Employee performance management – time for a new era Part 2 – From appraisal to coaching

Stifling agility – the reality of current employee performance management

Our initial article highlighted just some of the many flaws that have been institutionalised in our approaches to employee performance management. Undoubtedly the most significant problem is the concept that this constitutes an annual event that results in an employee ‘score.’

This process reduces the employee performance management system to the level of an annual school examination – it pits one employee against another; largely ignores teamwork; and fails to address the change agility required in 21st century business.

Twelve months is a long time in business these days. Professor Robert Kaplan from Harvard talks about strategy as a ‘continuous process.’ The employee performance management system rarely thinks and acts this way. How many times have we heard employees complain that ‘my supervisor changed’; I changed jobs within the company’; ‘I was set new objectives from those originally planned.?’ Despite HR efforts, none of these is easily accommodated within our inflexible performance objective setting systems.

Successful businesses today must be ‘agile.’ Opportunities and threats from new technologies, digital market disruption and unforeseen global events can, and do, occur within weeks. Our organization may be leading some of these changes – alternatively we may just be trying to keep up with events – but in either case our tactical goals, and in some cases our very strategy, may change at any point. Business is not constrained to a fixed 12-month cycle! So why should our employee performance system be constrained in this way?

Of course, the answer to that question is largely based around our misguided approach of linking employee performance management and employee remuneration in a hard-wired mathematical calculation. This has been the single most important factor that has undermined the value and operation of most employee performance management frameworks.

So, should high performing employees be rewarded above those whose contribution is less? Of course - but it is the way that we have gone about this through the employee performance management framework that has been the problem. In Part 3 of this series, we will address the broad question of approaches to employee reward (it’s not just an annual bonus!!), but in this article we will focus on addressing a better approach to employee performance management – one which is primarily driven by ‘enabling employees to be the best that they can be.’  

Principles for a new era

So, let’s leave reward for the time being and focus on why we are setting employee performance goals. There should be two main drivers which should permeate our thinking:

1)     Our employees need to understand, and focus on, achieving outcomes which support what the organization is trying to achieve

2)     Our employees should get the support and feedback that enables them to deliver on these important outcomes

This fundamental philosophy of employee performance management is driven by a belief that the majority of our employees come to work to do a ‘good job.’ Of course, a minority don’t and there are differing levels of capability among the rest. Nonetheless if we believe in the overall good intent of our people, then we should design our employee systems on this basis – not to just address the problems of a few.

If you don’t believe in the good intent of the majority of your workforce then read no further! Keep to the existing punishment and reward systems; or else take a fundamental relook at your recruitment processes.   

So now let’s look at an employee performance management framework that is not obsessed with how the outcome will be used to compute individual annual bonuses. How should it be designed?

The required components of employee performance

A typical job requires three separate components for overall successful delivery. Each of these three should be clearly understood and form a delivery contract between the organization and the employee.

-         For most of us, there will inevitably be a series of largely repetitive tasks which need to be performed accurately and on time. These form a ‘performance baseline.’ They are a minimum set of outputs that are required to justify the salary expenditure by the organization. They are often described in a job description and there is an expectation that they can be achieved by all post holders for that job role. They may or may not include team-based working. An example would be the timely and accurate processing of all supplier invoices by an accounts payable clerk.

-         In addition, there will be other outcomes, required of many, in today’s dynamic world. These additional outcomes are likely to revolve around change programmes that facilitate the wider organizational strategy. They may often involve team-based working and, unlike the repetitive activities referred to earlier, they may be transitory in nature. They are focused on delivering outcomes which enhance the overall performance of one or more aspects of the organization. These are not just special projects but can also be based around a culture of continuous improvement. As one progresses in the organization, the requirement to deliver on these may become a larger component of one’s job.

-         For both of the above, it’s not just the result that is key, but often the way that result is achieved - i.e. the behaviours exhibited. Whether this is a set of internal behaviours or behaviours with third parties, this critical component can define the look and feel (‘culture’) that prevails within an organization. Required behaviours are not always universal across an organization and different behaviours may be required in different roles. The ‘complete employee’ not only achieves – they achieve in the right way.

Our employee performance management framework needs to recognise and articulate these three different components in order to adequately communicate expectations from each employee.

Now that we have reorganized our approach to objective setting, it becomes even more apparent that we cannot think about an ‘employee’s annual score.’ Attempting to ‘weight’ different factors in the belief that this introduces some mathematical credibility and fairness to our scoring is misguided. By definition weightages are subjective. Is outcome more important that behaviour and if so by how much? Indeed, by making an assessment of each individual against each of the component areas above, we gain valuable insights into each person’s strengths and weaknesses that can be used to align them with the most appropriate roles, as well as planning for their effective development. Perhaps one employee is a strong ‘finisher’ in work that is repetitive. Another may have strong behavioural characteristics but be lacking in the innovation necessary to undertake change driven outcomes. A single composite score disguises this valuable information, and reduces our understanding of our most important resource.

Moving from the school classroom

Having redesigned our criteria for employee objective setting, the next critical factor is to abandon the once (or perhaps twice) yearly employee assessment model. Delivery of outcomes is a continuous process. Enlightened organizations are moving from ‘employee appraisal’ to ‘employee coaching.’ That’s not to say that we won’t make periodic assessments of employees and plan potential career paths, or that we won’t give periodic feedback on their longer-term aspirations. However, this doesn’t need to be done under the guise of an annual scoring system. Instead as managers we should be giving constant feedback and advice – praising achievements, highlighting improvements needed and constantly recalibrating goals. Employee coaching is one of the critical roles for all managers. Feedback is most valuable at the moment in time to which it refers, not 10-12 months after the event – assuming that we can even remember a majority of those ‘events’ by then.

So we need to carefully redesign our management thinking on employee performance management. This thinking will raise questions as to how a process of continuous coaching and abandonment of annual scoring will enable us to set a fair and transparent method for employee rewards and bonuses.

In Part 3 of these series, we will look at the spectrum of employee rewards and identify new approaches to establishing performance criteria that truly reflect achievement and build enhanced employee engagement levels.   

Author’s Bio

Nigel Penny is a leading global expert on strategy, performance and leadership techniques. His focus is to ensure the sustainable future success of clients through effective strategic management processes.

Nigel has over thirty years international experience implementing consulting solutions encompassing all aspects of business and people management. Between 1996 and 2002, he worked closely with Dr. David Norton and Professor Bob Kaplan, the co-founders of the Balanced Scorecard approach, and was Vice President of the Asia practice of Balanced Scorecard Collaborative. Nigel was also partner in charge of KPMG’s performance management practice in Australia, and a member of their team developing global methodologies for Balanced Scorecard development and implementation techniques.

Nigel has facilitated strategy and business performance improvement programs in food, manufacturing, financial services, retail and utility industries, as well as working extensively with governments and not-for-profit agencies. He has worked in UK, USA, Europe, Asia and the Middle East and has lived in UK, USA, Singapore, Malaysia and Australia. Clients include Downer Group, Philip Morris, Tata Group, Kiwirail, Monash University, National Library of Australia, CIMB, Ministry of Defence, Brunei and Qatar Development Bank, amongst many others.