By Bob Rogers
The growing trend in performance management today is minimizing or even doing away with the evaluation component and maximizing the frequency and quality of the interactions between the employee and the supervisor. Clearly, a worthwhile goal! But organizations need to be careful not to “throw the baby out with the bath water,” as some components of a performance management system benefit organization execution as well as employee engagement.
In my book on performance management (Realizing the Promise of Performance Management, 2004, updated in 2012) I highlighted what the organizations that “got it right” did to realize the full benefit of an effective performance management system. Many of the principles outlined there still apply in a new system focusing on more and higher quality interactions. DDI’S research on performance management found that companies changed their system every four or five years because they were never satisfied with the results of the revised process. I believe they were never satisfied with the results because they focused on the wrong things (evaluation, ranking, compensation, technology, and the form. In my 35 years using a system and helping companies implement them, I found approximately 20 percent that got it right.
Here are the EIGHT things they did that you must get right if you want your revised system to have the payoff you desire. I will outline them briefly here and then in future blogs, go into more detail on each one.
1. Align the system to the strategic priorities of the organization.
The key to strategy execution is a focused organization, where the passion and energy of all employees is in alignment with the four or five strategic objectives that will drive your organization forward. Seems logical, but it is not as easy as it sounds. Clear accountabilities visibly linked to strategy inspires passion, creates value, and increases the likelihood of organizational success.
2. Have clear accountabilities at all levels in the organization.
If you are still going to have a performance management system, (I don’t believe those who say they are doing away with theirs truly are) you must have specific and clear accountabilities for all. This not only helps execution but also helps employee engagement. All human beings want to know that their work has meaning and that they contribute to the organization’s success, even in a small way. The challenge is how objectives are aligned from the top of the organization to its lowest levels.
3. It’s more than numbers! Focus on both “What’s and How’s.”
I could write an entire book about this one, but to be brief, I’ll make two points. First, the culture (how people behave) is a major factor in long-term organizational success. Jim Collins' research and books (Built to Last, Good to Great, How the Mighty Fall) make this point clear as can be. Secondly, Norton and Kaplan’s The Balanced Scorecard book teaches us that companies that manage by the lead measures (engagement, development of people, teamwork, customer satisfaction, process efficiency, etc.) are the companies that succeed over the long haul. The “how’s” are critical! You can minimize the number of objectives as well as behavioral expectations, but you can’t do away with them.
4. Train leaders in how to conduct high quality interactions.
What brings out the best in people? Leaders that use effective interactions skills, such as coaching for success, giving straightforward and honest feedback, and focusing on the development of the employee with a strong development orientation. Unfortunately, leaders don’t inherit these skills with a new title. They must be developed through a learning process involving training, practice, feedback, and measurement. Only then will these skills become part of the leader's muscle memory. If you think of any great artist, performer, or athlete, all have one thing in common—they built their great skills over time through practice until they mastered the right behaviors (read Malcolm Gladwell’s Outlier). Organizations need to place significant effort into preparing their leaders to hold frequent, high-quality discussions or they will never happen.
Leaders must develop both skill and confidence, be held accountable, and be measured in order to have real rigor and discipline to make change occur. How many organizations do that? Not many. They may do training but struggle with creating an atmosphere of honest feedback, or in measuring how effective the discussions are that are happening. Measurement can be difficult but not impossible. You just need the right process.
Organizations struggle the most with this principle and yet it is the foundation for everything else in this article.
5. Promote shared ownership.
We know that "top-down" in performance management never did work over time. People need to own their own performance plan. You don’t wash a rental car because it’s not yours. How do your employees feel about their job? If you really want true engagement, they have to feel a sense of pride, passion, and ownership about their job or role. Give them a say in the objectives after you have communicated the department’s priorities. Have them contribute to the department’s strategy for execution. Let them call coaching meetings with their leaders. Have them give feedback to their leaders and the organization’s leaders. If you don’t build trust through these and similar techniques, all is lost.
6. Measure the effectiveness of your new system.
You can’t manage what you don’t measure. I think Peter Drucker said that many years ago. How true, even for something as nebulous as the quality of interactions between a leader and an employee. You can, and should. I just helped a company devise a method to get these kinds of measurements. In my 25 years as President of DDI, I had these measurements by country, by leader every eighteen months. It can be done. Naturally, you measure compliance, but the heart of these new systems is the quality and frequency of the interactions and the trust level built up between two people. It can and should be measured.
7. Have the senior line executives drive the new system.
This can’t be an HR-driven system. The CEO and executive team have to be models of the new system—and they have to be good at it! They also have to hold their leaders accountable for faithfully executing the new techniques and process. Without this, your system fails, no matter how good it is. Of the really good CEOs I have worked with over the years—ALL of them did this! Their communications to their employees stressed that this was how we will operate in the future. They insured that this was happening at all levels and in all parts of the organization around the globe. HR played a key role, but the champion of your new system has to be your CEO and his/her executive team. All have to be articulate advocates of the new system in order to capture the hearts and minds of their employees.
8. Simplify the link to compensation.
Notice I didn’t say, “eliminate” the link. As a president of an organization, I always wanted to pay for performance. However, I have seen some terribly complicated systems, let alone forced distributions. To simplify this process, I prefer a system without ratings at all. Just objectives (quantitative, qualitative, and behavioral) that are few but focused. Without ratings, the leader needs to make one of three choices.
The employee exceeded what was expected.
The employee achieved what was expected.
The employee did not achieve what was expected.
Once the leader makes the decision above, he/she must consider in other factors that might affect the final compensation decision (Position in compensation range, potential, retention, market equity, etc.). No complicated weighting, no complicated mathematical formula, no time-consuming compensation meetings.
Once I told my leaders the financial limitations of our budgets, this system worked fine for 25 years. The secret is to prepare your leaders on how to hold compensation discussions that are truthful, but not demotivating…again, another skill that needs to be developed in leaders. How many companies train their leaders in how to hold these sensitive compensation discussions? Very few, I bet. Yet this interaction is one of the most difficult to conduct successfully!
Regardless of the components of your system, these EIGHT principles can be applied in almost any organization. They will dramatically improve the effectiveness of your performance management system…and consequentially, the probability of organizational success.
More detail to come in upcoming blogs!
Robert W. Rogers is DDI's President Emeritus.
Learn more about DDI's approach to Performance Management.