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.

To, know more or talk to our experts please feel free to email us at reach@people-equity.com 




3 comments:

  1. Thanks for this example on how to use Linked In Polls (or Answers) into producing a view on how people from around the world sees these management 'tools'.
    About the central question:
    We've started testing a different approach to 'performance evaluation' a few years ago and are, at the moment, finalizing the structure that may be used in all companies. Our approach is to start from the bottom with self-assessment tools.
    Operators and technicians (those who are only responsible for their own actions) fill their own self-assessments that are to be reviewed by their supervisors;
    Those who are responsible for a team, a sector or a direction, also fill a self-assessment, and are evaluated by their team members; The revision is made by their 'superiors' by comparing the evaluation results found;
    The same happens with the C-Level: self-evaluation + evaluation from those with direct report to them; the revision is done by the consultant and the C person directly.
    This is not easy to be accepted, we know... What we've done was to start using it at NGO's, social enterprises that aim to perform as best as possible to help their fellow human neighbors having trouble in any aspect of their lives.
    Anyway, we have seen results: the first social enterprise we've worked (and are still working) with has become the nr. 1 non-governmental company in terms of clients’ satisfaction in Portugal, one year after we've started and is keeping its position!
    How does this work? It's meant to act as one's conscience: each one knows better what one is not doing right, so she/he will review what is of interest to the Client that is not being done as it should and will signal the needed improvement.
    We've found out that self-assessments are, when done with the needed attention, harder on the collaborator than those who are produced by others.
    And that happens because each one knows what she/he WANTS to do, and the competition will be between what one WANTS to be versus where one is at each moment, and it will not be against whoever.
    If you look at it this way: isn’t this what Daniel H. Pink is also saying?
    We also defend that there should be no rewards attached with the process, rather then the recognition of the collaborator’s evolution.

    http://luiscochofel.wordpress.com/2009/06/17/the-conscience-the-reason-and-the-body-had-a-meeting%E2%80%A6/

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  2. As I've shared this link on Facebook I've received two fresh thoughts about the question you're dealing with in here.

    One of them is from someone who probably is asleep at the time I'm posting this and he could not have the time to either come and post his thoughts or to allow me to come and paste his comment in here.
    The other one, came from a US friend who immediately allowed me to do this. Below these line you'll see his name and his thoughts:

    Colin Courtney:

    Good points from everyone. Management P M systems are only as good as they are relevant to the area of assessment. This is a real problem when those who programme the system do not fully understand the structure, triggers, timeframes, etc, of the areas they measure. Consequently, many areas are measured in an irrelevant way, which produces a false result, and consequently, KPI's. Additionally, many changes can be based on these results, so, you can see where error can be amplified through a business. I have experienced this first hand and it is a difficult mess to undo, mainly because the perpetrators, usually senior management, will not accept responsibility for their error. in depth consultation with those concerned is essential, to ensure the factors which matter are those analysed.

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  3. As expected, Debashis Nayak, my other friend who came into the discussion as I've shared this post of yours as allowed me to paste his thoughts into this area. Here's what he had to say:

    Debashis Nayak:

    Very well said Luis - Employee Performance Management Systems seems just a past-buzz-word, now-a-day - no rewards and recognition - it is just a system, per se! Organization should look at refining their scales by different metrics for measuring the indices, because most KPIs are hard to measure at some points. Plus, the process is quite a cumbersome when it comes to be implemented in larger organizations!

    in a first moment, and, after having read Colin's thoughts:

    Debashis Nayak:

    Hello Colin - thanks for your wonderful practical comment. Senior management must be very pro-active to make EPMS more flexible and trust-worthy system for each employee in the organization. I feel the role of HR is very crucial while dealing with employee emotions that somehow attached to position evaluation or appraisal system.

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