Evaluating Performance Management Systems

Defining, measuring and evaluating performance is a critical management responsibility.? If employees do not think their performance is accurately and fairly appraised they are likely to experience dissatisfaction. If the organization links pay to performance a lack of faith in the performance management system will also lead to pay dissatisfaction.?

Motivating Performance

There are four prerequisites for motivating performance. ?(1)

• First, employees must clearly understand what is expected at all times. This necessitates establishing goals and performance standards before the start of each performance period. It also necessitates continuous measurement and feedback, to ensure expectations are still valid.?
• Second, employees must believe they are capable of doing what is expected. This requires a belief that they have the required knowledge and skills and are capable of exhibiting the required behaviors. Employees must also accept that standards are reasonable and that they will be provided with the necessary resources (staff, time, budget) for meeting expectations.
• Third, employees must believe they will be allowed to do what it will take to meet expectations. This requires the appropriate amount of autonomy.? Overly controlling managers can have a negative impact on the employees’ ability to get the job done in the best way.
• Fourth, employees must want to do what is expected.? If rewards (pay; recognition; career progression) are not linked to performance employees who otherwise would extend the necessary effort may not do so.? The fact that the organization rewards good performance sends the message that performance is important and valued.? If outcomes are the same for all employees, no matter their level of performance, the opposite message is sent.

These four prerequisites must be met if the motivation to perform will exist.? Expectancy, equity and reinforcement theory are the principal motivation theories supported by research and they prescribe these pre-requisites.

Effective System Design

Systems that are designed to manage performance must fit the culture of the organization and of the workforce.?(2) Most U.S. organizations emphasize defining, measuring and evaluating performance at the individual level. This is the most common approach in individualistic cultures, which are more prevalent in Western and Northern societies. In more collectivist cultures there is a greater focus on group and organizational performance.? Organizations with culturally diverse workforces that have resulted from talent mobility must find a way to define performance in a manner that is acceptable to employees.?

The optimal approach is to measure and reward performance at all levels.? Organizations need individual employees to perform well, but they also need employees to perform in a manner that contributes to both group/unit and organizational performance.??

The level of expectations will be influenced by the culture. Some organizations define minimally acceptable performance at a level that would be considered excellent in others.

Performance management systems must also fit the economic realities the organization faces. Expecting an undercapitalized organization in a highly competitive industry to outperform all others is unrealistic. Some would argue that expecting the unlikely will make it come true. But that might result in employee skepticism about how realistic the expectations are and cause them to resign themselves to not meeting them. Research on goal setting has found that difficult goals will encourage more effort but that once they become so difficult that meeting them becomes highly unlikely, they cease to provide motivation and instead promote resignation to failure.?(3)

It is important to only hold employees accountable for things they can influence. A Customer Service Representative who gathers the relevant information, correctly applies policy and treats the customer respectfully has behaved well, which is all that the person can control.? Whether or not the customer is satisfied will depend a good deal on how reasonable the customer is.?

There must be trust in management if systems are to be effective. One of the pre-requisites for motivation to perform cited earlier is that employees must want to do what is expected. But if there is a suspicion that excellent performance will result in staff reductions or endless raising of expectations employees are apt to opt out of the run on the treadmill.?

The performance management process must be defined in a manner that includes performance planning, performance measurement and performance evaluation. Using a model like one below ensures each employee knows what is expected at all times and that those expectations are continuously evaluated to ensure they are still relevant. Continuous measurement must occur, and feedback must be provided so that individuals know how they are doing and what might be done to improve performance.? At designated times performance is formally appraised and linked to administrative consequences. And results must be attributed to their causes, so that development plans can be fashioned to capitalize on strengths and remedy any deficiencies. The last step in the cycle becomes the first step of the next cycle… definition of future expectations.

When managers wait to measure performance and provide feedback until formally scheduled times (annually; semi-annually; quarterly) there is a danger that the memories of the appraiser and the appraisee will differ. People tend to attribute poor results to uncontrollable external events and successes to their efforts. They also remember and accept positive things more readily than negative things. Utilizing CPRs (continuous performance records) as a diary can work to reduce the need to rely on memory. When they are used appraisals become reviews of what has already been agreed to.

Evaluating System Effectiveness

Performance management systems must produce the results required if they are to be considered to be effective. This will depend on whether there is a good fit of the system to the environment, the soundness of the design of the administrative system and how well managers and employees played the roles necessary for success.?

It must be recognized that employee perceptions are to them their reality.? If they feel their performance has been evaluated inaccurately and/or inequitably they will be dissatisfied. Even if they are incorrect that is still what they act upon. As a result, perceptions must be measured when evaluating the system. Cognitive bias makes this more difficult, since there is a strong tendency for people to overestimate their performance.

Figure 1 is a questionnaire that can be used as a tool for evaluating system effectiveness. It can be administered to all managers and employees or a sample of each. Once the results are compiled management will be able to identify which elements of the system are believed to be strengths, and which are viewed as weaknesses. Respondents can remain anonymous if it is believed that it will increase the response rate.? However, it will make a more in-depth analysis of the results possible if information about the employees’ role, length of service, age/gender/race and job held is accumulated. Whether the results of the survey are shared with employees is a decision management must make, considering the culture and the willingness to consider change. But if employees make the effort to provide feedback and then never hear back they are unlikely to repeat participation in the future.

A mistake organizations often make is that they fail to accompany employee perception surveys with a summary of what the survey showed, as well as explanations about what will and will not be done to address the issues raised.? For example, a recent survey disclosed employee concerns about two issues related to managers. One was that managers did not provide continuous feedback that included things that needed to be done better or differently. The other was that managers had very different standards they applied when appraising performance, which resulted in unfairness across the organization. The organization responded by announcing a two-part training program that would address these issues. The first would stress the need for continuous measurement and feedback and a focus on developing employees.? The second would use frame of reference training (4) to equalize the level of expectations across managers. A subsequent follow up with employees demonstrated that taking survey results seriously and doing something about issues that needed to be dealt with increased employee satisfaction with the system and the process for managing performance.

Conclusion

Performance management systems and processes must fit the organizational context and must be viewed as equitable and appropriate by all parties at interest.? Evaluating them should be a continuous process, since system effectiveness will be impacted by changes in the context within which they operate. When things change systems might have to change. Processes may have to be designed differently, or they may have to be done more effectively. Continuous evaluation will help determine what, if anything, needs to be done.

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Figure 1

PERFORMANCE MANAGEMENT SYSTEM EVALUTION

Evaluate the current performance management system by providing a rating of how well the system meets the criteria, designating “meets,” or “does not meet.” For criteria not met, describe what causes the inadequacy and suggest how the system can be improved.

In Our Performance Environment

1. We have a culture that encourages everyone to strive for top performance
2. Managers are held accountable for managing performance well
3. Performance is clearly defined and measured at all levels
4. Management believes high performance leads to competitive advantage
5. Individuals know how their role contributes to organizational performance

?Our System And Programs

1. Were designed with input from managers and employees at all levels
2. Measure the right things and do so accurately at all levels
3. Are legally defensible?
4. Provide a clear linkage between performance and rewards
5. Generate performance appraisal ratings that are accurate

Managers

1. Recognize performance management as a critical part of their responsibilities
2. Have been fully trained in how to manage performance effectively
3. Continuously measure performance and provide effective feedback to employees
4. Provide an opportunity to discuss ratings and consider other input that is relevant
5. Honestly differentiate between outstanding, acceptable and poor performance

Employees

1. Understand the relationship between individual, unit and organizational performance
2. Accept the way their performance is evaluated as fair and appropriate
3. Are encouraged to engage in continuous dialogue with their manager on performance
4. Have an appeals system in place if there is disagreement with their manager
5. Accept the way rewards are linked to performance as fair and appropriate

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?(1)Rewarding Performance, 2d ed., R. Greene, Routledge

(2)Rewarding Performance Globally, F. Trompenaars & R. Greene, Routledge, 2017

?(3)A Theory of Goal Setting & Task Performance, E. Locke & G. Latham, Prentice-Hall, 1990

?(4)Frame of reference training uses group participation in case analysis that results in participants coming to consensus about how simulated employees should be rated.

About the Author:?Robert Greene, PhD, is CEO at Reward $ystems, Inc., a Consulting Principal at Pontifex and a faculty member for DePaul University in their MSHR and MBA programs. Greene?speaks and teaches globally?on human resource management. His consulting practice is focused on helping organizations succeed through people. Greene has written 4 books and hundreds of articles about human resource management throughout his career.

• Strategic Talent Management: Creating The Right Workforce
• The Most Important Asset: Valuing Human Capitol
• Rewarding Performance Globally [with Fons Trompenaars]?
• Rewarding Performance: Guiding Principles; Custom Strategies?(2d Edition)