On HR's growing to-do list, performance management is a universally unpopular item. Employees are nervous about being evaluated and managers are often reluctant to be the bearers of negative feedback. If this is the common perception of performance management in organisations, chances are HR departments are missing out on potential benefits.
The value of skills recognition, for example, should not be underestimated. Teo Hock Kong, Senior HR Manager, IBM, says companies risk losing employees if they fail to recognise their skills or help them to grow. Some may feel directionless in a career because their contributions are not given due approval. Others may see no point in staying in an organisation where there are few chances for personal and professional advancement. "If there is no growth, people become saturated and they don't want to stay," Teo says.
Besides skills assessment, performance management has a number of other benefits which can improve overall organisational performance. Employers are given an opportunity to change roles and become coaches and mentors to their employees. Performance management results also make it easier to determine training and development needs as well as analyse hiring decisions. In larger organisations, it can be used to support manpower or succession planning.
Where performance management sits on HR's list of priorities can play a vital role in an organisation's success. Rebekah France, Adviser, People and Communications, BW Shipping says too many organisations place it in the 'too-hard' basket. "When managers complain about completing appraisals and see this as something above and beyond their basic job, or a favour to the HR department, it is clear that something is wrong."
Redefining performance management
The way performance management is defined can determine its effectiveness. It is tempting for companies to let individual appraisals dominate the performance management process and miss the bigger picture. "When this happens, we typically see a lot of wheels turning on process and system, but little being created in terms of effects and outputs that are directly relevant for business," France says.
"Individual performance is of value and interest in an organisation only in as far as helping the organisation achieve its goals and meet its targets. Individual performance evaluation or appraisals are therefore one very small piece of what would qualify as an effective performance management system."
Effective performance management should recognise skills, not just faults. It is about keeping workers updated and motivated. Although it is a useful way to identify poor performers, it should never be viewed by employers or employees as a veiled penalty system.
Performance management also stands to become more effective when HR stops looking at it as a once-yearly chore and more as an ongoing process. Caren Sim, Director, Global Leadership and Learning, Seagate Technology, says HR must stress that performance management is the employees' as well as the manager's responsibility. "The more people begin to look at it as a two-way, continuous process, the more effective it can be."
As with any other process, an element of patience is also necessary. "Performance management in itself is a process laden with time-proven objectives, it should not be seen as a tool, form, or any other (single) resource," says Sim. She encourages HR to keep goals firmly in mind, citing this as a difficulty in some organisations. "Rather than using it as a business strategy enabler, employers and HR professionals drive the usage of tools and forms. The process and objectives of performance management get misconstrued and lost easily."
According to Sim, HR professionals are ambassadors that can create the right culture, objectives and processes in performance management. Sim encourages them to over-communicate and evangelise the philosophy of performance management within the company. They should ensure employees have access to a rich library of resources to help them improve their performance.
HR also has a responsibility towards providing adequate education. Sim says this is especially important because executives should be seen as role models who give proper and frequent feedback and carry out adequate development planning.
So how do organisations know if what they're doing is working? France says that an effective performance management system has a number of characteristics. There is clarity and alignment on organisational and divisional objectives, employers and workers share an understanding of how individuals can contribute to overall goals, gaps between performance and expectations are always addressed with two-way, timely communication and, finally, individuals and the organisation work to close these gaps with regular reviews on progress.
France warns that performance management systems should never neglect rewards and incentives that create and reinforce desired behaviours, actions and outcomes throughout the organisation. The major hallmark of effective performance management is when individual performance is clearly and closely linked with organisational success. "In the absence of such a link, one may create a system where individual performance is maximised but organisational goals are still not met," France says. Successful performance management makes every effort to dispel inconsistencies, resulting in better organisational direction and results.
What works: IBM case study
The performance management system is a key component of IBM’s overall business strategy. According to Teo Hock Kong, Senior HR Manager, an effective performance management system must be content rich, with constant feedback between employees and management.
IBM carries out a ranking system so employees know where they stand. One roadblock in the otherwise ideal system of rankings is the inevitable occurrence of a bell curve representing the majority of workers. This signifies the average level of performance, and employees who rank below that average might find the comparison discouraging. IBM counters this challenge by clearly explaining why each employee is assigned their respective rating.
Employees at IBM are also encouraged to set their own goals. This provides them with a sense of ownership over their progress, so high performance becomes a personal aspiration. There is also flexibility; employees can adjust their goals as needed and they are given the chance to self-evaluate.
IBM follows through with its appraisals as well. The company has a performance improvement plan for each employee. Those who have done poorly are given a period of time to bring their work up to standard. Failure to improve results in dismissal but this is not without every effort from IBM to first help the employee to better their performance.