When I speak to business leaders and owners there is one HR area in particular that always grabs their attention- how can I make my staff more productive? The discussion usually then turns to what they are currently doing in terms of managing performance. In bigger companies business leaders invariably point to an existing performance management system that they often dislike. In smaller and medium sized companies it is invariably confirmed that there is no system in place.
If a business buys capital equipment with a commercial purpose it will generally have some key measures by which the value it is generating for the business can be measured. By way of examples: company cars can be measured in terms of mileage, fuel efficiency and depreciation. CNC machines can be measured in terms of speed of operation, maintenance costs and quality of products made. Servers can be measured in terms of processing speed, transactions and downtime. Even a desktop printer can be measured in terms of yield per cartridge and pages printed per minute. Everything that costs money in the workplace can -and should- be measured.
Despite the above, employees are more often than not let loose in the workplace with limited metrics in place or none at all. As I continually say, in management you can’t manage what you can’t measure. So why -given that businesses spend up to two thirds of their turnover on labour- are they so bad at performance management? And why, given that businesses are so bad at managing performance are so many business leaders still surprised that key HR measures such as quality of work, productivity levels of discretionary effort are so poor?
Having designed and helped to design many performance management systems -both in the corporate world and of course via Reach Higher Human Resources™- I would point to the following as key considerations in creating a performance appraisal system that will work:
1. It comes from the top | In the same way that creating a safe working culture must come from the top, any hope of creating a dynamic high performance culture must be driven from the same place. If a business thinks that it can task middle managers with creating a high performance culture from the middle and then disseminating down and up simultaneously then forget it. It won’t work. Don’t waste your time.
High performance cultures come from leaders who want to lead from the top and set an example of the behaviours and standards that that they expect others to emulate. Very few businesses currently fall in to this category, in my experience. Some businesses fail in this regard by choice. Most through ignorance. Some businesses are simply led by individuals who have a high risk appetite and who are therefore happy to stumble along with limited HR controls or none at all. Such an approach will sometimes work for some businesses who have a particularly healthy profit margin linked to their operational activity. For the majority of businesses however -who have gross profit margins of between 3% and 25% a keen interest in effective performance management should be a no-brainer and facilitation of this must come unambiguously from the top of the organisation.
2. It’s not a disciplinary or redundancy scoping exercise | Performance management is viewed with deep suspicion by many employees. This frequently applies even in those businesses where a higher degree of trust has been achieved. In my opinion the main reason for this is that the majority of employees have had bad experiences of performance appraisals at some point in their working lives. This can be for many reasons including: the format used, the perceived true purpose of the process or something as simple as the fact that nothing of any relevance happened from one year to the next even though a process was in place.
In addition to the above, far too many businesses let inexperienced line managers loose on performance appraisals without training them to an acceptable level. This often leads to reviews taking place that quickly turn from performance discussion to dispute and conflict scenarios. Some businesses even permit performance management (sometimes inadvertantly) to be used as mock-disciplinary processes (i.e. ‘you had better do this better or else’) or an opportunity to build evidence for future dismissals linked to poor performance or redundancy. If employees perceive performance management to be negative it will never be embraced or assimilated in to the organisation effectively. Once this has become the prevailing view it is extremely difficult to change individual or collective attitudes.
The basic format of performance management is actually very simple and should be structured as follows:
- Set objectives (must be attainable and measurable wherever possible)
- Set review periods and agreed measures
- Undertake reviews (on time and as agreed)
- Provide feedback outlining successes and areas for improvement
- Set new objectives (must be attainable and measurable wherever possible)
- Cycle begins again
This is of course a highly simplified version of how performance management is structured. But in essence this is the framework of a performance management process.
3. Performance management is like exercise | Straight after Christmas every year gyms up and down the country are full of people who want to get fitter, slimmer or both as part of their new year’s resolutions. By Easter most have given up because they found it too hard. Unfortunately, for many businesses, the decision to place a focus upon performance management is often like making a new year’s resolution. It starts with genuine intent but when results aren’t seen quickly enough and the initiative soon withers on the vine, interest wanes and the whole thing soon disappears.
If a business wants to see medium and longer term benefits from performance management it has to commit to the process for the long-haul. There are some instances where performance management might see rapid short-term gains -sales environments might be a case in point to some extent- but on the whole, to see noticeable benefits, much patience and perseverance are needed. If a company doesn’t have the desire to play the long game it would be better advised not to raise internal expectations in the first instance.
4. Quality of management actions are far more important than system formats | Some organisations still use paper performance management systems, others now use electronic formats and cloud-based systems. Whatever the format used, the way in which performance management is delivered and managed is a far more important consideration.
Let’s say an organisation decides to invest in a very expensive electronic performance management system. But there is a lack of engagement with the initiative, poor communication and limited buy-in amongst senior stakeholders. The potential benefits of the performance management system in such a scenario will be significantly reduced. In fact, in such a situation the system being introduced is at significant risk of simply becoming an expensive white elephant. If this does happen, questions will inevitably then be asked -rightly so- about the value of the investment and the return on investment it has provided.
Creating a high performance culture should be seen as a component part of a race to the top journey in a much broader sense. Meaningful leadership from the top, effective communication, a good training strategy and many other considerations will, in concert, all lend themselves to delivering meaningful cultural change. Simply setting the bar at a given level without parallel changes to support the hoped-for improvements will simply lead to most employees falling under the bar. To summarise, if a business buys an expensive performance management system but doesn’t manage it and other considerations correctly, it will be akin to buying a very expensive car and then not putting fuel in the engine.
5. Don’t move the goalposts | If a business has successfully navigated its way through the above considerations and developed a performance management system that is working or starting to work, the last thing it should then do is move the goalposts. Making significant alterations without fair reason will only serve to damage trust and confidence. At worst businesses may even find themselves in constructive dismissal situations.
Moreover, at the heart of any effective performance management system is a fundamental need for fairness and objectivity. If the system is seen as skewed in favour of particular individuals or groups it will meet with resistance and potential legal challenges. An effective performance management system that works well essentially aligns the effort of all employed within the company in such a way that functional levels of the organisation dovetail in to one another synergistically. Or put another way, the cumulative effort of the organisation is pointing toward delivering the common purpose of the business.
6. One cap doesn’t generally fit all | For most businesses there are a potentially diverse mixture of operational and support roles within the organisational structure. This is not always the case. But it is more often the case than not.
I have worked in and suuported organisations where the performance management system has been designed as a broadly generic process for all staff. This kind of approach doesn’t work. Objectives and measures need to be relevant for the individuals and groups in question. For example, if a business had production staff as the main element of its workforce with a ten to one ratio versus support staff, each group will require a performance appraisal format that suits each defined group. There are of course exceptions to this. For example if the whole workforce is being measured on ethical behaviours and other “softer” company values. But if there is a commercial dimension in terms of how performance is being assessed -as there invariably is- this needs to be factored in to the design process relative to each functional area concerned.
One question that always seems to arise is whether performance management systems should be linked to remuneration mechanisms such as bonus payments. Some within the HR community strongly object to this. I disagree. I see no problem with it per see so long as the correct methodology is considered along the lines summarised above. If linking the two is likely to drive a net loss from a behavioural or indeed financial perspective though it is almost certainly best avoided.
Many organisations make statements along the lines of ‘our staff are our greatest asset’ and in many cases there is an honest belief that this is true. But far too many organisations dream of but never implement a performance management system that delivers tangible benefits to the business. At Reach Higher Human Resources™ we have all the necessary skills and experience to help organisations realise the huge benefits that are to be had in this key area of HR expertise.