Dirty Words in the Workplace – Performance Management!
Author:
Susan Stitt,
Director/Human Resources Business Partner,
AstraZeneca Canada
From every perspective - employee, manager, business leader and HR practitioner - performance management systems have become an antagonistic tool. At many organizations, it is referred to as the annual de-motivation cycle. And it’s a fitting label.
Here are five reasons why I think “performance management” fails to achieve its intended goal:
-
Compensation has taken over. Some organizations have allowed compensation to overwhelm the performance management process. In doing so, elements are included that significantly detract from the intended objective of performance management systems, namely driving employee motivation and performance. For example, in many companies most elements of their compensation system are tied directly to annual performance ratings. Annual bonus and salary increase budgets are pre-determined, well before actual performance is known, and are based on everyone achieving average performance. Then, in order to ensure that managers contain their spending to these pre-determined budgets, a strict distribution for performance ratings is mandated, such that only 20-30% of employees can “exceed expectations” and 10-20% of employees must be “below expectations”. Managers are forced to assign ratings that they may not agree with. Additionally, the 60% of employees with “average” or “met expectations” performance receive smaller bonuses than expected because of how bonus budgets are calculated. Without realizing it, a process originally intended to motivate employees to perform by driving clarity and alignment with the company’s vision and strategic direction, has turned into a financial management task that puts people behind the process.
-
Performance ratings are labels that de-motivate everyone. Why do we insist on putting a label on people’s performance? Unless I’m “spectacular”, the performance rating you give me is a label that will de-motivate. I don’t want to know I’m “average”, or that I “met” expectations. In my mind, I am giving my all and am better than 70 per cent of my colleagues and I want to know that my unique strengths are valued and recognized. In current performance management systems, a label is required to categorize employees, so they can fit into a box that designates their compensation rewards – which is another danger to allowing compensation to take over.
-
Goal setting gone awry. The front end of the performance management cycle is about developing annual performance goals. Predicting a year out, and how people need to respond is a difficult task, and by May or June, many of the goals you carefully crafted in January are outdated. Business leaders have attempted to simplify and streamline the process by writing standard and generic accountabilities that can be used year after year. They have created standard goals/accountabilities for all individuals in the same job, so a sales representative in Vancouver has the exact same performance plan as a sales representative in Quebec City. You can’t argue with wanting to streamline and simplify this exercise, but the unintended consequence of writing standard performance plans is that you get substandard performance because there is very little buy-in from the individual. A generic plan overlooks rather than harnesses each person’s unique skills, strengths and passions. Individuals are placed in a box that tells them exactly what is acceptable and required and, in the process, creativity and performance are stifled.
-
Risk, rather than Performance is managed The performance management process has become a convenient way to manage things such as health and safety risks, reputational risks and financial risks. Standard accountabilities inserted into everyone’s performance plan are seemingly a powerful way to demonstrate to auditors and boards of directors that the company has taken strides to mitigate these kinds of risks by reinforcing every employee’s accountabilities. Unfortunately, similar to “goal setting gone awry”, what happens is that it makes the performance plan more generic and less likely to be used. Instead of focusing on a few key priorities and outcomes employees need to accomplish against the company’s strategy, every single priority becomes emphasized, becoming a long laundry list of activity that can’t be easily recalled or committed to memory, let alone achieved.
- Form vs. Function. Organizations tend to emphasize the process, forms and deadlines in performance management systems. Little time is devoted to educating people managers and employees about the real benefits of performance management and the underlying philosophy. It seems as though organizations forget the currency of conversation managers have available. In an effort to comply with process, meet deadlines and submit draft performance plans, people managers tend to forget the power within employee conversations. A well-written plan has very little value if a manager and employee never talk about it. It’s only through conversation that managers truly get to know their people, know their interests, their passions, their fears, their strengths and how to harness them all in such a way that it provides the best experience for that individual and the organization.
The bottom line is that organizations have lost their way with respect to performance management systems and forgotten their purpose. Instead of inspiring performance, most systems de-motivate and disengage employees.
Where do we go from here? Being aware of what’s gone wrong is the first important step! Next time, I will share practical and easy-to-implement solutions that will call forth exceptional performance from your employees.
Published with permission from author, Susan Stitt, Director/Human Resources Business Partner, AstraZeneca Canada.