is performance management an organizational priority?

March 25, 2016 0 comments

Over the weekend I was thrilled to receive a call from a friend, also a successful senior executive with a reputed firm. Amongst many topics that only friends can banter about, we spoke about professional choices, aspirations, what next, and our experiences in pursuing professional careers in organizations. While the conversation was enjoyable, one discussion thread invited some intense reactions from my friend.  Some provocative questions that emerged—How do we truly drive a high performance work ethic if we do not have the courage to differentiate performance? Is there any ecosystem that truly has got it all right in managing performance and aspirations and careers…? Can the ‘whats’ and ‘hows’ of performance be assessed in balance? Can this process ever be seen as being fair, balanced, and transparent especially when linked with reward? What do we develop people for—here and now, or to build future readiness? Who owns this system anyways?

571-1No matter where you are in experiencing or implementing a process that drives people and business impact, we invite you to reflect on a few points. Let us begin with exploring why employees are so universally dissatisfied with a performance management system.

While the reasons might be intuitive, I am an advocate for these systems. No matter what the difficulties are, in modern organizations human behavior represents a large source of error and variation in implementing plans and processes. The central opportunity is hence to establish performance management as a business priority, communicating its importance to the organization, and holding managers accountable for performance management outcomes.

DDI’s research over the last four decades has highlighted five qualities that uniquely predict the effectiveness of a performance management system:

  1. Value and alignment of performance management for driving an organization’s strategic goals/vision.
  2. Involvement of senior management in driving the system.
  3. Integration of the system with other talent/people in the organization.
  4. Consistency in use of the system across all managers.
  5. Employee involvement in the process.

Most organizations have recognized the criticality of points 1, 2, and 3 and also invest a lot of time and resources in ensuring that these elements are set right. But often what gets less attention are the qualities related to the employees’ involvement and the managers’ ability to consistently manage their roles in the performance management process. If strengthened, these facets have the potential to build a culture of high performance in any organization.

Here are a few tips and caveats to consider as you make performance management an organizational priority.

  • strong business case: In order to overcome manager (and employee) resistance to being ‘assessed’ on unclear outcome goals, organizations must build a strong business case around the necessity of aligning individual performance objectives with business success and strategy. In other words, employees perform better if they understand how to do their work and feel that it is connected to a ‘larger vision’ and their personal development, and enjoy it. The ability to inspire, encourage, and share a compelling vision will be demanded therefore of leaders and process sponsors.
  • line involvement: Successful implementation of the process is greatly facilitated through collaboration of line executives who can assist in developing realistic metrics and act as internal advocates of the system and benefits thereof. It is important to not assume that line managers have the skills and readiness to play their part. Providing support without taking away responsibilities and building interaction skills to sell, engage, direct, and develop performance is the key.
  • transparency and simplicity: A critical success factor is transparency in the design, implementation, and integration of performance management with other critical people processes—be it selection, promotion, reward, or development. Understanding, connection, and fairness are more important than system design and structure. In doing so, we help employees to understand the standards on which they are evaluated and foster a belief that they and their colleagues are being treated fairly and objectively. Increasing employees’ perceptions that the feedback they receive is both fair and accurate can substantially boost the amount of effort they put into their job.
  • interacting v/s managing: An organization needs to empower an employee to self-assess and take charge of his/her own development, whilst enabling a manager to have high quality interactions. Interaction skills when strengthened help people engage, set clear expectations of self and others, emphasize the positive, set others up for success, help find solutions to work problems, drive future focus, recognize and reward progress—some of the key ingredients towards becoming a ‘catalyst’ leader.
  • being intentional about building a performance culture: While the performance management system is clearly a critical driver of individual performance, its ultimate success or failure is a product of the cultural environment that surrounds it. While many facets contribute to building this culture, a few that have the potential to increase organizational commitment and fuel discretionary effort are:
  • agility and flexibility: An ecosystem of openness and change in which employees are provided with latitude, space, and encouragement to work on new ideas despite uncertain outcomes or initial failures.
  • seamless communication: One that is characterized by frequent and effective communication and the extent to which information flows upward, across, and downward within an organization.

DDI’s research has shown that when a performance management system is successful, employees should be able to attain virtually all their performance goals, which lead to successful business outcomes. Our results show that the average performance management system improves the ability of employees to achieve their goals by 10%. And as far as effectiveness goes, the best performance management systems yield up to twice the benefit in performance compared to the lowest rated systems. Depending on the type of result (i.e. hard results such as revenue growth, productivity, and profitability, or soft results like customer and employee satisfaction or retention), organizations with strong performance management systems are 41–51% more likely to outperform their competitors.

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