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7 elements of effective performance management

A concise read of best practices

Dr. Sandeep K. Krishnan, Fellow IIM Ahmedabad, Practice Lead – Organization Development, Infosys Ltd

http://in.linkedin.com/in/sandeepkrishnan/

Performance Management is one of key aspects of human resource management and is considered a

core function to be performed by business leaders, human resource professionals, and managers. While

business leaders give direction in terms of “what” aspect of performance management, HR professionals

manage the “how” part and managers deal with the “doing”. As a process, the performance

management integrates aspects related to strategy, planning, managing, legal, and human resources.

The key of a successful performance management system is to identify the hard and soft elements and

incorporate the best practices. The key belief of having a strong performance management program is

that it can help business be more successful and help employees perform and grow. It also helps to

create a sustainable organization and build a strong employer brand.

Interesting Research / Practice: CLC research shows that business and HR leaders expect performance of

employees to grow atleast by 25 % to achieve the business results they would like to see ! Research also

shows that less than 25 % are happy with the current performance management processes and systems.

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Element 1 : Performance Target Setting

This element deals with goal setting for both organization and the individuals below. Some of the best

practices at this stage are

a. Using mechanisms like Balanced Scorecard to have different perspectives of goals captured

(eg: Financial, Customers, Process, and People)

b. Ensuring the organizational goals (Goals of the CEO) are captured within the various business

and functional heads

c. Goals are cascaded to levels below and also provides provision for unique contributions of

individuals and focus should be on a maximum of 5 to 6 goals

d. Goal setting involves discussion between manager and employee and relevance of goals are

explained. Best practice is that the goals are set by the employee and approved by the manager

e. Goals follow “SMART” framework and as Dick Grote mentions, they should be “Wise”

f. Manager shares his/her goals with her team and explains the “big rocks” of expectations

g. Goals are aligned to employees’ roles as much as possible.

h. Targets and stretch targets and outcomes of achieving them are explained

i. Explain what to deliver, and what are the expected behaviors – setting of performance

standards

Interesting Research / Practice: Latham and Seijts (1999) and Locke (1996) suggests that while

Specific targets and SMART frameworks work well for well-established general jobs, for complex

jobs “do your best” is more effective

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Element 2 : Continuous Feedback

This element looks at whether we are on track and what support is required. Continuous feedback

ensures that we avoid last minute surprises, expectations are clear, development needs are voiced, and

gaps in terms of performance are dealt at the right time (Performance Coaching). While at the

organizational level, business reviews and planning takes care of where we are, for an individual

continuous assessment and feedback helps. Some of the best practices here are:

a. Set up time to assess performance at regular intervals

b. Do informal checks on how the person is doing

c. Give feedback both on the deliverables and competencies/behaviors

d. Record feedback and progress for future use (this can help handy for legal compliance as well)

e. Actively seek feedback from various stakeholders on employee performance and behaviors and

feed forward

f. Ensure that necessary support for performance is extended

g. Seek inputs from the employee actively

h. If the employee is currently undergoing a transition – eg : just after promotion, change in

responsibilities, assignment in a different geography etc, have relevant feedback based on the

context

i. Be aware of cultural context of giving feedback

Interesting Research/ Practice: Spreitzer and Porath (2012), uncovers four elements of sustainable

performance in an organization – providing decision making discretion, sharing information, civility at

workplace, and offering performance feedback.

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Element 3 : Evaluation and Feedback

This step is different from the continuous feedback and performance coaching as it looks at how an

employee has performed vis-à-vis the expectations or the goals set in the beginning. Some of the best

practices here are:

a. Ensuring that enough preparation is done – asking the employee to send a list of major

achievements, doing a self- appraisal – focusing more on achievements rather than rating

b. Refer to the ongoing feedback and any documentation available related to performance

c. Understand the job the person is doing along with the expectations set in the beginning

d. Evaluate both results and behaviors and if possible have separate discussions for each

e. Do not focus on the percentages / weightages for the goals and rate – use an overall parameter

of high/medium/low on each of the goals and have the final rating based on the same

f. Rate based on managerial judgment rather than a mathematical approach

g. Have the reviewers inputs for the appraisals that you are doing

h. If the company follows normalization process, share all the achievements of the employee and

calibrate based on relative achievements. Segment the population to the top most, average ,

and lowest and then allow to debate.

i. Use documentation and evidence for decision making and record all performance related

observations.

j. Be prepared for negative reactions and communicate with clarity performance and competency

gaps with evidence to support rating decisions

k. Do not focus too much on negative or positive factors; avoid psychological traps like recency,

halo effects.

Interesting Research/Practice : Use elements of transactional analysis – State of transaction – Parent,

Adult, or Child and this can capture softer aspects of in a rational process like performance

management

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Element 4 : Competency Evaluation and Development

This element looks at ensuring that employees have the right capabilities and behaviors to perform in

the role. The elements of competencies – knowledge, skills, and attitudes are taken care here.

Performance management will incorporate discussions on competencies, their evaluation and a plan for

development. Some of the best practices here are:

a. Use evidence based approach. Competencies should be evaluated based on observable

behaviors

b. Differentiate between exemplar and very poor on competencies. An exemplar will be a person

who can coach other on the competencies and a very poor will be one who will show negative

behaviors

c. Use evidence from multiple sources – 360 degree is a good source

d. If you do not have evidence, do not evaluate and it is best to rate as “NA”

e. Understand why the person is lacking in a competency: Knowledge, Skill, or Attitude : For

example in communication skills, the person might not know the vocabulary (Knowledge), or

does not know how to pronounce/ use the right punctuations while talking (skill) or there might

be a fear of speaking in certain occasions (attitude). Customize your development to the root

cause.

f. For development, look at the top 3 competencies that require development – apply the criteria

of Impact and Ease : Impact – how improving this competency will help the person showcase

better performance and Ease – Easy to develop. This will help the person to show a noticeable

difference. Have a plan for demonstrating and developing strengths as well.

g. Use multiple methods for development (self learning / projects/ mentoring/job

shadowing/coaching etc) based on the need

h. Always give an individual opportunity to showcase improvements and track development over a

period

Interesting Research/Practice : Zenger, Folkman, and Edenger (2011) shows that it is important for

executives to focus on competencies that are their strengths to make a difference.

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Element 5 : Career Planning and Development

This element looks at career development aspect linkage of performance management. As a person

enters the role and performs effectively, he/she will also be looking at enhancing his/her careers and

also seek opportunities to grow. It is important that guidance is given in terms of where the individual

can see himself/herself over the years and enable the process through career development

conversations. Some of the best practices here are?

a. Have the conversation after having inputs on the person’s performance and competencies

b. Use inputs from talent review – looking at how the performance and potential of the person is

from business, function, and individual point of view

c. While career development discussions are for everybody customize them for various groups –

high performers, high potential high performers, etc.

d. Start from the basics – of career interests, personal values, long term interests, and then look at

the strengths and weaknesses of the individual: you may seek help of tools here – predictive .

e. Encourage to explore options : both vertical and lateral and shortlist for next move and time

frame in line with organizational policies

f. Document a development plan to achieve the career move

g. Ensure mentoring, special projects, job shadowing, specific training etc as part of development

plan

h. Have continuous review built up and enable through programs like fast track

i. Use the inputs of career planning to talent mobility and engagement.

Interesting research/practice: Job Shadowing can be used as an intervention for learning from leaders,

task learning, or observation of other function or jobs

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Element 6 : Outcomes management

This element looks at what are the critical outcomes that are part of performance management process

and the best practices in them.

a. Ensure that there is differentiation in-terms of incentives, compensation hikes, and payouts for

high, medium, and low performers

b. Have data from atleast two consecutive cycles to manage decisions related to careers

c. Ensure that data beyond performance is used to critical promotion and talent related decisions

– viz. potential, career aspirations, mobility etc.

d. Have learning and development related actions documented post performance appraisal

e. Have a plan to support poor performance with clarity on outcomes post intervention

f. Ensure that legal aspects of managing outcomes of various countries are taken care of

g. Ensure that fairness and respect are displayed in taking decisions and communicating them

h. Do not over empathize or be overtly curt while communicating negative outcomes –

communicate the process, and policies behind the decision making

Interesting Research/ Practice: Research shows that people are more worried about relative

decisions and procedures followed for pay decisions rather than absolute pay.

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Element 7 : Culture, Process and systems

This element looks at the infrastructure the organization provides for performance management. It is

like the operating system for the performance management.

a. The organization recognizes that high performance culture is critical for business growth

b. Basis of rewards and growth in the organization is performance

c. Values supersede performance and only performance achieved through sound practices are

recognized

d. Organization believes that performance management is critical for business growth and by

managing performance both the organization and employee benefits

e. There is a well -documented process of managing various aspects of performance management

f. There is clarity on the rating scale and the meaning of each of the ratings.

g. Senior leaders act as advocates for the process and themselves enable performance as coaches

h. Culture of continuous feedback and improvement exists

i. Managers are enabled on processes, system, and skills of performance management

j. An IT system supports the performance management program and process

k. Organization believes in internal and external compliance to legal and process dimensions of

performance management

l. Performance management system and processes are not misused to penalize employees

Interesting research / information: Organizations can automate a lot of workforce performance

related data using workforce management software like Kronos, Mobyforce, Frairtuck, Oracle-HCM.

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References/ Good Reads Grote, D. (2011). How to be good at performance appraisals, Harvard Business Review Press.

Zenger, J. H.; Folkman, J. R.; Edinger, S. K. (2011), Making yourself indispensable, Harvard Business Review. Oct,

89(10), p 84-92. (Available: http://talentfactor.nl/wp-content/uploads/2011/09/Making-Yourself-Indispensable-

HBR-Oct-2011.pdf)

Spreitzer, G., and Porath, C (2012). Creating sustainable performance, Harvard Business Review. 90(1/2), p 92-99

(Available : http://www.uky.edu/Centers/iwin/RTMay13/HBR_Porath.pdf)

Latham, G. & Seijts, G. (1999). The effects of proximal and distal goals on performance on a moderately complex

task. Journal of Organizational Behavior, 20, p 421- 429.

Locke, E.A (1996). Motivation through conscious goal setting. Applied and Preventive Psychology, 5, p117-124.

(Available: http://expand.nu/wp-content/uploads/M%C3%A5ls%C3%A6tning-review.pdf)

Weirich, H (2000). MBO: Appraisal with Transactional Analysis, Accessed online June 13, 2013 at

http://usf.usfca.edu/fac_staff/weihrichh/docs/mbo.pdf.

Websites

http://www.cs.ny.gov/

http://www.mobyforce.com/

http://www.kronos.com

http://www.peoplebusiness.org

http://www.oracle.com/hcm

http://www.dickgrote.com

http://www.mmu.ac.uk/humanresources/policy/pdf/job-shadowing-guidelines.pdf

You may send in your feedback / suggestions to sandeephrm@gmail.com. This article does not claim any reference to practices or processes in

the current or previous organizations that the author was associated with. The images used in this documented were downloaded from

www.thinkstock.com and www.dreamstime.com

Dr Sandeep K Krishnan is a Fellow of IIM Ahmedabad. He has worked with organizations like IBM, Infosys, Ernst and Young, and

RPG Group. His expertise is in the areas of key HR processes like Performance Management, Leadership Development,

Executive recruitment and compensation, and Employer Branding. He has been an HR Leader including heading HR and has

worked as a consultant in various HR transformation projects. He has also authored articles in professional journals and

magazines of repute. Contact : sandeephrm@gmail.com