“HOW TO” build an effective PERFORMANCE MANAGEMENT SYSTEM?

Performance can be simply put as an act of doing something! In most cases, it is referred to as an act happened in past, which means performance is something which has been done or carried out. But then we often talk about performance in future tense as well, like “the product will perform well”, “I will perform well in my upcoming exams” and “the company is expected to perform better than last year”! In all these statements, performance is a function of expectation which might or might not be based on factual realities.

Now, let’s try to look at how we can ensure that the expected performance is achieved. We can manage the situations which lead to a performance; in short we can MANAGE the performance. I am trying to bring this to the concept of PERFORMANCE MANAGEMENT in organizations where employees are expected to carry out certain activities and deliver  aforesaid PERFORMANCE.

The concept of Performance Management evolved with a perspective of improving the performance of employees and organizations. Tools like Performance Appraisals are being employed since ages to manage performance. On a lighter note, I wouldn’t wonder if a set of people believe that Performance Appraisals is a part of some mandatory sections under some statutory regulations!!

Anyways, no kidding, but can we say that after exercising the concept for so many years (since ages) it has been perfected? I am afraid not! We have seen (read) Performance Appraisal concept fail for many reasons in different organizations. Below are a few of the most common reasons for that:

• Incoherent rating scales

• Lack of awareness and proficiency of the appraisers/evaluators

• Lack of responsibility in the managers for the system

• Use of system for only reprimanding

• Performance standards are subjective and ambiguous in terms of relation to the work

Since we are trying to establish the fact that Performance Management is yet to evolve immensely to serve the true purpose and intent, let’s try to discuss the ways how we can achieve the same.

I will share 8 steps which can help in managing performance in any organization across industries and geographies. These are based on basic concepts of human psychology and organization behavior.

1. Robust System:

Any organization need to put an effective system in place, which finely aligns the processes of HR management with the vision of the organization in regards to performance management. Performance Management should be an ongoing process and not an annual meeting between the manager and subordinates to fill out pre-formatted forms. Performance appraisals done for the sake of completing the task would never have any positive impact on the performance. The appraisal meetings and forms should be designed keeping the organizational goals and values in mind.

2. Communication of the intent

Most of the companies have their mission and vision statements listed out very clearly. The core values and beliefs should be deep-rooted in the performance management system. Organization should clearly communicate to the employee on the first day of the appointment that his/her performance matters. Organizations can deploy various means like handbooks, message boards, orientation programs, training, and timely reinforcement by the leaders.

Compensation structure also serves as another mean of communicating that the performance is imperative.Communicating the intent clearly helps in maintaining a synergy amongst the teams and assists in developing the culture of continuous performance improvement. Moreover, the expectation from every individual employee in terms of performance should be clearly communicated to each one of them. For that to happen, the system has to ensure that the supervisors are clearly aware of the expectations and they are sharing the same intent with the employee.

3. Be Development Centric

Most organizations have Performance Appraisals which focus mostly on the past. Organizations should work towards reduction in time spent on the past. The focus should be shifted on the future and intensive goal setting should be done for the upcoming time. Future goal setting can lead to both employee and organizational improvements. It can have an output in the form of a list of improvement areas.

Another common mistake organizations commit is of preparing a long list of goals and improvement areas. Instead, improvement areas and goals should be carefully selected, defined, recorded, tracked, and reported. Goals should be challenging yet achievable. It should be accepted that not all goals and targets are quantifiable. If numeric goal cannot be assigned to a desired outcome, then its outcome and employee’s role in acquiring the outcome should be clearly defined. “It is more important to measure what counts than what is countable.”

The goals should be such that employee should be in a position to actually stimulate the outcome.

A few common mistakes done at the time of setting goals can be listed as below:

  • Setting goals that are beyond the scope of the employee’s control.
  • Setting goals that are not aligned with organizational interests.
  • Setting individual goals that do not relate with group goals and the company’s core beliefs and values.
  • Setting goals that instill fear by insisting that the goal be met OR ELSE.

4. Set “reasonable” performance standards

To me, setting performance standards is the most difficult part of the performance management cycle.

How much production can I expect? Can I expect perfection from my subordinate? How do I assess and quantify the effectiveness of negotiation abilities? Who would set the standards? These are a few of many questions which crop up at the time of setting standards. There always are 2 sides to it viz. listing responsibilities and defining rewards for it; performance standards need to be set somewhere in between these two process steps.

Employees must know what is expected so they can work toward achieving the goals. Reasonable standard clearly means challenging yet achievable standard. It should be something that can be achieved in the current state of the organization and should not be out of the wish-list of someone in the management who would like to experiment and see if employees can come up to the expected level of performance.

Standards should also have a related mechanism of measurement and employees should be aware of that. If an employee is expected to achieve a standard set for “Internal Feedback of the function”, but is not aware of the mechanism of capturing the feedback from within the organization; its fails the system at the basic level of intent itself.

Management, on the other hand must clearly know what they want so they can plan, establish, analyze, and improve work activities to meet company goals.

Setting performance standards is an exhaustive exercise and it requires considerable study, scrutiny, and consideration, though every moment spent at it is worth.

Systems should be flexible to modify performance standards as company needs change and the job changes to meet company needs.

5. Track performance

An effective performance management must be supported with run-time documentation of actual performance. It is practically impossible to effectively document the performance after a year or even 6 months for that matter. It should be an ongoing process and various methods can be used to document employee performance in a decided time span (year / half-year). Supervisors should document the incidents where they found the performance of the subordinate to be good or beyond expectation. These can be recorded in any form – pre-defined logs created by PMS team or any other mean as found suitable by the supervisor.

These serve as a reference during the appraisal meetings and also at the time of deciding performance ratings. Also, if challenged by an employee regarding an incident, the supervisor has a written resource to rely upon rather than just memory or hearsay.

If employees have been demonstrating severe performance issues, documentation becomes even more important. It is important to ensure that supervisors are not biased and none of the employees are being victimized for the lack of documentation of performance. Although often overlooked, good performance is as important as poor performance to document. The reason for ongoing communication about performance is to reinforce the good performance which will lead to continued good performance and to deal with the poor performance in an appropriate way that will extinguish it.

6. Be Upfront

Performance Management System always does not give sweet fruits since under-performers and non-performers have always been a part of the system. An effective PMS assists in identifying such cases before they can cause any damage to the organization. Supervisors must be conditioned to be forthright and honest with employees, instead of holding back the feedback in apprehension of losing the face with that person. Although none of the employees want to hear bad news (neither do I), it is still better to deal with a problem when it happens than to let it become a more serious concern. It has been commonly seen that a few managers in the organization always rate their subordinates as good performers since they do not want to get into any confrontation with either of the team members. These are dangerous and risky attributes, which work against the concept of an effective PMS.

7. Recognize exceptional performance

One of the factors that motivate people the most is “Recognition”. And trust me, it is least expensive too. All it takes is a “thank you” or “I really appreciated that” or “you did a great job, keep it up!”. It sends the message that the contribution of the employee counts. It is an established fact that employee performance improves through regular constructive feedback. A recent study of employee satisfaction with performance appraisals showed that many employees did not really want to be appraised more frequently on a formal basis but they wanted more frequent and continuous informal, day-today or casual feedback.

8. Reward performance

A lot has been written and said about the relationship between performance and pay. Many organizations believe that good compensation structure and considerable performance based pay can lower the attrition and help retain good employees. It is also widely believed that rewarding an employee for good performance will result in continued good performance. It makes sense to pay good performers more than mediocre performers. Still, we do not have conclusive answers to this perspective.

However, we do know that to be motivational, performance pay must be directly linked to performance and be significant to the recipient.
The concept of performance based pay makes some employees uneasy, but in many cases proficient employees, who desire recognition for their efforts relish the strategy of rewarding good performance and will be motivated by the idea.
To summarize, an effective Performance Management System is an employee-valued system of encouraging and rewarding employee contributions for the specific purpose of improving employee performance which directly impacts organizational success.

1 comment

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