Tuesday, December 3, 2013

Designing Performance Management with Line Managers in Mind

Today’s Blog comes from Scott Mondore and Shane Douthitt of SMD. They have the only talent management technology with business analytics and have written two books on connecting HR to actual business results: “Investing in What Matters: Linking Employees to Business Outcomes” and “Business-focused HR: 11 Processes to Drive Results”. Visit them at www.smdhr.com, on LinkedIn and Twitter: @scottmondore @smdhr

Nearly every week a new article comes out about getting rid of performance reviews and starting over because of all kinds of reasons—poor ratings, fairness, poor feedback and managers not putting much effort into them. Those are certainly valid reasons—and every year it is an uphill battle to get managers to complete their ratings on time. As usual there are plenty of new unproven theories (and products!) that actually propose that we do MORE performance reviews and include MORE raters (crowdsourced performance appraisals?!?). This logic seems to say that “we have a bad system, so let’s get more people involved to do more low-impact ratings”. Academics have spun their wheels for years focusing on ‘rating’ training with little impact. But shouldn’t HR look in the mirror and ask ourselves why performance reviews have such a bad image in the first place?  The real issue is that we in HR often focus on the execution and compliance of the process – not the business impact.  Performance management, when done correctly, is simply an extension of the business planning process – and who will argue that we don’t need business planning?  We need to focus more on goal setting, goal alignment, and the impact of the process using analytics.

Think about it from a manager’s (our customer’s!) perspective and this is what they hear from us:
“I need you to have your employees’ reviews entered into the system by November 22nd, so that we have all of them completed on time. Once they are completed you won’t get anything back from us, just check the box. Hopefully you have a good conversation with your employees and you don’t get us into any legal trouble. We’ll see in you in a month to do a calibration meeting where we will change all of your ratings around anyway.”

Not very motivating from a manager’s perspective, is it? If you were a front-line manager, how motivated would you be to put in maximum effort to complete a quality review?
The good news is that performance reviews can be a treasure trove of data—and if analyzed properly can give us tremendous insights on how to drive real business outcomes. If you rate competencies along with goals (which you should), then you can do some analytics to uncover which competencies have the biggest impact on goal performance. You can then create leadership and organizational development programs around those competencies with the biggest business impact. In those talent review/calibration meetings, focus on making talent decisions based on who performs well on the important competencies.

As an HR Business Partner, use the goal ratings data to create development coaching plans for those employees who are struggling or work with managers to create performance improvement plans—or even exit plans.

A question you should ask yourself:

Do you train leaders on how to write strong, measurable goals with specific parameters?
Do you do goal audits?

Here’s an example:
Typical Goal: Hits Sales Quota
Better Goal: Makes 100% or more of sales quota
Even Better Goal: 5 rating: 100% or more of sales quota; 4 rating: 90-99.9% of sales quota; 3 rating: 80-89.9% of sales quota; 2 rating: 70-79.9% of sales quota; 1 rating: below 70% of sales quota
Now let’s revisit our customer’s perspective once we start thinking like business leaders and not box-checkers:

“I need you to have your employees’ reviews entered into the system by November 22nd, so that we have all of them completed on time. Once they are completed I will conduct an analysis that will show us exactly which competencies have the biggest business impact—I will use that information to create development opportunities so that we move the needle on competencies that actually help us make more money. I will also examine the goal ratings and do two things: make recommendations on how we can write better goals (because, as your HR business partner, I have made it my job to understand our business as well as anyone) for employees and how we can get specific under-performers on-track or off of the bus. Finally, I will make sure all compensation decisions are directly tied and aligned with the ratings that you give your people.”
Sound different?

Let’s not fall into the typical HR trap, that if we make something prettier, faster and with minimal thought—it will get our leaders to buy-in more. How about if we tie it directly to business results? Leaders seem to be able to make time for things like that. There is nothing wrong with the classic performance appraisal process (just like there’s nothing wrong with the classic employee survey process)—companies that tie the process to business results and hold people accountable for quality follow-up seem to do just fine. Eliminating performance management is not a solution and would be as irresponsible as the CEO saying, “let’s not have a plan or goals for any parts of our business, let’s just wing it this year”.  Likewise another fad/theoretical approach (like turning performance management into a social media event) will do nothing but erode HR credibility. The process doesn’t need prettier reports, it needs to be more business-focused.

Click here to read about ICC's new Performance Management workshop, titled: Results Driven Performance Management: Driving Employee Performance for Business Results

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