When done well, performance management creates a shared sense of performance expectations across a company, gives employees meaningful feedback that helps them improve their effectiveness, and provides the organization with insight into the quality and capabilities of the workforce.   When done poorly, performance management has about the same level of strategic value as the process for completing expense reports.  It simply documents what people did in the past (and often does this very poorly), and has very little emphasis on improving what they might do in the future.

Using performance management to drive business execution is largely a matter of focusing on four things:

Accuracy: have you clearly defined the goals and competencies that people are being evaluated against?  Effective performance management starts with accurately defining what you mean by performance.

Relevance: Is performance management data used for anything that is important to the managers who are completing the reviews?  If managers know their performance ratings are going to be examined by senior leaders in the company and used to inform important workforce decisions then they will take them more seriously.  For example, are performance management ratings used to influence succession and promotion decisions?  Are managers expected to discuss their ratings with their peers, or do performance ratings just go into a file cabinet never to be seen again unless they lawyers show up?  Note, pay is probably the most common outcome linked to performance reviews.  While pay decisions are certainly relevant to managers, in terms of impacting the value managers get from performance data, tying performance to the pay of their direct reports is probably relatively low on the list.

Accessibility: Is it easy for managers to provide and use ratings?  Do they have access to the tools, skills and knowledge needed to make accurate ratings and hold productive employee feedback discussions?

Accountability: Do leaders in the company hold managers accountable for making accurate performance ratings?  What happens to a manager if they refuse to complete their performance reviews or provide poor quality data?

Focusing on these four areas will go a long way toward increasing the impact of performance management on business execution.   Conversely, a failure to think through issues of accuracy, relevance, accessibility and accountability is almost certain to lead to a performance management process that solely focuses on tracking the past as opposed to influencing the future.

DDI and Badbossology.com (that’s actually a real site) did a survey of 900+ employees to determine the worst (and best) qualities of a manager. And, the survey says:

A bad manager:

• Tries too hard to be everyone’s friend
• Micromanages
• Ignores conflict
• Arrogant
• Wishy-washy
• Impulsive
• Unable to delegate
• Impatient
• Stubborn
• Unprofessional

You’ll have to read the article as written up on CNN.com to find out the best qualities and to take the quick “how good a boss are you?” survey.

It’s easy to dismiss this stuff as just for fun – but when you consider that employees often leave jobs due in whole or in part to their relationship with their managers, this kind of thing takes on real meaning. And it’s also fun.

“One big thing that’s gone? Stack ranking. No longer am I judged against Charles and Adam and Tina and Jeff. Now, either I’m doing a good job for Microsoft or I’m not and my review will now reflect that.”

I know Dick Grote think that forced ranking is great (I just saw him discuss the topic at World at Work in Anaheim) – at least for a period of time – so perhaps Microsoft’s forced ranking simply outlived it’s usefulness. Perhaps they culled enough low performers to start demotivating the people that were left.

Thoughts?

Everyone thinks they’re above average.

This tidbit found via the Damn Interesting blog where they deconstructed a report by some Cornell researchers on the topic. What they found was that the worst performers in a variety of tested categories often rated themselves on par with the best performers and in most cases far above average. Top performers are of no help either. Even they weren’t able to accurately assess themselves, rating themselves lower than their performance merited.

The reasoning for these behaviors is fascinating. Poor performers lack the skills to perform – which are the same skills required to evaluate their performance. They don’t understand that they don’t understand, and so believe their abilities compare positively to their peers.

On the other hand, Top performers incorrectly assume that their competence is shared among their peers – leading them to rank themselves lower than they deserve.

You can see what this looks like in the chart above. People that fall into the lower three quartiles believe they performed better than they actually did. The highest performers underestimate themselves.

There’s relevance here to self-assessments as the HR world understands them. When asked to evaluate themselves on a variety of competencies, it would seem that people can be expected to incorrectly rate themselves most of the time. Poor and average performers will overestimate their abilities, and top performers will underestimate them.

So what to do? I think that the importance of gap analysis makes itself evident here. It’s only through external feedback that people can understand the difference between what they believe to be true and others’ perceptions of the reality. There’s nothing clearer than a competency gap:

 When you can see what you think about yourself right next to what others think about you – there’s simply nothing more compelling to a change in perceptions and ultimately, in behavior.

The responses are based on a 2003 report from Towers Perrin called “Understanding what drives employee engagement.” (PDF) Based on some statistical analysis, they arrived at 10 workplace attributes that they determined to be the most critical in driving employee engagement.

Of these 10, which are the most important in your organization?

We asked, “What is your most pressing HR issue?” 

We had 50 people respond to the poll, and the results are interesting. Despite all the talk about succession and compensation, the core issue (28%) for our respondents was Performance Reviews followed followed closely by Goal Alignment (24%).

To me, it indicates that Performance Management and Goal Alignment are still the biggest pain points for HR practitioners. They represent the heart of talent management initiatives, and Succession and Comp. are just further down in the hierarchy of HR needs.

I’d be curious to hear what you guys have to say about the results. Do you think they’re generally representative, or are they skewed for some reason?

The solutions are not the “end-all-be-all” and will not solve all of the issues in the performance review process.  They are though a huge enabler to level the playing field, eliminate (or at least minimize) the emotional factors involved during the difficult review process, and have the ability to build in the necessary flexible required to accommodate the changing demands of an increasingly dynamic workforce. 

The first bit: don’t be defensive. It’s everyone’s first instinct to try to prove why what we’ve done was the right thing, but often that response leads to a spiral of negativity. It’s a difficult response to control, but you’re better off seeing it as an opportunity to find out what you can do to improve.

1. What the heck is my job again?
Being just one piece of a bigger entity like a company is not an easy thing. It’s sometimes hard to know what part I need to play to add the most value. I want to add as much value as possible because I want to advance my own career, make more money and do something important with my life. Our performance management system lets me understand what I can be doing to support the company’s larger goals, know what’s expected of me and find opportunities to do bigger and better things.

2. Why is THAT guy driving a free Touareg?
At our company meeting this past January, four VW Touaregs were given out to top performers -people who add a lot of value to the company and our customers. Two went to salespeople. They bring in the bucks, so fine. But two went to regular employees. Why are they driving brand new, free cars (or getting watches, vacations, bonuses – you get my drift)? If I know why, I can work at those qualities and results and get myself a brand new ride next year. But what are those qualities, what is the measure of success? Without performance management, it’s anecdotal, arbitrary and simply unfair.

3. What is this company doing, anyway?
I now know what it is I’m meant to be doing (see #1), but what is everyone else doing? Why does any of this matter? What is this company striving at? What are the strategies and tactics that will make us all (and me, particularly) successful? Our performance management system lets me understand that. How what I’m doing aligns to what my boss and his boss are working on. Why what I’m doing matters. And I want it to matter.

4.  What’s wrong with me?
I admit it – I’m not perfect. I’m close, dammit, but I’m just not there – yet! What can I do to get better? What areas do I need to work on to perform at the next level? Without performance management maybe I’ll figure it out and maybe I won’t. With performance management, my development needs are outlined and I can know where I need… (ahem) work. Even better, I can get my boss to agree so when I nail those things, he has no choice but to admit it.

5.  What’s great about me?
Like I said, I’m pretty close to perfect – now tell me about it! It makes me feel good and lets me know I’m on the right track. Performance management forces my peers and my boss to tell me what I’m good at so I can lord it over everyone and do my special victory dance. Ok, no dancing, but you get the idea. People, myself included, like to know what we’ve done well so we can keep doing it.

6. Pay me more money. And a bonus, too.
What’s that, I achieved every goal we set out? Nice. Pay me. When I know what I’m being measured on, I can work against those goals. When I achieve them, there is no choice but to recognize my performance. If the company doesn’t, I can take my clear track record of success elsewhere.

What do you all think? What are the reasons you like (or dislike) the results of your performance management system or process?

It reminds me of all the times I’ve encountered such things in my own professional career. I once had a boss who was so generally offensive for lack of emotional intelligence that her staff was a constantly shifting grouping of people who rotated into her department hesitantly and out of her group as quickly as possible. Vendors would refuse the company’s business once they understood who they’d be required to work with. But this company had no formal performance management or 360 process that would have enabled the feedback that may have had a chance to fix things. The result was a largely ineffective group.

Changing people’s behavior is one of the most difficult challenges there is, but without an infrastructure for providing feedback, it’s virtually impossible. Hank Paulson, the CEO of investment bank Goldman Sachs delivered a memorable quote that I picked up somewhere:

“One of the things we have done for years is 360-degree reviews.  It’s amazing when you go to a leader and say, “There are 30 people who reviewed you, and 30 of them trust you.  But all 30 say you don’t listen well.”  It has an impact.”