Performance management is a common practice in companies, despite some issues. Learn how to avoid these common mistakes to succeed in performance management
What’s performance management? To put it simply, the goal of performance management is to close the gap between a company’s desired results and its actual results. Even though the details may change, companies generally follow the same steps:
- Establish goals and objectives that derive from a strategy
- Monitor how those goals and objectives are satisfied
- Evaluate the performance, generally in the form of performance reviews
- Adjust system for better performance by fixing performance problems
- Reward top performance
What could go wrong with that? Apparently, a lot.
In fact, performance management is one of the most hotly debated topics in management. It is the object of much criticism if not ridicule: useless, inefficient, antagonizing, overly complex, hated by employees and managers, referred to as one of the 7 deadly diseases of management, it’s even seen as a source of actual brain damage.
And yet, most companies still implement performance management process. Not because they are masochists, but because they answer to a profound need: creating order out of chaos by planning, setting goals and executing them to improve the company’s outcomes.
Performance management is an endeavour fraught with problems and pitfalls, but still necessary, and the first step in overcoming those problems is to become aware of them.
1. You don’t understand what performance management actually is
Probably the most common misunderstanding about performance management is that it is not the same thing as performance review. The performance appraisal is only a part of the whole process outlined above.
Worse, performance management is often confused with the mostly outdated annual performance review. If it is to be taken seriously, performance should be monitored on an ongoing basis so that problems are fixed when they arise, and opportunities exploited as soon as possible. It is a continuous process, not an event.
Thinking this way is one of the things that get organizations into trouble, because the yearly appraisal process, no matter how well designed, is not enough to ensure that employees perform at their best.
It is also not a purely administrative burden: performance management is about making people and organisations more efficient in a measurable way, not about filling forms and having meetings to collect data that will never be used.
Basic misunderstandings about performance management explain both why it is reviled, and why it is inefficient when companies decide to go through with it even though they are missing critical pieces of the puzzle.
2. You think performance management is a silver bullet
Very often, performance management is seen as a kind of monolithic solution that will fix every problem in a company. Company isn’t doing so good? Performance-manage the hell out of it. But companies are far too complex for that to exist.
As Alfredo Behrens highlighted in an HBR article:
What are we looking for? Improved alignment? Fair compensation? Competency development? Let's stop thinking a single approach can change our organizations. We need more purpose, realistic values, increased feedback, more autonomy, better recruitment approaches, only to cite some of the changes we need to go through.”
Performance management is not a single comprehensive theory that can be applied blindly. It’s more of a bag of tricks that need to be applied with high dexterity so that your efforts in one area do not cancel out with efforts made in another.
3. You’re over-enthusiastic about it
Who would not be enthusiastic about a system that purports to make their company more efficient, and thus more profitable?
The promise of increased performance is alluring, and many companies engage in performance management programs without fully committing to what they entail.
Uninformed management will blindly apply flavor-of-the-month practices with no regard for company fit, become disillusioned when the results are not up to par after an unreasonably short delay, and get discouraged with the whole idea of performance management.
Damage results from implementing new practices that may seem compelling but are difficult or impractical to sustain, the consequences of which are implementation failure, eroded credibility, and increasingly negative attitudes towards performance management.
Implementing new practices that produce sustainable results is a long term project. It needs to be seen as such from the outset, which means getting thoroughly educated on the subject to avoid succumbing to fads, and wisely choosing the particular implementation that will fit the company.
Performance management has been vulnerable to fads, more so than seems to be the case with other human capital systems. In the last 20 years, there have been fads to evaluate results, competencies, behaviours, and contributions; to rate performance using highly differentiated 5, 7 or 9 point scales, much simpler pass-fail scales, strictly developmental scales, or no scales and instead prepare written narratives; to collect ratings from supervisors, peers, customers, or the employees themselves; to cascade goals from the highest organisational level to individual employees, establish individual objectives that are rated directly, or not to include goals; and the list goes on.
Be wary of fads.
4. Your managers don’t buy it
When you decide to implement a system to manage performance, much of the work will fall on your managers. They will need to be trained and helped in many areas to ensure that the program works.
They will need to know what to say during an appraisal meeting, how to provide feedback efficiently throughout the year, how to measure their team’s performance, etc.
But more importantly, you need to tell them why they should be interested in it at all. Support from leadership is fundamental, and to get that support, you need to explain how the program fits within the organisation’s strategy. How is the information going to be used? What’s in it for them? Understanding the value of performance management is capital for it to work.
To help achieve that, you should provide your managers with material that will help them understand and later execute on their new tasks.
5. Your employees don’t buy it
Employees also need to believe that performance management will benefit them before they begin to apply its principles. If you want your employees to start focusing on the right things, to get better at what they’re doing, you need to show them that it is in their best interest.
A good performance management system will help them on a personal level to answer a number of problems they face:
- How good/bad am I doing?
- How can I do better from my side?
- How can the organization change to help me be more efficient?
You need to show them how their and the organisation’s goals align, for example by finding a good way to reward performance. After all, if your employees are not performing at their best, something must be amiss with your performance management.
6. You are not committed enough
If you do decide to go forward and implement some form of performance management, you have to commit to it for a long enough period if you want to see any results. The plan has to be executed well, and from start to finish.
Very often, managers, teams or individual employees will feel ill at ease with a system that tells them they are underperforming. They might want to blame the system, or worse, game the system. Some data will be ignored, hidden, conveniently forgotten, or tweaked.
The system will become more and more useless, wasting much of the time and effort that went into setting it up in the first place.
That’s why it is imperative that on top of strong employee and manager buy-in, you accompany your effort with processes that help them deal with performance on a day to day basis. How can they identify the cause of the issue? Is it the metrics that are wrong, outdated? Is it a team problem? An individual problem?
Managers and executives need to understand that the framework may have ‘bugs’ that must be fixed, and avoid always blaming the employees when things go wrong.
7. You’ve picked the wrong goals to optimize
You have to be incredibly careful with the goals you decide to set, and the way you will measure success.
Some metrics might seem like obvious performance levers to optimise, but what you have to pay attention to is potential unintended consequences.
Here is an illustration of a typical case of a badly chosen metric:
We also discovered that how we measured people’s performance was hurting our improvement efforts,” said the customer service manager. “One of our production manager’s main goals was to keep his employees 100% utilized. Even though he verbally supported our improvement efforts, he blocked most of the lean initiatives. It turns out that he was worried that if the team figured out a way to improve the process, they might get stuff done faster and if they ran out of things to work on, his employees’ utilization rate would drop and he would fail to meet his objectives.⁂