Thursday, 28 July 2011

Are Employee Performance Management systems actually helping organizations improve performance?

Come April-May it is the season for companies to embark on that dreaded annual rite, the often hated, time-consuming performance review. The process can be bitter for many, as a vast majority or organizations in India evaluate employees based on systems that pit them against their colleagues in the name of healthy competition.

Adopted mostly as a means to motivate employee to their highest levels of performance, rewarding the best and acting tough with the low performers logically seems to be the right way to go. But the practice increasingly is coming under fire as it and hinders positive collaboration and teaming and risk-taking. 

Daniel H. Pink in his paradigm shattering book Drive (The New York Times Top 10 Bestseller) explains that “the secret to high performance and satisfaction in today’s world is the deep human need to direct our own lives to learn and create new things, and to do better by ourselves and the world”. He suggests that it is about time that organizations evolve their people management tools to cater to the new motivational needs of professionals.

In this context the research team at Medallion decided to study the issue of employee performance management through a firsthand interaction with HR practitioners, the implementers of these systems, and line managers and employees, the users of the systems. The aim was to gain a greater understanding of modern trends in performance management, the techniques that work and practices that are questionable and need a serious relook.

The research included a random poll on Linkedin, one of the most trusted professional networking sites, which received over 300 responses as well as in depth discussions with over 20 industry leaders from across multiple industries. Both the surveys elicited responses from HR professionals, non-HR professionals, who have used or have experienced performance management systems in their work environments.  

The Linkedin poll through a single question “What do you hate most about performance management system?” brought out some interesting results. A third of the respondents believed that performance management systems they have encountered actually fail to meet their primary objective of helping and motivating employees improve their performance. The second most commonly cited issue is the inability of the immediate supervisor and/or the HR to take accountability or provide adequate explanation for the ratings given, as one of the participants put it “If you are fortunate, you will have a manager who provides (you) more specific information on how each category relates to your work”

(For the poll results click here)

The comments on poll and the detailed discussions with industry professionals helped us analyze and understand the poll outcomes. Most organizations introduce performance management as a tool to track and thereby encourage higher performance among staff, however more often than not, the emphasis remains on “measuring past performance” than “motivating higher future performance”. One of our survey participants comments that Performance management “is seldom used to improve overall efficiency and motivation levels of employees.  Often mistakes and errors are highlighted without suggesting how to avoid/reduce such mistakes. It has hence become a chore or a routine activity and has lost its purpose.”
A lot of time is spent of grading and rating staff, often pitting team members one against the other, creating a negative impact on teaming and as a result jeopardizing the overall team performance. Often concepts like the forced ranking, bell curve or “bottom 10” push line managers or HR to manipulate rating, which they are then unable to explain or justify to staff.

These issues and many more weaken the credibility of performance management systems among employees and end up encouraging employees to compete with each other when they should be collaborating, putting organizational performance at great risk. Dissatisfaction with ratings invariably results in loss of talent to competitors and some managers compound the problem by pretending that employees are easily replaceable by new hires. So while these techniques may seem to work in short run, the benefits are likely to dissipate over the long term.

Having identified the drawbacks of grading system, is not an easy task to replace the existing system and yet find ways to foster merit-driven cultures that motivate standouts while staying tough on low performers. What then should organizations do to do away with some of the drawbacks, while still retaining the core purpose of performance management?

  1. Shift focus from the past to the future – It does not help employees to be only told that they performed poorly, unless it is followed up with specific feedback on what and how they need to improve things.  
  2. Make feedback a continuous process – How does it help the employee to be told that he had performed below par on a project 10 months back, when an immediate feedback with action items for improvement would have actually helped him in his subsequent works. Periodic informal feedbacks upon completion of tasks and assignments are a must to ensure effectiveness of the formal cycles..
  3. Avoid Surprises – Inefficient managers, in order to avoid the discomfort of giving critical feedback time and again, bottle it all up till the formal appraisals and shock the employee with the ratings. This can be very frustrating for employees, especially to receive a poor rating, while otherwise have been expecting a good rating.
  4. Work through positive reinforcements – It is a well accepted theory that positive reinforcements have a far more powerful and lasting impact that negative reinforcements, hence the systems should enable encouragement of even the low performers through positive stokes.
  5. Make it less number based – People and their performance are more than what can be signified by a grade or rank. While it is easier to deal with grading scales and rankings, especially while dealing with a larger workforce, it may not be the best approach, as it tends to leave a huge gap on developmental front. A survey participant comments “The challenge for managers is to make the performance management outcomes more actionable rather than just numbers/charts on a page. The critical part of successful performance management is in the coaching & development of employees and that is where the most organizations (fail).”

People Equity helps organizations remodel and upgrade their performance management systems, to cater to the changing needs of current day professionals, through introduction of techniques of goal setting, positive reinforcements, continuous constructive feedback and many more etc.

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