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Making Performance Management More Manageable

A new survey by OnPoint Consulting reveals that managers and HR professionals alike are disenchanted with their performance management systems. The survey, which involved 115 HR professionals and 441 line managers, found that more than half of the respondents have a negative view of their companies' systems. "We found that only 44% of the line managers and 45% of the HR professionals believe their companies' current performance management systems deliver value to the business," says Jennifer Forgie, managing partner at OnPoint. "Furthermore, only 43% of line managers and a surprising 46% of HR professionals believe the time spent on their performance management systems is worth the investment. And only a paltry 30% of respondents say their systems achieve their intended objective to a 'great' or 'very great' extent."

All this dissatisfaction drives many organizations to tinker endlessly with the details of their performance management systems—revising the rating scales, moving from paper-based to software-enabled, adding or revising competencies, and so forth. In fact, 60% of study participants report that their performance management systems have been altered in the past three years.

But these changes don't necessarily translate to success: "Only 24% of respondents believe that reported changes actually improved their organizations' performance management systems," Forgie relates. "Furthermore, more than half of the respondents with the worst performance systems report they have made changes to their systems in the past three years."

So what is the answer? While there are no one-size-fits-all solutions, OnPoint's survey yielded some useful insights:
  • Resist the temptation to keep tinkering with the evaluation process. Almost any system will work if you get managers committed to using it. As mentioned earlier, organizations like to fiddle with performance evaluations by changing from a four-point rating scale to a seven-point one, shortening the evaluation form, or by ditching their old paper-based system for a more high-tech computerized one. But, as Forgie points out," the system components that people seem to change most frequently do not directly address the primary obstacles we discovered in our survey: lack of clarity between pay and performance, inconsistent application of the system, lack of commitment to developing people, and lack of managerial skills. Generally, it's a user problem, not a system problem. Pick a system, commit to it, and make sure everyone is on the same page."

  • Ensure that your performance management system has the six critical factors that impart fairness, accuracy, and value to the business. Seventy-five percent of the survey respondents say they do believe it's possible to develop a system that fairly and accurately measures employee contributions to business results (though only 40% believe their current systems fit that description). Three factors tend to earn a system the "fairness & accuracy label":

    —The system helps employees build their skills and competencies.
    —The system is applied consistently across the company.
    —The rating scale enables managers to accurately differentiate levels of performance during the annual reviews.

    Three additional factors that not only impact the perception of fairness and accuracy but also impact the perception of overall business value, leading employees to believe the system is worth the time invested:
     
    —It helps to build a high-performance culture.
    —It provides useful data that is used for succession planning.
    —It provides useful data that drives leadership development initiatives.

"Basically, people know what a good system looks like, but most don't believe these six criteria are in place in their systems," adds Forgie. "We found that 45% or fewer respondents rated these factors favorably."

"Organizations seem to recognize the importance of skill training, but the focus appears to be on the annual evaluation meeting," she notes. The majority of companies in the study, 62%, provide managers with training to conduct effective performance evaluations. Yet fewer organizations—only 53%—provide the skill training related to setting goals and coaching and feedback. "If you don't have clear, measurable goals in place and provide ongoing coaching and feedback,” says Forgie, “it's almost impossible to have an end-of-the-year appraisal that employees see as fair and accurate, no matter how well the manager conducts the meeting."

In addition, the study found that only 46% of companies surveyed provide training in development planning. "This is surprising," says Forgie, "because we know that solid development planning has a positive effect on retention. We found that in 2006 voluntary turnover was much lower in the companies with the best performance management systems. Twenty-six percent of the companies with the best performance management systems experienced turnover of less than 5%, compared with only 9% of the companies with the worst performance management systems."

It appears that the skills many companies neglect get to the heart of good management itself. "When companies ensure that managers can do these things well," says Forgie, "it becomes easier to identify and recognize top performers and help those who aren't achieving expectations improve their performance."

"By setting the expectation that periodic performance 'check-in' meetings are a standard component of their systems, managers provide more effective coaching and feedback," she says. "In those companies where periodic meetings are not a formal part of their systems, only 43% provide positive ratings on the statement 'managers provide effective coaching and feedback,' compared to 71% where they are required, and 62% where they are encouraged. In addition, we found that requiring managers to conduct regular 'check-ins' ties directly to higher positive ratings for 'the system helps employees build their skills and competencies'—one of the key factors that impacts the perception that a system is fair, accurate, and delivers value to the business."

The bottom line, says Forgie: "When your managers understand how performance management is linked to your company's larger goals—how it drives the business and adds value to the company—they'll stop treating it as a bothersome administrative task. That buy-in is everything. Get it and you'll see a whole new attitude toward performance management…which can transform the entire culture of your company."

For more information, visit onpointconsultingllc.com