Does Performance Management stand up to appraisal?

This article looks at the issues surrounding performance review systems, their worth and inherent difficulties, what components are most likely to make them effective and alternative approaches that are being taken. There seem to be two extremes as to how companies choose to approach ‘performance management’. On the one hand, a traditional appraisal process, with objectives cascaded from the Business Plan. On the other, a system based on personal objectives that relies on a raft of behavioural and technical competences also being assessed. The point of entry between the two lies in the size, resources and sophistication of the particular organisation. Quite often, a system is a mixture of both approaches, with corporate objectives being augmented by those concerning personal development. Some large organisations see their performance management system as being a necessary evil: one of the only tools whereby ‘corporate will’ can be articulated, translated into individual deliverables then measured against outcomes. When a company has thousands of employees in diverse locations it also becomes a unifying mechanism to support and control development, succession planning and sometimes reward consistently. But performance management systems are beset with issues: too much focus on the process, inevitable time-consuming bureaucracy and the divisiveness caused by rating employees one against another. In isolation, such systems will never deliver a gear change in organisational performance. Plus, they cannot (and should not) be a substitute for effective capability management - I have attended many employment tribunals where irredeemably hopeless employees have been able to rely on positive appraisal documents to support their case!

Above all, traditional review systems seldom generate any emotional engagement from employees - when was the last time you heard a loud ‘hurrah’ ringing out across the office because annual reviews were due to commence? The engagement issue is especially evident when reviews are filled in online and then forwarded to the employee’s manager ‘for their bit.’ At worst, performance management presents HR with the fruitless task of chasing up paperwork or responses that managers are often reluctant to engage with, frequently because they view the process as yet another burden handed down from HR! It is interesting, in this respect, that Peter Cheese the CIPD’s Chief Executive has commented that processes such as formal appraisals “have almost been a comfort blanket for HR staff”, who may lack confidence in engaging with the business at a broader level. I have encountered businesses where managers’ pay awards are dependent upon completion of their staff reviews in an effort to get around this situation. Where managers only see the review process as a ‘tick box’ exercise this obviously devalues it and undermines any benefit. Performance management systems typically do not deliver because they are just too narrow in their focus and too concerned with process rather than outcomes. How many times do previous staff reviews get read once they are filed, other than immediately before the next review? The regimen of completing the annual review exercise, plus interim reviews, either online or hard copy, loses sight of the broader issues such systems are intended to address. Adding an inherently dishonest, and often necessarily political, 360 degree peer review process to this can provide the icing on the cake in terms of how to disengage employees where they perceive no intrinsic value in reviews.

Consider, beyond having a blank sheet of paper, what a performance review document really needs to include. It could be condensed into the following five question areas:

• What does the Company have to achieve in the coming year and what actions are required to deliver this?

• What does each individual have to do to enable the Company to achieve its goals, and within what timescales?

• Are there any barriers that may prevent individuals from achieving their targets - for example the way parts of the organisation operate, or immediate training needs?

• How successful were individuals in achieving the previous review period’s targets and what lessons did they learn from this?

• What does the Company need to do at an individual level to retain talent and meet personal development aspirations?

It is worth noting that one of the principle reasons for low performance is employees not being clear exactly what is required of them in their role, which may change according to business priorities, re-organisation or a new line manager. Job descriptions do not remedy this: they are always written in the past tense!

Some managers will feel more comfortable working within a structured review document which guides them through the process. Success lies in achieving the balance between a format that provides for this, whilst deterring tick box completion, and the certainty that managers are sufficiently confident to hold meaningful review discussions. This comes down to training and preparation but also requires the culture of the organisation to make such discussions the norm. The latter may be particularly difficult in ‘command and control’ type businesses that are hierarchical and overly-reliant upon reporting. Successful companies are those which generally allow employees at all levels ‘room to breathe’. Where review systems really succeed, and offer true added value, is when they sponsor open and honest feedback between the two parties, unconstrained by the limitations of a paperwork process (for example having to determine where an individual sits in relation to prescribed competences).

It is the value of the conversation itself that matters: understanding an employee’s aspirations and frustrations, ascertaining which elements of their job are most satisfying or frustrating, agreeing the priorities to which their efforts should be directed. Then, having done this, tailoring the style and extent of management required to permit them to succeed as individuals - daily. Mutually agreed objectives and outcomes, and follow up discussions of how these are progressing, can be recorded as simply as diary notes. These will provide just as much ‘evidence’ of performance, if it is ever needed, as pages of ratings and commentary. Confidence gained from such conversations is also more likely to lead to relationships whereby individuals feel more comfortable to raise issues that concern them, or constrain their performance, and to communicate a desire for advancement. It can be a most effective early warning system to enable retention of talent, prior to notification by resignation. Paperwork, or software, systems designed to proceduralise such discussions can never be a substitute for structured conversation, and can actually be a barrier to it. Over the past 18 months there has been some press focus on organisations abandoning formal review systems altogether, largely following PwC’s July 2015 publication ‘Performance Management Research’. Whilst this discovered broad support for formal reviews and a desire to gain feedback, it also noted that a number of high profile global organisations were either getting rid of year-end reviews or considering this. The same month Accenture announced that it was ending annual performance reviews for its 300,000-plus workforce. Companies such as Gap, Expedia, Deloitte (US) and Microsoft have taken similar steps, opting instead for continuous informal reviews. There are concrete benefits to be gained from this approach, as the purpose of reviews should always be about ‘how’ employees get things done as much as ‘what’ they actually achieve. We have all come across individuals who ‘get things done’ very successfully whilst having no regard for how their personal style impacts on those they work with or, more often, on those who work for them. In other words, there must be a focus on behaviours as much as results; regular informal discussion between managers and employees is more likely to facilitate this. This consultancy worked with Rolls-Royce in 2010 to implement its global performance management system. The key tenets underpinning this were to promote engagement, matched with positive employee behaviours and to ensure that quality conversations took place during reviews. The informality of discussions enabled much greater scope for both parties to share feedback and promote a positive relationship. If, having considered changes in current thinking, your business believes it will benefit from having a formal performance management system, here is a checklist of items to explore before jumping in: • What exactly is the business aiming to achieve through introducing the system; how will it add value

and how will the success/effectiveness be measured?

• What kind of system will best suit the business, how often will reviews take place and who will administer them?

• Does the culture of the Company, and perceived behaviours of senior managers, sponsor performance management?

• How much additional time, administration and cost will operating the system require?

• Is this another potential example of a ‘good idea from HR’ that may not translate into higher performance, and might act to slow the business down?

• How are you going to sell the benefits of the system to employees and get them to engage with it?

• Is the system going to rely on formal ratings and how will you moderate outcomes to ensure they are consistently applied across different departments?

• If the system is going to be linked to pay, in any form, how will you ensure this is fairly awarded and does not create potential inequality claims?

• Do managers have sufficient experience and commitment to carry out reviews, are they sufficiently motivated to follow them up, do they need coaching or training?

• Are all your employees aware of the key objectives and targets the business has to achieve in the coming year and are these informed and driven by your Business Plan?

• Do employees understand the priorities for their section for the next two quarters, or are they firefighting ‘in the moment’?

• Is deviation from the Plan visible and manageable at functional, departmental and team/individual levels through an agreed process or policy?

• Does the business have an appropriate internal communication structure to brief out ‘progress to plan’ at least quarterly?

• Are your reward systems properly geared to the achievement of key business outcomes and high performance?

• Will the organisation’s policies for talent management, succession planning and employee retention be fully integrated into the management of the review system?

• Is there a documented and communicated Capability Policy for managing performance that falls below required standards?

Finally, are their alternative ways of achieving the same objectives through, for example, employee engagement surveys, better communications, creating more empathetic line management, better reward systems, looking at talent management, improving employee relations, or managing capability issues more effectively?

In a nutshell, performance management should go well beyond annual appraisals and needs to ‘join up’ the components of business strategy, communication, organisational design, employee reward, talent management and resourcing. The completion of annual reviews will have little impact on overall business performance unless they are properly aligned to all these factors. Plus where reviews are not conducted well it can adversely affect the retention of quality staff.

We would welcome the opportunity to assist you in reviewing or implementing a performance management system and are happy to answer any initial queries you may have.

David Spencer Director, David Spencer-HR Consulting Limited www.davidspencer-hr.co.uk