing feedback about day-to-day accomplishments, rather than waiting until exceptional or ineffective performance is observed or, worse, once a year, is very powerful. To be effective, feedback must be a two-way communication process:

    The manager’s responsibilities include providing feedback in a constructive, candid, and timely manner.

    The employees’ responsibilities include seeking feedback to ensure they understand how they are performing and reacting well to feedback they receive.

Having effective, ongoing performance conversations between managers and employees is probably the single-most-important determinant of whether or not a performance management system will achieve its maximum benefits.⁹

Managers, team leaders, even peers have to be comfortable with giving qualitative feedback. Yet these conversations don’t come naturally for many individuals. The following are guidelines that may help:

    Create a positive, communicative atmosphere.

    Be sure to allow ample time for the meeting, and don’t allow interruptions to occur.

    Engage in dialogue. Listen to the employee’s perspective.

    Provide specifics and avoid vague, general statements. For example: “You failed to deliver the product specifications on time which demonstrates poor preparation and resulted in budget over-runs.”

    Chapter 26 (Critical Conversations) has additional guidance.

Documentation and Data

A strong rationalization for the traditional performance appraisal instrument has been that it provides documentation for future management decisions, such as an out-of-cycle raise, a promotion, or a termination. Yet, many a human resources professional, when faced with a request by a manager to terminate an employee because of performance, is perplexed after reviewing the last annual performance appraisal, which had nothing but positive comments and ratings. Clearly, it was not fail-safe.

Documentation of employee performance and conversations with the employee about the performance, whether positive or negative, should be created and maintained. As organizations are moving to more frequent assessments and check-in discussions with employees, there’s no reason a one-page assessment that addresses the employee’s contributions cannot be prepared. Also emerging with the redesign of performance management systems is the use of new technology to capture and analyze performance-related information.

General Electric (GE) has introduced a phone app called PD@GE that employees use to assess both subordinates and superiors in order to facilitate more frequent feedback.¹² The consulting firm Accenture is also building a proprietary app that will more easily chart ongoing performance discussions. With the human resources function becoming more data- and analytics-driven, the ability to leverage technology to capture this information can both help identify trouble areas in which concerns show up repeatedly and target developmental programs. Capturing information real-time in one digital app has the potential for greater legal defensibility around employment decisions.¹³ Of course, managers and employees alike will need to be trained on the appropriate use of such apps to assure they are not being misused and are effective. Information placed in such apps should be used to facilitate, not replace face-to-face conversations.

Fueling Future Performance

When managers assess employees’ performance, they determine if an employee is experiencing any gaps or if an employee is exceeding performance expectations. Whatever the manager concludes, the next questions he or she should ask are “What about the future? How does the organization help the employee grow in his/her current role or prepare for a future role?”

If there are gaps in performance, an employee is often placed on a performance improvement plan. These are positive plans that can and should be implemented at any time. They focus on specific gaps or opportunities and address what can be done to correct them.

Performance improvement plans have between three to five tasks that need to be achieved. Each should include:

    A task definition that describes specifically what needs to be completed.

    An action plan that describes how the task will be completed and how the results will be measured.

    An expected date when the task needs to be completed.

When an employee falters, it is easy to focus on what he or she does wrong. However, there may be other factors contributing to the problem, such as:

    Training. Is an experienced employee, who moves quickly and summarizes critical information, training a new employee? Is the new employee too intimidated to ask questions? Is the trainer training while being expected to meet deadlines? In other words, the training took place, but the learning did not.

    Colleagues and constituents. Are others not holding up their part of the bargain, missing meetings, or forgetting to do things?

    Customers. Customers do not come in neat tidy packages. Are they part of the problem?

    Life. Are there other factors, such as illnesses, families, automobiles, or dogs and cats, affecting the employee’s ability to focus on the task at hand?

None of these variables eliminate the responsibility of the employee to meet performance expectations. They do, however, affect how a manager approaches performance issues and must be considered before an employee is held solely accountable. In addition to the above issues, a manager should also be asking:¹⁴

    Were my work assignments clear?

    Was I available when I needed to be available?

    Were my deadlines reasonably based on the employee’s workload?

    What did the employee need from me to do this assignment successfully?

    Did the employee have the resources necessary to complete the assignment?

    Were there extenuating circumstances that are not readily apparent that affected the employee’s ability to meet the performance expectation?

    What are the specific facts of this performance issue?

    Did I establish a workable process for keeping track of the employee’s progress on this assignment? Did I support the process by being available and supportive when the employee needed my help or input?

    How have I addressed similar performance issues with other employees in the past?

    Am I approaching this situation with a goal of creating an opportunity for this employee to be successful in the future?

    Appendix: Plan for Performance Improvement.

Fueling future performance, not merely improving performance, is a powerful objective that all organizations should embrace. It goes to the core of performance management. Recognize strengths and leverage employee talent. Grow the individual along with the organization. Continuous learning and improvement is necessary for any organization’s success. Don’t take for granted that good performers need no encouragement for continued growth. Put energy into inspiring everyone.

    Chapter 23 (Best Approaches to Developing Employees).

Launching an Appraisal Process

When you design and implement a performance appraisal, consider:

    Is the appraisal process aligned with other HR systems? Are the performance factors, behaviors, and competencies the same as those used for recruitment, staffing, and development?

    Have key individuals been involved in the design? Will they be involved in the implementation process?

    Have you conducted a pilot test in order to evaluate the process and make improvements? Have you identified any flaws or omissions and made corrections? Are you certain that the managers and employees in the pilot understand and support the process?

    Have you communicated what you are doing so managers and employees understand it?

    Have you trained employees and managers on their roles and responsibilities?

A good communication plan is key to engaging employees and managers. Publicizing frequently asked questions and answers (FAQs) is an additional way to engage the staff and reduce anxiety. Training employees and managers ensures that they are motivated to use the system and will use it effectively. Topics can include roles and responsibilities, setting objectives, giving and seeking feedback, and how to use the appraisal instrument or automated system. Classroom training is a desirable format because it can train both groups on how to provide and receive feedback effectively and give them an opportunity to practice.

Generational Considerations

As younger generations enter the workplace, they bring with them different expectations. These differences impact the way they view the world, and the way they need and want to be managed. For managers to effectively manage performance, they need to be aware of some of the fundamental differences of these generations.

People are different and individuals are unique, but common experiences shape a generation’s thinking. We form most of our views during the first 10 to 15 years of life based on what was happening in society and the outside world during that time.

Baby Boomers are still a force in the workplace. Smart organizations will continue to engage this generation even as they prepare for retirement because they possess a great deal of optimism, institutional knowledge, and intellectual capital. Generation X-ers are adaptable, self-reliant, pragmatic, and creative. They love technology, have confidence in dealing with authority, and are willing to embrace diversity. They seek balance and flexibility in their lives. They want to see results and may sidestep rules in order to achieve them. They learn quickly and want development, continuous learning, coaching, challenging work, and innovation.

Millennials have high expectations and self-esteem, and are confident, goal oriented, and inclusive, as they were raised with diversity. They are tech-savvy and can multitask.

This generation needs a transactional approach in dealing with employers. Their ease with technology makes them would-be experts on everything and a good target for just-in-time strategic approaches to thinking, learning, and communicating.

Legal Considerations

    Chapter 3 (The Legal Landscape of Employee Rights).

    Appendix, Guidelines for Documenting Workplace Issues

In preparing a performance appraisal, a manager is creating documentation regarding the employee. Poorly prepared appraisals could be used as evidence to show inconsistent treatment of employees. However, good documentation can support a decision for taking an adverse action against an employee, such as reassignment, demotion, or termination.

To assure that performance appraisals are legally defensible, they must be reasonable, generally understood, accepted as objective and fair, and focused on job-related activities and behaviors. They should not mention characteristics and traits that may relate to race, sex, age, or any other legal protections. Finally, they need to be reliable or consistent. If the same employee were rated by several different managers for the same review period, the results of the appraisal would be fairly consistent if the instrument and the process were reliable. Organizations should consider having a formal appeals process if an employee feels that his or her evaluation was not fair or lacked objectivity.

Discussion Questions

1.    What are some of the major strategic choices organizations should make in implementing a performance appraisal?

2.    What steps can a company take to assure its performance management system reflects its mission and values?

3.    What are some of the values that cannot be quantified (for example, you exhibit the behaviors or you don’t)? How can those values be evaluated?

4.    How is your organization responding to the emerging trends involving performance management?

5.    If an organization abolished performance appraisals, what should it do instead?