Casting an appraising eye on performance management

Chibuzo Ejiogu, PhD researcher at Strathclyde Business School’s Department of Human Resource Management looks at the impact of appraisals in organisations and how to improve performance management.

There is more to performance management than implementing pay-for-performance, annual ratings and appraisal processes. How performance is managed speaks volumes about an organisation. Customers soon experience the impact and vote with their money, feet and Facebook ‘likes’.

Performance management is a hot topic, recently Microsoft announced it is doing away with its forced ranking system which was blamed for fueling an individualistic culture, with colleagues competing for higher ratings rather than collaborating on new products and ideas. The new approach to performance management is designed to promote teamwork, agility and business impact.

Many managers and employees approach performance appraisals with dread – this needn’t be the case.

When performance management is done well it can increase productivity and facilitate the focused development of individuals and teams. Employees feel motivated and energised. Performance goals that provide achievable stretch and challenge are a vital part of talent management and leadership development.

So how can organisations improve the way they manage performance?

• Think culture – what is the reality beneath the rhetoric of ‘high-performance’ cultures? Encouraging teamwork through recognising collaborative behaviours can significantly improve innovation and the sense of a supportive and friendly culture. There is a fine line between managing underperformance and creating a culture of fear through ‘rank and yank’ and ‘up or out’ policies.

• Focus on performance not ratings – Many managers and employees often get hung up about what rating should be awarded especially when this is tied to individual financial rewards. Haggling over the score can detract from focusing on improving performance and developing people. Some organisations have jettisoned annual ratings entirely while others have increasingly emphasised descriptive ratings (such as ‘exceeds expectations’) rather than numerical ratings.

• Align performance appraisals with business unit cycles – A one size fits all performance cycle may not work for business units operating at different business cycles. Appraisals tend to become tick-box exercises when business units are at crunch times in their business cycles. Long-term and consistent performance should be the focus.

• Feedback and Feedforward – Feedback provides valuable insight on ‘lessons learned’ and can also be an important source of praise, recognition and motivation. The key is ongoing and timely feedback, the informal chat or email can do wonders. Performance reviews can be used to ‘feedforward’ an employee’s performance by directing attention to what and how performance objectives should be achieved in the future and coaching the employee to achieve personal goals. Coaching is vital to help employees leverage their strengths in their role.

Every organisation needs to tailor their Performance and Reward Strategy to fit their context. Designing or changing the approach to performance management should be based on evidence – internal feedback from employees and managers as well as external practices, trends and context.

Developing a performance management system that balances equity and organisational effectiveness is key. Forced rankings don’t have to be used to arm-twist managers to stay within compensation budgets, differentiate between employees performance or counter inflation of ratings. Employees and trade unions want open and honest performance reviews based on objective and measurable performance goals. Any hint of a pre-determined or ‘guided’ performance distribution curve which arbitrarily designates a proportion of employees as over/under performers is likely to be treated with suspicion and mistrust.

A well designed performance management system is only as good as the people who implement it. Line managers in particular need to believe in its value, all stakeholders benefit from a simple and fair system that manages exceptional, good and under performance. What do you think? Let us know in the comments below.