Pitfalls and Best Practices in Performance Management Overview
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1 Pitfalls and Best Practices in Performance Management Overview Introduction This article describes common pitfalls that undermine performance management initiatives, and best practices that address those pitfalls and make for an effective, ongoing performance management system that does much more to improve performance more fully develops the potential of employees, and produces greater results. Source This is an Information Mapped version of the following article: Montebello, Anthony R., Ph.D, Pitfalls and Best Practices In Performance Management, published in 2003 by Psychological Associates, St. Louis, MO. Objectives of performance management Performance management is a powerful tool for energizing people propelling productivity to new heights shaping a group of individuals into a committed work force dedicated to continuous improvement.
2 Overview, Continued Pitfalls with performance management These objectives, however, are often far from realized and, in worst cases, can actually deteriorate employee motivation. Poor performance appraisals are the result of haphazard processes and poorly developed systems. The pitfalls with any performance management system can be found in one or more of the following areas: divergent goals and purposes appraisal forms implementation, and appraiser skills. Each of these pitfall areas is correctable. In this document This document addresses each of the following topics. Area Divergent Goals and Purposes Appraisal Forms Implementation Appraiser Skills Conclusion: Manager as Coach See Page
3 Divergent Goals and Purposes Two types of goals Performance management serves two very broad, but often divergent, goals. These goals Involve Developmental Administrative The many ways managers attempt to enhance employee motivation and ability. Decisions regarding salary increases bonuses promotions layoffs demotions, and transfers. And require that The manager and employee examine performance problems, and search out causes and solutions. The employee minimize disclosure of negative information, and accentuate only the positive. Pitfall of divergence These divergent goals serve to undermine the appraisal s effectiveness. The employee s need to protect his/her status in terms of administrative goals leads to defensiveness and lack of candor that thwarts any attempt to identify performance issues that address developmental goals. Standard solutions and drawbacks Organizations address this problem of divergent goals in two possible ways: separate administrative and developmental goals, or maintain two separate systems. Each of these, however, has drawbacks as described on the following page.
4 Divergent Goals and Purposes, Continued Separate the goals Description In this solution, organizations conduct two discussions separated by several weeks: 1. A discussion focusing on performance strengths and improvement areas, creating a developmental action plan. 2. A discussion focusing on pay increases and bonuses tied to performance. Drawback The separation does little to resolve the candor problem, as the employee is still aware of the ultimate consequences of the first discussion on the outcome of the second discussion. Two separate systems Description Organizations maintain two separate systems: 1. A quantitative, goal-oriented system to focus on what an employee has accomplished to determine results and compensation. 2. An entirely independent, competency-oriented process that addresses how an employee performs to improve performance through feedback and developmental initiatives. Drawback Separate systems can diminish the capacity to make cause-and-effect connections between what is or isn t being accomplished (competency strengths) and why (improvement areas), or hinder promotional decisions since there is no measurable relationship between meeting or exceeding goals in a lower-level position, and the skills needed for a higher position, or result in a competencies review that indicates one s potential for promotion, but not if the person is sufficiently goal-driven to produce results.
5 Divergent Goals and Purposes, Continued Need to combine the goals Administrative and developmental goals need to be combined because a composite of goals and behavioural standards facilitates coaching and problem solving enhances the basis for decisions about promotion establishes an employee s total performance as both what the employee accomplishes, and how the employee accomplishes it. Example In a retail setting, measuring transactions per hour (administrative) without observations of customer service and bedside manner (developmental) is considered myopic. Best practice: Regular, ongoing reviews Description We advocate a performance management cycle in which managers and employees review goals and competencies on a recurrent basis throughout the year. Advantages Disciplined and regular reviews of both what is being accomplished and how the person is performing alleviates the conflict between divergent goals allows managers to move an employee towards improved performance, and allows the employee to be more open and candid, secure in the knowledge that if performance is managed during the year and appropriate corrective actions are taken, the review at the end of the performance management cycle will be positive when compensation and promotion decisions are made.
6 Appraisal Forms Poor forms mean poor appraisals Poorly constructed appraisal forms can prevent good appraisal discussion by including content that is subjective and ambiguous. Example of an ineffective form This is an example of an ineffective appraisal form. FIGURE 1: SAMPLE TRAIT RATING FORM Rating Factors Rating Scale Makes good decisions Demonstrates planning and organizational skills Displays a positive attitude *1 = Outstanding Performance; 2 = Exceeds Requirements; 3 = Meets Expected Level of Performance; 4 = Below Expected Level of Performance; 5 = Inadequate Performance This table summarizes the elements that make this appraisal form ineffective. Element Example Failing Ambiguous, illdefined rating factors Rating scale with problematic terms Making Good Decisions Planning and Organizing Positive Attitude Outstanding Exceeds Requirements Meets Expected Level of Performance Forces each manager and employee to decipher what is intended: Does Good mean timely, accurate, logical, or all of these? Planning and Organizing are too dissimilar, forcing a negative rating for an effective organizer dismal at planning. Positive Attitude is subjective, requiring personality judgment rather than behaviour assessment. What does Outstanding look like? Does one person s idea of Exceeds Requirements coincide with another s? The subjectivity and ambiguity of the form generates performance reviews that lack validity, practicality, and value, and can damage working relationships due to disagreements over terms.
7 Appraisal Forms, Continued Best practice: Five factors There are five factors that make for an effective appraisal form: an effectively structured form using 5 well-defined sections well-written goals observable and one-dimensional rating factors clear rating scales, and a continuous performance management cycle. Each of these factors is described in detail on the following pages. Factor 1: Structured form A performance management appraisal form should have at least four sections, each section providing guidance on a performance management cycle of planning and reviewing performance, and conducting the annual appraisal. This table describes the four sections. Section Business Goals Function A list of what the employee will ideally accomplish during the appraisal period. Behaviour Rating Rating factors, standards, and competencies that describe how the employee will go about achieving goals. Development Planning Administrative A plan that specifies behaviour improvement goals and development actions from each prior review, and spells out what the company will do for the employee developmentally during this appraisal period. Sign-offs showing that the employee received the appraisal, and the manager acknowledged it.
8 Appraisal Forms, Continued Factor 2: Wellwritten goals Write clear goals by following this formula: Action + Object of the action + Measurement Method Use as many measurement methods (quality, quantity, cost, time lines) as possible. Example: Action Object of the action Measurement methods Time line Quantity Quality Increase production this year by 10% over last year while keeping the reject rate to 1:1000 and incurring no overtime. Quality Cost Factor 3: Observable and unidimensional rating factors Write all competencies, behaviours, and standards of performance in clear, behavioural terminology: Define terms such as effective so the employee knows what it looks like and what must be done to improve performance. Avoid long, multidimensional statements in which an employee performs well on some aspects and poorly on others. Example: Plans short- and long-term goals and strategies for profitability and customer satisfaction, and ensures the goals are met by directing and following up on actions. Break such statements up into one-dimensional elements that capture a single behavioural event. If desired, comparable elements can be grouped under a rubric, such as Gets Things Done.
9 Appraisal Forms, Continued Factor 4: Clear rating scales Rating Quantifiable Goals: Use a simple, three-part scale for rating quantifiable goals: Did not meet goal Met goal Exceeded goal An optional fourth response can be Met or exceeded stretch level of performance to motivate high achievers, accommodating exceptional levels of quality, quantity, cost, or time lines. Rating Behavioural Factors: A frequency scale is preferable in rating behavioural factors since behaviours are more complex and cannot be quantified. The frequency scale ranges from Almost Never Almost Always with frequency anchors in between.
10 Appraisal Forms, Continued Factor 5: Use a continuous performance management cycle A good form ideally drives a continuous performance management cycle. Each appraisal period goes through the stages described in this table. Stage Beginning Regularly throughout Period End Employee and manager plan performance Description set business and development goals, and clarify behavioural expectations. Employee and manager keep on track by reviewing performance, and discussing areas where improvement is needed. Employee and manager perform an annual appraisal by discussing overall performance (which should be a recap of the year s discussions), and begin the entire cycle over again. Results: an effective working agreement The result of using an effective appraisal form is a working agreement specifying performance and developmental expectations, and how performance is appraised.
11 Implementation Implementation is critical The implementation, or sell-in period, is critical to overcoming opposition to any performance management system that is new. Successful implementation of a new performance management system requires that you emphasize the benefits, and minimize any negative factors. Introductory phase During the introductory phase, acknowledge that there is no perfect system, and some adaptation or evolution is natural even with the best possible approach. Do not be noncommittal by identifying the new system as a pilot program or trial balloon. Best practice: Implementation Follow these principles in implementing a new performance management system: Emphasize that a good system can always be made better. Talk about the benefits of the system; inform people what s in it for them. Totally commit to the new system for the full performance management cycle. Adjust the system during subsequent cycles based on the experienced input of all key participants. Results Following these principles minimizes resistance to the new system, and generates few but very thoughtful and constructive recommendations.
12 Implementation, Continued Best practice: Briefings and self-discovery questions People need a lot of explanation and education about performance management. We advocate a process involving a briefing, followed by selfdiscovery questions. Stage 1 Briefing 2 Selfdiscovery Questions Description Review the system in-depth, citing its features functions (how it works), and benefits (what s in it for the people to participate). Conclude the briefing with a round of self-discovery questions: What do you see as the positives of this process? How might you benefit? What s the down side of not doing performance reviews? Having employees publicly express their views on the positive aspects of the system increases receptivity, and enhances commitment and implementation.
13 Appraiser Skills Good appraisals Good appraisals by managers helps employees understand what s expected and how their performance will be appraised how they are performing how they can improve, and motivates employees to fulfill their performance and improvement goals. The process generates understanding and commitment, which together increases employee productivity. Problem: Lack of appraisal skills Too many managers lack the appraisal skills for educational and motivational purposes. Many managers merely tell employees how they have performed deliver positive feedback with phrases like Good work or Nice job that are too general to educate or motivate, and manage negative feedback by either issuing it summarily, or avoiding it completely. Results Poor appraisals tends to generate this negative process: The employee does not address any performance problems so that the problems escalate. The manager s annoyance similarly escalates, leading to annoyance-driven feedback. The employee perceives such feedback as harsh and biting, leading to resentment of the manager.
14 Appraiser Skills, Continued Best practice: 5-step COACH format An effective appraisal session is one that is open and collaborative. With practice, any manager can function like a coach or mentor and conduct an effective appraisal session by following this five-step COACH format: Create a positive climate Obtain the employee s views Add your views, using the ABCs of feedback Clarify and resolve disagreements Help develop an action plan. Step 1: Create a positive climate Here are the 3 sub-steps involved in step 1, create a positive climate. Step Action 1 Establish a positive climate by being appropriately sociable at the outset. 2 State the purpose and benefit of the meeting. Example: Our purpose today is to discuss your performance. Pinning down your strengths and addressing any areas of improvement can help strengthen performance and enhance your chances to achieve your goals. 3 Outline the format of the meeting. Example: I d like to hear your views on how you re performing, and then I ll give you mine. Together, we can resolve any differences we have and then discuss an action plan to go forward. Step 2: Obtain the employee s views Performance appraisal should promote self-discovery by obtaining information from the employee on how he/she sees their performance. Follow these principles to obtain the employee s views: Allow employees to express their views first, giving them ample time to provide a detailed self-evaluation of their performance. Note: Most employees prove to be up to this challenge. Do not give your views first or react prematurely to the employee s views as this shuts down communication and undercuts the goal of self-discovery.
15 Appraiser Skills, Continued Step 3: Add your views Add your views by using the ABCs of feedback, providing feedback as described in this table. Feedback Actionable Balanced Constructive Description Addresses aspects of performance that the employee can do something about immediately. Example: Telling an employee to follow a 5-step decision-making format is actionable. Non-Example: Telling an employee to make better decisions is not actionable. Provide some positive and some negative feedback. Any one-sided feedback (all positive or all negative) is neither realistic nor informative. Focus on three things: On the Behaviour you observe, not judgments of the person or personality, so that the discussion remains objective and constructive, and the employee tends not to become defensive. On Positive aspects, even with a performance that is below standard: Do not say, You aren t making as many errors as you used to. Do say, Your accuracy is up to 95 percent. On Timely feedback as it is much easier to change while things are still fresh in the mind.
16 Appraiser Skills, Continued Step 4: Clarify and resolve disagreements Appraisal discussions can sometimes lead to disagreements and emotional reactions, such as anger or passive aggressiveness. When this occurs, it is important to remain cool and do the following: vent the emotions, and employ a problem-solving process to resolve any disagreements. Follow these steps to vent emotions and resolve disagreements. Step Vent emotions Action 1 Reflect the emotions back to the employee by saying something like You re upset, or You seem angry. 2 Allow the employee to verbalize their feelings. Note: Typically, the emotion bubbles up and then dissipates so you can resolve the disagreement. Resolve the disagreement 3 Point out that a disagreement in perception exists, and there are no right or wrong perceptions. 4 Summarize where you agree and set the agreements aside. 5 Develop insights into the differences between you and the employee by describing and probing differences exploring the facts that are influencing the perceptions of both parties, and collecting additional information if needed. 6 Reach an agreement that may involve concessions from both sides.
17 Appraiser Skills, Continued Step 5: Help develop an action plan Developing an action plan is critical to the appraisal process because it focuses on the future building the strengths and addressing the developmental needs of the employee. Follow these steps to help develop an action plan with the employee. Step 1 Define an explicit goal: Action the skill or performance area to be improved, and by when. 2 Develop a series of action steps that spells out what the employee will do, and the manager will do to achieve the goal. 3 Establish a follow-up date with the employee to review progress and accomplishments relative to the plan.
18 Conclusion: The Manager as Coach Benefits of coaching By acting as coach during performance management, a manager promotes the employee s self-discovery of performance strengths and improvement areas clearly establishes what the employee needs to do to enhance performance, and produces a shared understanding and commitment to greater productivity. Benefits of ongoing performance management An ongoing performance management system is preferable to the typical once-a-year performance review because it does much more to improve performance more fully develops the potential of employees, and produces greater results. And, after all, isn t that what managers are paid to do?
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