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Performance Management

Cor Faling

November/December 2011

ALL RIGHTS RESERVED COPYRIGHT

The views expressed in this document are not necessarily those of the Seta’s.

Performance Management – November / December 2011

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Table of contents

1. CRITICAL SUCCESS FACTORS 4

1.2 Definition of performance management 5

1.3 The basis of performance management 5

1.4 Incorporating a balanced scorecard 8

2. PERFORMANCE MANAGEMENT PROCEDURES 13

2.1 Organisational readiness 13

2.2 The performance management cycle 16

2.3 Competencies 28

2.4 Key performance indicators 33

3. PERFORMANCE CONTRACTING 37

3.1 The need for a policy 37

3.2 Policy statements 37

3.3 Performance contracting paperwork 39

4. TRACKING PERFORMANCE AND TAKING CORRECTIVE ACTION 45

4.1 Tracking results against objectives and renegotiating outputs 45

4.2 Performance improvement planning 51

Template: Performance Improvement Plan 53

4.3 Career Development Plans (CDP) 55

Template: Career Development Plan 57

4.4 Disciplinary Action 62

4.5 The concept of 360 degree feedback 73

5. REWARD, REMUNERATION AND COMMUNICATION 76

5.1 Reward strategy 76

5.2 Remuneration model 78

5.3 Performance communication

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6. CHALLENGES AND LIMITATIONS OF PERFORMANCE MANAGEMENT 87


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6.1 Introduction 87

6.2 Potential Challenges of implementation 87

7. TRENDS IN PERFORMANCE MANAGEMENT 91

8. THE ROLE OF TECHNOLOGY IN AUTOMATING PAPERWORK* 93

8.1 Introduction 93

8.2 Improving administrative efficiency and reducing risk 93

8.3 Making performance reviews relevant 94

8.4 Maximising productivity and paying for performance 95


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1. CRITICAL SUCCESS FACTORS

1.1 Introduction

“Performance management is about having everyone succeed and improve.”

Discussion: Identify the groups that would fit the description of “everyone” in the context of performance

management

This definition stands in stark contrast to the way management and staff of an organisation tend to perceive

performance management. It mostly conjures up a picture of onerous paperwork, the dreaded annual appraisal

meeting, subjective judgments, and often, lasting animosity between employees and boss. For these reasons

and others SMMEs in particular tend not to implement a performance management system, considering it a

waste of time and resources.

Yet, world-wide businesses of all sizes are re-committing themselves to performance management, embracing

affordable technology to implement and run real-time systems as part of their talent management. They have

come to recognise performance management as a user friendly process of creating a work environment in which

management and staff are enabled to perform to the best of their abilities.

An integrated performance management system has as objective the creation of a working environment in which

the employee (and manager) can achieve incremental self-actualisation by developing his/her expertise while

delivering maximum results for the organisation in line with its objectives.

A well structured performance management system will start with the development of clear job descriptions and

conclude with an exit interview. It will have processes in place that cater for appropriate staff selection;

accomplishment-based performance standards and measurements; orientation, education and training; ongoing

coaching and feedback; performance development; an effective compensation and recognition system based on

individual and team contributions and the creation of promotion/career development opportunities.

It will provide managers and employees the confidence and competence to set goals, observe performance, give

and receive feedback, deliver and digest tough messages (including grievances and disciplinary actions), and will

help to create development plans.

1.2 Definition of performance management


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Since this toolkit is about the management of performance a realistic definition of performance management

must be the departure point that guides the development and implementation of a performance management

system and process.

“Performance management is a business process that links what individuals and teams do on a daily basis with the larger goals, values and cultural practices of the organisation and the needs of its customers; it is a process for establishing a shared understanding about what is to be achieved and how it is to be achieved; it is an approach to managing people that when done well, contributes to an enduring and healthy organisation.”

1.3 The basis of performance management

1.3.1 It is a business processIt is about the everyday actions and behaviours people use to deliver the goals of the organisation to meet

customer needs, improve performance and themselves. It cannot be divorced from the management and

business processes of the organisation. Performance management is not about a set of forms, the annual

appraisal ritual, or the merit or bonus scheme.

1.3.2 It creates a shared understanding about what is to be achieved and how it is achievedIndividuals and teams need to have a common understanding of how their roles connect to the business mission

and goals of the organisation. To improve performance they also need to know what superior performance looks

like, and how to achieve it. Performance can be described as a set of tasks, goals, behaviours or results or any

combination of these elements. The goals and tasks must be formalized into a performance agreement.

1.3.3 It is an approach to managing peopleThe focus of performance management is on connecting people to one another and to the larger organisation

and its values. The main emphasis is on how to get people to work together and support one another to achieve

shared aims. In particular it puts the responsibility on managers to work effectively (through coaching and

motivating) with those for whom they are accountable.

1.3.4 It increases the probability of organisation health and durabilityPerformance management has a clear purpose. It is about delivering success for individuals, teams, and the

organisation. By establishing a continuous management process that delivers clarity, support, feedback, and

recognition to all, leaders take a major step in sustaining performance, the performance management process,

and organisational life span.

1.3.5 It is driven by competenciesThere are as many definitions of competency as there are competency authors. The term as used here refers to

the key personal skills and knowledge that enable individuals to perform their work.

The reason why competencies have been included as a key element in a proposed performance management

system is that competencies are the only common denominator that can be used across human resource


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systems consistently. This assists both line managers and human resource professionals to measure and

manage jobs and performance in an integrated way. What this means in practice is that a set of competencies

used to define any (specific) job would be applied consistently to all individuals in that specific job or job category

for all human resource applications such as performance management, training, selection, remuneration and so

on. This makes comparisons and measurements of individual (performance) consistent, reliable, and legal.

1.3.6 Focus areas of performance managementBest practice organisations see performance management as a dynamic, ongoing process that helps them

achieve business goals and helps individuals focus on high-payoff activities that improve performance. Their

focus is on three areas:

Structuring the performance management system for success

Building commitment to the system

Assessing results

Focus Area 1: Structuring for successActively align work unit, team, and individual goals with organisation goals. The starting point is always the

organisation’s strategic goals. Establish and reinforce the importance of core competencies and job

competencies. Support line managers to use performance management across a variety of people applications

i.e. to reward high performing groups and individuals, to target poor performers for improvement and/or

termination and to steer special development initiatives such as employment equity planning. Use performance

management to ‘encourage’ line managers to take responsibility for both the technical and people component of

their role, i.e. consolidate their primary role and deliver their people management responsibilities

Use electronic and information technology based systems in the administration of performance management.

Administer a performance management process that is reliable, objective, and fair with performance ratings.

Focus Area 2: Building commitment to the process to assure proper executionActively transfer the responsibility for the initial development and ongoing administration of the system from the

human resource function to the line organisation. The role of Human Resources becomes one of maintaining

policy and quality standards for the system. The demand for effectiveness now comes from line and not the

Human Resource function.

Increase the amount of employee involvement in the operation and administration of the performance

management process, particularly at the beginning and end of organisational cycles such as planning, budgeting,

and programme evaluation. Provide ongoing training support for executives, managers, and employees to

implement and maintain the performance management process.

Focus Area 3: Assessing resultsTake a balanced view of measuring the benefits that flow from the use of performance management as a

contributor to organisational effectiveness. Use a ‘balanced’ scorecard of criteria to monitor and fine-tune

performance management processes. Involve all relevant stakeholders in the evaluation process. Best practices


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studies clearly support the view expressed above that performance management is more than an administrative

process that revolves around a single event at performance appraisal time. Performance management is an

approach to managing people and performance that recognises the fluid, dynamic and ever changing nature of

the world of work. Organisations have to rapidly respond to the multiple pressures from various stakeholder

groups who may or may not be customers.

The assumptions that guide the use of performance management are that customers, stakeholders and context

are the chief drivers of performance management practices. The word practice is the operative word here.

Practices can and must be adapted to suite a particular context at a particular time. Practices can also be more

rapidly changed than can systems, which rely on mandates and precedent. Businesses will in future have to

rapidly deliver service to customer segments who have conflicting needs and ‘wants’, with reduced resources

and where ‘innovation’ is called for. Performance management in this scenario is very much an ongoing

communication process, co-determined and undertaken in partnership between employees, managers,

supervisors, customers and other stakeholders

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1.3.7 The role of HR and SDF in performance managementPerformance management is the process of creating a work environment or setting in which people are enabled

to perform to the best of their abilities. Performance management is a whole work system that begins when a job

is defined as needed. It ends when an employee leaves your organisation. The involvement of HR and SDF lies

in guiding line management to:

Develop clear job descriptions

Select appropriate people with an appropriate selection process

Negotiate requirements and accomplishment-based performance standards, outcomes, and measures

Provide effective orientation, education, and training

Provide on-going coaching and feedback

Conduct quarterly performance development discussions

Design effective compensation and recognition systems that reward people for their contributions

Provide promotional/career development opportunities for staff

Assist with exit interviews to understand WHY valued employees leave the organisation.

Discussion: One of the biggest challenges in performance management from an HR perspective is to obtain

commitment from line management. What is your experience?

1.4 Incorporating a balanced scorecard


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1.4.1 Creating a balance in performance Balancing measures is a strategic management system for achieving long-term goals. Senior executives in

industries from banking and oil to insurance and retailing use balanced measures to guide current performance

and plan future performance. They use measures in four categories—financial performance, customer

knowledge, internal business processes, and learning and growth—to align individual, organisational, and cross-

departmental initiatives and to identify processes for meeting customer and shareholder objectives. Their

experience has shown that balancing a family of performance measures works. This means that in each phase of

performance planning, management, and measurement, the customer, stakeholder, and employee are

considered in balance with the need to achieve a specific mission or result.

1.4.2 The need for a balanced approachA balanced approach allows all the important operational measures to be considered at the same time, showing

whether improvement in one area is achieved at the expense of another. Key indicators should tell how the

organisation is doing. They will probably change over time to reflect shifting organisational goals. Performance

levels can be reported on a monthly or quarterly basis. All levels of management, including field personnel, can

participate in the reporting process; together, they provide a good idea of the health of the organisation from a

variety of perspectives. It is only with a balanced approach that leaders can create success throughout their

organisations.

This proven approach to strategic management imbeds long-term strategy into the management system through

the mechanism of measurement. It translates vision and strategy into a tool that effectively communicates

strategic intent, and motivates and tracks performance against established goals. A strategy is a shared

understanding about how a goal is to be reached. Balancing measures allows management to translate the

strategy into a clear set of objectives. These objectives are then further translated into a system of performance

measurements that effectively communicates a powerful, forward-looking, strategic focus to the entire

organisation. In contrast with traditional, financially based measurement systems, the balanced measures

approach solidifies an organization’s focus on future success by setting objectives and measuring performance

from distinct perspectives. The old method of management, which focused only on the bottom line, no longer

works. If the customer, stakeholder, and employee are not part of the solution, they will forever be part of the

problem.

1.4.3 The perspectives in performance management Performance management is viewed from three perspectives: employee, customer, and business.

The employee perspective focuses attention on the performance of the key internal processes that drive the

organisation. This perspective directs attention to the basis of all future success — the organisation’s staff and

infrastructure. Adequate investment in these areas is critical to all long-term success. Without employee buy-in,

an organisation’s achievements will be minimal. Employees must be part of the team. How does one get


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employees to see the business as an employer of choice? It needs focus on issues such as employee

development and retention.

The customer perspective considers the organisation’s performance through the eyes of a customer, so that

the business retains a careful focus on customer needs and satisfaction. It therefore makes the customer the

driver of performance. Questions to ask are

How do you want your customers to view you?

Who are your customers? Is there more than one target market

Are measures based on external customer input?

Do your measures reflect the characteristics of good service (accessible, accurate, clear, closure,

timely, respectful)?

The business perspective looks at the organisational efficiency and effectiveness. Questions to ask are

How do you want your stakeholders and/or customers to view you?

Are your measures results-based?

Are the results something customers care about?

Do you have real-time data for reporting purposes?

Together, these perspectives provide a balanced view of the present and future performance of the organisation.

A balanced set of measures allows leaders to think of their organisation in its totality. There is no one "right"

family of measures. The measures must reflect the overall mission and strategy of the organisation. They have to

be the measures that drive the organisation. In most cases, they are developed through an iterative, evolutionary

process. There can be several categories but the idea is to keep it as simple as possible so that measurements

can be global and quick.

1.4.4 Best Practices in Balancing MeasuresThere is no generic set of balanced measures that can be applied as best practice to all functions of the

business. Certain conditions, however, need to exist within an organisation for a balanced approach to

performance management to be successful:

strong leadership that supports the adoption of balanced measures as a feature of organisational

management and accountability;

the capability to communicate effectively throughout the organisation and the organisation’s ability to

communicate to decision makers; and

the knowledge that customers, employees, and stakeholders are fully informed and that they

understand and support the initiatives of the organisation.

While an attempt to find a one-size-fits-all approach will not work, there are some generic principles that remain

constant across all organisations:


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Good product or service: Does the organisation meet the consumer’s need for goods or services or

rectify a perceived wrong?

Good image: How does public opinion view the organisation? Are employees enthused by the public’s

perception of them?

Good availability: Can customers get easy access and satisfaction? Is the organisation ready and able

to respond immediately to any reasonable challenge?

Good employer: Are there high levels of staff retention, staff morale, and job satisfaction?

Continuous improvement: Is there a continuous evaluation process to identify and implement

improvements? Do the improvements benefit the product to the community?

1.4.5 Establishing a results-oriented set of measures Creating a family of measures is the most crucial part of the strategic planning process. And a most crucial part

of this creation process is for businesses to consult with their customers (to find out what they really want) and

with your employees (to find out what they need to achieve success). This consultation has a significant impact

on how the organisation’s overall performance is managed. If customers and employees are part of the planning

process, they then become part of the achievement as well, building an environment of trust and openness that

can really turn things around. Trust and openness stimulate buy-in, and buy-in is what unifies a business around

a strategic mission. The critical areas of practice in the establishment of measures are the following:

Define what measures mean the most to your customers, stakeholders, and employeesThe following are some best practices of our partners. They are offered as ideas for use in an

organisation’s strategic and performance planning.

Have customers, stakeholders, and employees work togetherThe strategic planning process, from establishment to performance reporting, should be collaborative

and interactive at all levels.

Create an easily recognised body of measures

It could be customer satisfaction, expertise, innovation, employee commitment, return on investment,

productivity/efficiency, internal processes, protection of the environment.

Commit to Initial ChangeOne of the biggest challenges of the balanced scorecard approach is the culture change needed to

realise that employees and customers matter, and that employees are accountable for results.

Changing the culture and getting that initial buy-in from everyone in the organisation is of tremendous

importance. Without it, there can be no sustainability: the strategic performance framework will cease to

exist with any change in the organisational structure. While leadership is a strong factor in this there are

some things an organisation can do to help ensure that buy-in occurs.

Use expertise wherever you find itIdeally the business has an employee with experience in the area of performance benchmarking. If not,

a consultant may have to be retained. Often a vendor of an integrated digital performance management

system can provide the expertise as a member of a team to set up initial benchmarking in establishing a

family of measures.


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Involve everyone in the process. It is wise to invite all employees to participate in workshops to establish the organization’s performance

measures. It will contribute greatly to future buy-in.

Make the system non-punitive

Implementing a balanced set of measures system can be more difficult than it is first expected.

Therefore it is important to develop challenging, but achievable, stretch targets and placing them in a

non-punitive context. Leaders recognise that buy-in and commitment from employees will be

compromised if the system is initially structured to put budgets at risk if a performance target is not met.

During these initial phases of culture change, they feel it is best to leave the employees with some

breathing room—to let them know that they and the business are struggling through this together, rather

than this being some sort of "us versus them" situation.

Bring in the unionsIt may be necessary to hold focus group meetings with employees and unions. A business with a large

staff complement may want to publish its intent and process in a booklet to communicate its balanced

set of measures to employees—and thus ensure understanding and buy-in.

Provide clear, concise guidance

Consider publishing a Planning Guidance Document which describes the planning framework, guides

development and management of operational plans, provides a consistent process to follow, and

identifies accountable points of contact. There is a certain comfort in having a document such as this: it

eases transition by giving managers a frame of reference from which to work.

Maintain FlexibilityIt is more than likely that sets of performance measures will be revised from time to time. In most cases,

the number of performance measures will need to be reduced to simplify the overall system. This

supports the fact that a balanced set of measures cannot be established overnight. It must be given

time to develop, and the organisation must be given time to adapt. Flexibility is the watchword here.

While it is true that smaller organisations—almost by definition—can be more flexible than large, the

latter can, and must, incorporate flexibility in their approach to performance measurement. Change will

be slower and more incremental in larger organisations, but it can nevertheless be steady and

progressive.

Limit the number of measures.

It offers a real opportunity to reduce the reporting burden and focus management on an organisation’s

most important issues.

Recognise that this is a living process

Performance measures may have to be adjusted in response to new market conditions, the effect of

new legislation, technological innovation and improved staff expertise.

Discussion: To what extent is the Balanced Scorecard practically in operation in your organisation?


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2. PERFORMANCE MANAGEMENT PROCEDURES

2.1 Organisational readiness

2.1.1 Change readinessImplementing an integrated and competency driven Performance Management system represents a substantial

investment in time and money for organisations big and small. Managing the implementation of such a

programme involves managing the process of workplace change in a business environment and transitioning

people to meet performance targets rapidly and effectively.

One of the first steps in implementing a Performance Management system is to evaluate your company’s

readiness for change – a combination of willingness and ability to undertake the journey. Successful change

management starts with an assessment of your organisation's change readiness along three dimensions:

Creating the Pull. Do key stakeholders understand the need and feel motivated to implement an

integrated Performance Management system?

Supporting the People. Are company stakeholder goals (including unions) aligned and on-board to

enable successful movement towards the change?

Managing the Process. Can you leverage project and programme management tools to plan, execute

and monitor the implementation of the process/change?

By assessing and understanding your company’s readiness to implement a Performance Management system,

leaders can identify potential roadblocks, as well as strengths and best practices. Use the following assessment

tool to determine the organisations readiness to change.

2.1.2 Exercise: Determine organisational readiness in your business.InstructionsAssessing readiness to implement a performance management system:

The change readiness assessment includes three sections. Select the score that best matches your assessment

of the situation: 1 represents weak/low, and a score of 6 represents strong/high with the remaining numbers

being degrees of weak or strong.

Current Readiness

Weak/low Strong/high

1 2 3 4 5 6

Step 1: Creating the pull: Do key stakeholders understand the need and feel motivated to change?


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Strategy and business goals: Is there a clear link between the business strategy & goals and

how performance management is used to support the strategy and goals?


1 2 3 4 5 6

Leadership & Sponsorship: Has senior management made a public commitment to act as a

sponsor of the launch of a performance management system?


1 2 3 4 5 6

Creating Measures: Have the leaders in the organisation provided a balanced scorecard of

measures / goals / targets against which performance will be measured?


1 2 3 4 5 6

Stakeholder Identification & Assessment: Have all affected stakeholders been identified and

the degree of impact of the change on the operation of their work unit was assessed?


1 2 3 4 5 6

Step 2: Supporting the people: are company and stakeholder goals aligned to enable successful movement towards the change?

Cultural Alignment: Will the launch of a performance management system be consistent with

the current organisational culture?


1 2 3 4 5 6

Business & People Practices Alignment: Will HR policies, practices and processes (e.g.,

compensation, benefits, performance) support the launch of a performance management

system?


1 2 3 4 5 6

Employee Training & Development: Does the infrastructure exist to build competence and

confidence at all levels to implement the launch of a performance management system: i.e.,

provide them with the appropriate tools and training?


1 2 3 4 5 6

Leadership Transition: Is there a history of adequately helping managers and key employees

to implement HR and business process changes?


1 2 3 4 5 6


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Step 3: Managing the process: can you leverage project and programme management tools to plan, execute and monitor the launch of performance management system?

Programme & Project Management: Are programme and project management practices and

tools institutionalised?


1 2 3 4 5 6

Conflict Management: Is there a process in place for managing (identifying, addressing,

resolving) conflict associated with the launch of a Performance Management system)?


1 2 3 4 5 6

Performance Measurement: Is there a framework and process for measuring the contribution

performance management will contribute to organisational performance and effectiveness?


1 2 3 4 5 6

Evaluation and Debrief: Has the company successfully captured and institutionalised past

lessons learned when similar changes have been introduced?


1 2 3 4 5 6

2.1.3 Interpretation of the scores:Scores of mostly 1's and 2's: Very low readiness, high risk.Need to develop "pull" so that stakeholders understand the change and feel motivated to participate. Employee

"support" needs to be aligned, so that employees will have the ability to participate and will not encounter

obstacles. Strong program and project "management" are required to continue to move the change forward and

achieve results.

Scores of mostly 3's & 4's: Moderate readiness, moderate risk.Moderate "pull" could build momentum, and moderate alignment means that employees will not encounter too

many obstacles. But strong program and project "management" are required to continue to move the change

forward and achieve results.

Scores of mostly 5's & 6's: Strong readiness, low risk.The strong "pull" will build momentum and the strong "support" will provide employees with the ability to

participate. However, the moderate "management" could result in the program overall not moving forward.

2.2 The performance management cycle


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Performance management has a clear purpose. It is about delivering success for individuals, teams, and the

company. By establishing a continuous management process that delivers clarity, support, feedback, and

recognition to all, leaders, managers, and supervisors are to take a proactive step in sustaining performance, the

performance management process, and life span of the business. Below is a diagram that lists the key elements

of the company performance management system.

The process steps that follow for the implementation of a performance management system are shown below.

Discussion: Identify the groups that would fit the description of “everyone” in the context of performance

management


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Discussion: Internationally it is estimated that 95% of staff are unaware of the organisation’s strategic

objectives and/or can not relate to them in the execution of their daily tasks. What is the situation in your

business?


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2.2.1 Step 1: Balanced scorecard/measuresThe starting point for performance management is to gather the information to create meaningful and

measurable performance agreements with each team as a whole, and each employee within the team. The

definition of ‘employee’ in the Labour Relations Act (1997) now extends to everyone: executives, managers, and

workers.

The following is a list of the information and planning processes that executive management will need to have in

place to support managers and employees with the management of performance:

Strategic plan with at least a three year time frame

Strategic priorities for each year of the 3 annual performance cycles

Balanced measures for three years and the ‘critical few’ for the first year of a three year performance

cycle (including unit/team measures for line and staff units)

Business and operations plan for one year for each major function/division/unit; these plans provide the

basis for senior management performance contracts

Competency profiles/job descriptions/performance profiles/unit standards which are updated annually

for each job family or each unique job at employee level.

2.2.2 Step 2 (a): Plans for individual performance and developmentPlanning is the next important step in the process of managing performance.

INFORMATION: In this context, planning is first and foremost an exploration of what the work group, as a whole

and each member within the work group needs to know to perform at a level of excellence determined in

consultation with external and/or internal customers.

BUDGETING: Writing a realistic budget forms a critical part of the performance planning process. All budgets

require various assumptions, and the planners (usually managers) need to make these assumptions explicit

(through effective performance communication) to those who will implement the plan and be responsible for

expenditure.

2.2.3 Step 2 (b1): Team and Individual performance and development contracting, communication, and ongoing performance trackingManagers and employees meet as a group to create a common understanding about the performance

requirements for the upcoming performance period. This meeting serves to empower work group members to

create meaningful performance agreements that teams and individuals can take shared responsibility for

achieving.

The next step begins with a manager conducting a work expectation and performance contracting session with

the team as a whole, and each employee individually. Together they discuss and assess the employee’s job in

light of the work unit and customers’ needs. The discussion should cover seven areas:


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What the person in the work position currently does

How the work is done (processes used)

What assistance is needed to perform the job well (information, equipment, support)

What the expected work outputs (performance objectives) are

What competencies (knowledge, skills and style/attributes) are required for the job?

What the skill gaps are that can be closed by means of training, coaching, and on-the-job learning

What the process improvement and learning goals for this job are.

The overall purpose of this discussion is to conclude a mutually acceptable set of performance and development

expectations. Expectations – whether they are called ‘objectives’, ‘goals’, or ‘accountabilities’, should be clear,

mutually agreed on, and be (re) negotiated when necessary. The major role of a manager/supervisor is to

negotiate, and renegotiate sound performance objectives, and agreements and to clear obstacles for employees

to perform without undue distractions or anxiety.

Guidelines for performance contracting:Four critical steps are at the heart of solid performance planning and contracting:

Define goals which consist of outputs, quality criteria, and indicators (the what of performance)

Define competencies (the how of performance)

Create a development plan

Renegotiate goals and competencies as needed

The criteria for well-written goals are as follows:

Measurable: A measurable objective defines the appropriate mix (for each goal) of performance

dimensions/standards. These dimensions can be prescribed in some cases and in other case the

employee may be able to negotiate the measurement standards and dimensions.

Within one’s sphere of influence: Employees might not be in complete control of the objectives they

agree to. However, they must have significant influence/authority to achieve them.

Realistic: Goals must be within employees’ reach if motivation and commitment to quality is to be

maintained.

Observable: The results of employees’ efforts need to be evident to the people who provide feedback

(peers, manager, customers).

The criteria for selecting competencies that are required to achieve performance and development goals are as

follows:

Support business’ values: Values can be translated into competencies that employees can focus on

in their performance agreement. This brings values alive and begins the process of defining a culture in

concrete and achievable terms.


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Relate to objectives: Competencies must relate directly to the objectives employees have agreed to

commit to. This ensures that time and resources spent on developing these competencies are well

spent.

Observable: Competencies need to be spelled out as observable (or deducible) behaviours that can be

observed. This is crucial if employees are to receive feedback that is useful and relates to objectives

and values that they can act upon.

Understandable: Competencies if well described/defined creates a common language for the

organisation to be able to communicate to and with the organisation as a whole. This makes the job of

employees and managers easier as everyone has a common frame of reference when communicating

about performance and development.

Discussion: What constitutes superior performance in your organisation?

The concept of superior performanceSuperior performance is customer driven. Staff that deliver superior performance possess the attributes

(competencies) of passion, imagination, and persistence to deliver service to internal and external

customers, “exceeding expectations.” It requires identifying customer needs, delivering on specification

and taking personal accountability when service falters. They are inclined to volunteer for tasks others

consider beneath their dignity which later turn out to be a stealth opportunity. They are motivated by the

intrinsic value of work and are keen to receive remuneration based largely on performance.

2.2.4 Performance development planningManagers and employees must conclude a development plan for a 1 year performance period, and up to a

3-year career development period. Development planning and continuous learning follows a three-stage

process that employees use intentionally. The stages are:

Assess current skills and knowledge: Here the manager and employee assess current strengths

and development needs as they relate to achieve work objectives, support organisational values, and

the employee’s career goals.

Acquire skills and knowledge: Here the employee and manager discuss the various options available

to gain the required skills and knowledge. These options may involve any combination of formal training

or ‘shadowing’ a co-worker, reading a how-to-do book, using the Internet or company intranet.

Apply skill and knowledge to the job: This requires practice and obtaining feedback about skill

mastery.

Figure 2 below is a basic form to create a development plan and is used in conjunction with the

objective setting worksheet.


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2.2.5 Performance agreementManagers and employees must conclude a written performance agreement which is updated as and when

circumstances dictate that a change is required; contracts are not cast in stone. The agreement should include a

summary of the performance improvement, and personal development goals. It should also (where applicable)

indicate how goal attainment and performance affect career advancement, development opportunities and

pay/merit increases. Figure 3 below is a model performance agreement that supports a balanced scorecard

approach to total performance management.

Discussion: If a similar performance agreement exists in your organisation, is it operational and regularly

reviewed?


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2.2.6 Re-negotiate goals and competencies as needed Outputs and quality criteria may need to be renegotiated in these situations:

When organisation or work unit priorities change

When external conditions change – this includes budgetary, legislative and technology driven change

are out of employee’s control


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When support expected from others does not occur

When unforeseen problems or opportunities arise.

When this occurs, it is up to employees to recognise the potential effect these changes may have on his/her

ability to deliver an output at an agreed level of quality. This situation requires that employees take the initiative

to renegotiate their performance agreement. The employee is responsible for taking the initiative to renegotiate,

as he/she is accountable for monitoring the work and the situation. It is not a valid excuse for letting go of this

responsibility. When a higher level of authority is needed to achieve a goal it is the employee’s responsibility to

ask for it. It is the manager’s/supervisor’s job to provide support to overcome the obstacle. Work is at all times a

shared responsibility. Managers and employees communicate formally and informally throughout a performance

cycle.

2.2.7 Step 2 (b2): Continuous communicationThe performance management cycle of events starts with planning and ends with appraisal or review. What

makes performance management a dynamic process in addition to a series of events is the processes of

ongoing performance communication. Take out communication and all you have left is planning and appraisal.

Ongoing performance communication is the process by which managers and employees work together to share

information about work progress, potential barriers and problems, possible solutions to problems, and how

managers/supervisors can provide ongoing support to the group to achieve its goals. This dialogue links

planning and appraisal and creates a living process by which to manage performance. Managers and employees

formally and informally monitor and track performance.

Discussion: How does performance management shift the emphasis of managing and supervising?

2.2.8 Step 2 (b3): Performance tracking: keeping performance and development on coursePerformance management is essentially a business process whereby employees and managers produce results

for customers. Like any well managed businesses, tracking, and monitoring progress by the business partners

(managers, employees, and customers) towards achieving goals just makes good business sense. All partners

need to monitor their business situation in order to take action based on good information to keep performance

and development on course or to change course if needed. Decisions about giving and receiving feedback and

asking for and receiving coaching for improved performance relies on observing, tracking and recording

performance information.


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2.2.9 Guidelines for performance trackingThe following are actions that employees and managers can take to gather and record information in preparation

for formal and informal performance discussions (ongoing communications and formal and informal reviews and

appraisals). Performance tracking is also vitally important to ensure that formal individual and group

performance reviews are conducted on business lines using quality information gathered over time.

Track outputs

Track competency development

Track work style

Managers and employees commit to undertake interim team and individual performance reviews every three

months, and an overall evaluation annually.

2.2.10 Step 3: Reviewing performance2.2.10.1 DocumentationPrior to all review discussions both the manager and each team member complete the performance planning and

review documentation independently. Formal group and/or 1:1 reviews must occur every three months. The final

performance discussion is a private 1:1 performance appraisal between the manager and employee only.

2.2.10.2 Type and frequency of evaluation Individual formal performance appraisal needs to occur preferably four times a year to keep their

immediate manager/supervisor and functional counterparts in the picture about any effect their

performance may have on work unit success

Team and individual review go hand in hand – preferably four times a year. Before formal appraisal time

teams meet to review team performance and adjust employee performance contracts

Customer review(s) refer to the regular and formal reviews that customers are invited to participate

twice per performance period to assess work unit and/or individual performance; information from

customer reviews must be incorporated into individual and team formal reviews and contribute to overall

ratings.

2.2.10.3 Procedural support and fairness Review and appraisal checks and balances must exist by means of sign-offs at a higher level or an

appeal process

Consistency of ratings across work units must be maintained (using a consistency checking process

and committee)

Review and confirmation of ratings may occur at least one level higher in the work unit; multiple inputs

from customers and project leaders must be obtained if individuals are working in any project and/or

matrix structures.


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2.2.10. 4 Administrative support and efficiency to line management Training is essential to overcome the many forms of appraiser bias and to develop the interpersonal

skills required to give and receive candid feedback, undertake performance and development planning

and follow-through

Instruments and forms are merely to be used as recording devices for comments and ratings; space for

all parties to record their judgments must be available for each instrument used

Electronic support systems need to be used wherever possible to reduce the administrative burden.

Discussion: Is a three-month review cycle feasible in your business?

2.2.11 Step 4: Compensating and rewarding performanceThe company will follow a balanced approach to paying for superior performance in combination with reaching

superior development targets and supported by a structured wage and benefits system that is market related.

An effective compensation and reward system can have a positive impact on shaping desired work behaviours

and performance. The goals of the pay system should be to motivate teams and individuals to make optimum

use of their abilities, skills and knowledge, and to attract and retain high performing employees. Each employee

should be rated according to the terms established in the job expectation agreement. The review and appraisal

form should use a 4 or 5 point rating scale.

The structure of the reward system needs to consider three variables:

1. Individual performance

2. Team performance

3. Organisation performance

1. At the individual level, the organisation can use a merit-based pay system based on their performance

agreement to reward performance. In addition to the standard across the board increases negotiated with unions

the top performers are paid a percentage over and above minimum increases.

2. Team rewards or bonuses can also be factored into the pay package.

This is a very powerful mechanism to use peer pressure to perform to gain an additional once off payment for

meeting agreed team-based goals in addition to individual goals. This approach can be introduced as a second

phase to a revised reward system.


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3. A third component that can be introduced once a Balanced Scorecard process is in place is to negotiate

organisation-wide process improvement goals, which everyone contributes to and for which people receive

periodic and additional once-off payment.

There is no single best compensation system. However, a combination of all three compensation approaches

will meet the goals of compensation better than the traditional merit raise system. Skill-based pay, gain sharing

for savings achieved combined with merit increases can strengthen the link between pay and performance. The

above system and practices are the formal side of rewarding employees and is often perceived as a constraint in

the public sector due to funds allocation being outside the control of most managers. The other side of the coin

is recognition on an ongoing and day-to-day basis. This is within a manager's scope of authority and must be

used to complement the formal pay system.

Discussion: Globally a distinct shift towards meritorious compensation is manifesting itself. Has it become a

reality in your organisation? What are the limitations for application?

2.3 Competencies

2.3.1 DefinitionA competency is a written description of the knowledge, skills, abilities, motives, drives and attitudes causally

related to effective performance of a job or position within an organisation or possessed by an individual.

Competencies may be defined organisationally or on an individual basis. Recruiting and developing staff in line

with organisational competencies provide the basis for creating a competitive advantage. Such competencies are

aligned to the organisation’s vision. mission, values and strategic objectives. Individual competencies are those

attributes that each employee brings to the workplace for his/her particular function. Individual and team

competencies are critical components of the organisational competencies.

A business should create a competency framework to provide management and staff with a common

understanding of the set of competencies and behaviours that are vital to the organisation’s success.

Competencies are developed based on information collected by studying what top performers do in a defined job

context. They focus on the attributes that distinguish the high performers from the rest of the workforce and in

their industry.


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Creating a competency framework is an effective method to assess, maintain, and monitor the knowledge, skills,

and attributes of people in your organisation. The framework allows management to measure current

competency levels to make sure their staff members have the expertise needed to add value to the business. It

also helps managers make informed decisions about talent recruitment, retention, and succession strategies.

And, by identifying the specific behaviours and skills needed for each role, it enables HR to budget and plan for

the training and development the company really needs.

The process of creating a competency framework is long and complex. To ensure a successful outcome, involve

people actually doing carrying out the roles to evaluate real jobs, and describe real behaviours. The increased

level of understanding and linkage between individual roles and organizational performance makes the effort well

worth it.

Naturally, competencies required in the workplace vary from business to business and from profession to

profession. Below is a list of competencies which an ICT market leader defined for its entry level leaders and

more senior leaders:

Core competencies for entry-level leadership positionsFunctional technical skills Business acumen

Integrity and trust Command skills

Intellectual horsepower

The following competencies are required as success factors for leaders:

Priority setting Problem solving Drive for results

Building effective teams Developing direct reports Customer focus

Organisation agility Continuous learning Model company values

Anticipate change and prepare for the future

Implement with quality speed and value

Achieve results with people

Share knowledge and experience Effective communication Dealing with ambiguity

Diversity Management


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Another example: Competencies required for an HR Manager

MANAGING THE JOB

Analysis Ability to secure relevant information and identifying key issues and relationships

from a base of information; relating and comparing data from different sources;

identifying cause-effect relationships.

Business approach The ability to apply management principles and techniques to the management of

all organizational resources. This involves translating management strategies into

clear and practical operational realities. It is demonstrated by using management

information to support cost effective and timely decisions and the willingness to

take calculated risks in the pursuit of organizational goals.

Judgment / decision making Make decisions that reflect sound judgment. Use creative problem-solving

methods to analyse problems, generate alternatives and determine a course of

action that moves the organisation toward its goals.

Managing complexity Ability to manage continually changing and challenging circumstances in an

organised, efficient and calm manner whilst attaining objectives. Organised to

make the best use of time and able to handle a number of competing priorities.

Able to move from one task to another.

MANAGING SELF

Contracting Negotiating, organizing, preparing, monitoring, and evaluating work performed by

vendors and consultants.

Flexibility Adapt readily to changing situations. Open to new ideas and new ways of doing

things. Patient with changing circumstances.

Initiative Ability to assert one’s influence over events in order to achieve goals; self starting

rather that accepting passively; taking action to achieve goals beyond what is

required; being proactive.

Integrity Ethical, honest and trustworthy. Take responsibility for own actions and treat

others honestly and fairly. High personal standards and values.


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MANAGING OTHERS

Conflict management Ability to identify, manage and resolve potential and actual conflict through

effective communication and relationship building skills. Maintain a sense of

composure and credibility that reflects well on the organisation.

Customer service Ability to make an effort to listen to and understand both internal and external

customers; anticipating customer needs; gives high priority to customer

satisfaction.

Developing people Ability to develop an individual’s skills and competencies by planning effective

developmental activities related to current and future jobs. Setting goals, providing

timely feedback and coaching employees at all performance levels from the model

employee to the troubled team member.

Impact Ability to create a good first impression; commanding attention and respect;

showing an air of confidence displays confidence and a commanding presence.

Negotiation Ability to effectively explore alternatives and positions to reach outcomes that gain

all parties’ support and acceptance.

KNOWLEDGE, SKILLS AND ABILITIES REQUIRED

People management Use appropriate methods and processes to attract, retain, manage, develop and

reward staff to achieve strategic objectives.

Recruitment and Selection Organizational practices, decisions, and processes that affect (a) the capability of

an organization to make hiring, promotion, and other personnel decisions, and (b)

the number or types of individuals who are willing to apply for or accept a given

vacancy.

Training and Development The systematic acquisition of attitudes, concepts, knowledge, roles, or skills that

result in improved performance at work.

Reward System Monetary compensation and monetary and non-monetary benefits organizations

provide to their employees.


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ExerciseConsidering the above, compile a list of the required competencies in your organisation

Grow the business Lead people to perform Drive implementation


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2.4 Key performance indicators2.4.1 IntroductionIn performance management the key question asked is, "How well is an employee applying his or her current

skills, and to what extent is he or she achieving the outcomes desired?" The answer has traditionally been found

in the performance evaluation process, where managers look for hard data to tell how well an employee has

performed his or her duties. What is often missing from this evaluation, however, is the part about making sure

that the employee is doing the right thing. After all, you may have a very hard-working and dedicated team

member, but if he or she is not working on things that advance the organisation's purpose, what is the point?

This is where key performance indicators (KPIs) come into play, and they apply both at the organisational and

individual levels. At an organisational level, a (KPI) is a quantifiable metric that reflects how well an organisation

is achieving its stated goals and objectives. For example, if the business’s vision includes providing superior

customer service, then a KPI may target the number of customer support requests that remain unsatisfied by the

end of a week. By monitoring this, management can directly measure how well the organisation is meeting its

long-term goal of providing outstanding customer service.

If the KPI is inappropriate or naive, however, the resulting behaviors may be counterproductive. For example,

using the same goal of providing superior customer service, the first KPI that often comes to mind is the number

of customer complaints received. Intuitively, it is considered that the fewer complaints received, the higher the

customer service being offered. This is not necessarily true: The business may be getting fewer complaints

because they have fewer customers, or because customers are not able to access the firm’s support services.

Taking this a step further, while it is important for organisations to choose the correct KPIs for business

performance, it is equally useful if managers and employees define KPIs for members of their teams. In fact, an

ideal situation is where KPIs cascade from level to level in the organisation. This helps management and staff

work in such a way that their activities are aligned with corporate strategy.

2.4.2 Employee Goals and KPIs So part of performance management is setting goals with members of a team. This may be done within the

formal appraisal process, but it does n ot have to be. The important factor is that the goals that are set are

aligned with the department's strategy, which in turn is aligned with the overall strategy of the organisation. This

follows the common adage in management that says, "What is measured gets done." If a goal around a certain

outcome is set, the chances of that outcome occurring are much higher, simply because there is a commitment

to managing and measuring the results. When an employee's goal is defined in terms of an organisational KPI, it

ensures that what the employee is doing is well aligned with the goals of the organisation. This is the critical link

between employee performance and organisational success.

Here is an example of how an individual employee's goal is linked to organisational strategy:

Organisational Vision – To be known for superior customer service and satisfaction.


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Organisational Objective – To reduce the number of dissatisfied customers by 25%.

Organisational KPI – The number of customer complaints that remain unresolved at the end of a week.

Team Member's Goal – To increase the number of satisfactory complaint resolutions by 15% this

period. Taken to the next level, each employee goal should have at least one associated KPI. A metric

must be designed to specifically measure, on a regular basis, whether or not this person is meeting his

or her goal.

Team Member KPI – The weekly percentage difference in complaints handled that result in satisfied

customers versus unsatisfied customers.

2.4.3 Starting point for effective KPI formulation

Understanding the context What is the vision for the future?

What is the strategy? How will the strategic vision be accomplished?

What are the organisation's objectives? What needs to be done to keep moving in the strategic

direction?

What are the Critical Success Factors? Where should the focus be to achieve the vision?

Defining KPIs Which metrics will indicate that the correct vision and strategy are being pursued?

How many metrics should there be? (Enough, but not too many!)

How often should they be measured?

Who is accountable for the metric?

How complex should the metric be?

What should be used as a benchmark?

How is it ensured that the metrics reflect strategic drivers for organisational success?

How could the metrics be cheated, and what will guard against this?

What negative, perverse incentives would be set up if this metric was used, and how will it be

prevented?

2.4.4 KPIs and Rewards, Recognition, and DevelopmentOnce meaningful metrics for measuring organisational or employee performance have been established

employee performance needs to be aligned as well. Just as what gets measured, gets done; so does what gets

rewarded! In the process of establishing rewards and recognition practices, it must be ensured that rewards tie

directly to the KPIs. For example, if measuring staff on how well they deal with customer complaints, then

rewarding them for lowering numbers of complaints confuses the message being sent. Conversely, if the

business wants to attract new customers, then a suitable KPI is one that measures how many new customers

are attracted each week. Depending on the situation, a well-aligned performance system may reward employees

based on the number of new customers they personally help to attract.


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2.4.5 Examples of KPI measures2.4.5.1 Insurance industry

Sales staff Number of new insurance policies

Average size of insurance policies sold for the period

Policy renewal rates

Gross premium income forecast vs actual

Operations staff Percentage of overdue claims

Percentage overdue premium

Average handling cost per insurance claim

Average handling time of insurance claims

Percentage of claims handled first time correctly

Percentage of insurance claims handled within agreed-upon time frame

Percentage of escalated insurance claims

Average closure duration of insurance claims

Backlog of insurance claims

Percentage of re-opened insurance claims

Queue rate of insurance claims

Number of days open of insurance claims

Management Loss ratio: claims to premiums

Claims solvency

Percentage of fraudulent claims

Percentage of claims where initial liability decision is not made within statutory timeframe.

Policy premium to staff costs

Combined cost and claims ratio

Number of policies in force relative to headcount

Claim reserves

2.4.5.2 Finance and accounting Typical accounting ratios

Accounts payable and accounts receivable processes:

Percentage overdue invoices

Percentage of invoices disputed


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Debtor’s days.

Accounts payable days

Percentage of bad debts against invoiced revenue

Cycle time to resolve an invoice error

Cycle time to process payroll.

Percentage of invoices under query

Discussion: Designing KPIs and measures have been highlighted as the most challenging part of designing

and implementing a performance management system. What is your experience?

Exercise: Please draft a list of KPIs for your position

in the organisation.

How would you measure them?

Please note: Excellent resources on the topic of KPIs:

www.kpilibrary.com and Measures and More: www.staceybarr.com


http://www.staceybarr.com/

http://www.kpilibrary.com/

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3. PERFORMANCE CONTRACTING

3.1 The need for a policy

To facilitate the shift to a strategic and integrated approach to the management of performance it is necessary to

share the rules of the game. This is best done by means of a policy which determines and communicates how

performance management will be used by managers and employees as a business process. This will encourage

and empower managers and employees to see performance as an integrated and dynamic, real-time feature of

work life. It will clearly illustrate that performance management is not a separate stand-alone process but

integrates with the organisation’s and work units’ business, operational plans and budgets.

3.2 Policy statements

Our performance management system is driven by the following principles:Policy statement 1: it is a business process

Policy statement 2: it is used to create a shared understanding about what is to be achieved and how it is

achieved

Policy statement 3: it is an approach, and at the same time it is a system to manage people and performance

Policy statement 4: managers and employees are required to use performance management for the health, and

long-term growth of the business

Policy statement 5: competencies are used to drive the process of achieving performance, results, and

development

Policy statement 6: judgment is recognised to be the most important factor in determining competency ratings,

and mathematical calculations cannot be a substitute for the use of judgement

Policy statement 7: clear, consistent, and visible involvement by senior executives and managers is a mandatory

part of successful performance measurement and management

Policy statement 8: effective and open communication by all levels of management and employees is mandatory

Policy statement 9: accountability for results will be clearly assigned and well understood by everyone

Policy statement 10: business performance measures/indicators must link to performance planning and appraisal

for teams and individuals

Policy statement 11: targets will be linked to appraisals

Policy statement 12: compensation, rewards, and recognition will link to performance measures

Policy statement 13: progress toward achieving outputs and results must be openly shared/communicated with

employees, customers, and stakeholders

Policy statement 14: performance measurement results should be used to effect continuous performance change

and improvement

Policy statement 15: “Figure 1” is the system to follow for managing total performance (strategically and

operationally) for a three- year period is mandatory.


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Policy statement 16: managers and supervisors will be sufficiently well briefed and trained to take responsibility

to implement a formal performance management system.

Policy statement 17: managers and employees must conclude a development plan for a one-year performance

period, and up to a three-year career development period.

Policy statement 18: managers and employees must conclude a written performance agreement which is

updated as and when circumstances dictate that a change is required; contracts are not cast in stone.

Policy statement 19: managers and employees communicate formally and informally throughout a performance

cycle.

Policy statement 20: the company will follow a balanced approach to paying managers and employees for

achieving superior performance and development targets; performance based pay will be supported by a

structured wage and benefits system that is market related.

3.2.2 Progress test

Study the above statements. Mark those statements that you perceive to be already operating in your

organisation. Out of a score of 20, judge the progress that your organisation has been making towards an

integrated performance management system. If not already implemented, which of the above would be most

challenging to implement and why?

Score out of 20:

Most challenging to implement Reasons

3.3 Performance contracting paperwork

3.3.1. Goal setting3.3.1.1. Work unit outputs and job priorities sheet: Helps to clarify work expectations between managers and

direct reports in relation to business strategy and goals.


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Step 1:As manager, review your business plan, strategic priorities, and goals for your work unit. Decide which priorities

each team member will manage, and which are team priorities.

TipConsider each employee’s current skill profile (i.e. decide what each person is capable of delivering at an

excellent level). Consider what development and stretch each employee requires when assigning priorities.

Step 2:Distribute a Work Unit Outputs - Priorities Worksheet with a cover memo to each team member.

TipFor each person list all the outputs the unit is responsible for. This provides everyone with a common picture of

the total commitments of the work unit. Each job/job family is unique. It is important to convey this uniqueness to

each team member prior to negotiating a job model/profile. For each player list the priority issues their job

model/profile and objectives should address.


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Memo sent out by manager

Memo: Work Unit Outputs and Job Priorities

To: [Employee name]

From: [Manager name]

Subject: [Year 1/2/3 Objectives]

Date: [Date]

Attached is a list of all the outputs we need to produce this year. I have also indicated the priorities you will be personally responsible for taking care of.

On [insert date], we will have a unit team meeting to discuss our work unit outputs, and the priorities each team player will take care of. These job priorities will form the basis for you to formulate a job model/profile for the next quarter.

The job model/profile form will also be distributed at the meeting. Here, you will have an opportunity to develop a draft copy in preparation for a 1: 1 discussion with me.

Within three days following our team meeting, I would like you to have a draft of your job model/profile of your objectives available for discussion and negotiation.

Please feel free to contact me before our meeting if you have questions.

cc: [Manager's Manager]

Attachment: Work Unit Outputs – Job Priorities Worksheet


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Worksheet to be completed by staff member

Worksheet: Work Unit Outputs – Job PrioritiesAssignmentCollect information (see objective setting worksheet)

Good objectives are based on good information. By completing the first step before the team meeting you will be

prepared for a successful objective setting discussion, since such data will be your rationale in establishing

objectives. You need to collect two sets of information from your manager/supervisor. Make an appointment and

discuss the following:

Outputs of work unit/group

Priority issues which your objectives should address

Fill in the blanks as you discuss the information with your manager/supervisor. During your discussion make sure

you understand:

Why each unit output is important to your manager/supervisor

Why your manager/supervisor has selected the specific priority issues for your job; what is negotiable

and what is non-negotiable

Your role is to gain a clear understanding of what to concentrate on when developing your objectives.

After the discussion, you will formulate a set of objectives/job model, which will form the basis of a negotiated

and agreed performance contract.

3.3.1.1.2 Objective setting worksheet: (Electronic) memos and guides to help managers and teams to (a) set

measurable goals/objectives, and (b) evaluate results against objectives/track results.

Step 1


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Once you have received the feedback from “Worksheet: Work Unit Outputs – Job Priorities” and had discussions

with individual staff and teams you should familiarise yourself with each team member’s job requirements/job

priorities. Assign non-negotiable outputs, and list those outputs that you want the team player to consider

incorporating into their job model/profile.

Step 2Distribute the Objective Setting Worksheet to each team player with a cover memo setting a date for a personal

objective setting discussion/negotiation. This step requires that employees have been trained/have the

competence and confidence to write a job model/profile, and negotiate a performance contract.

Step 3 Meet with each employee to discuss and clarify his or her work goals.

Be sure to confirm the outputs, quality criteria, and indicators for each output/objective assigned

Negotiate the performance levels for the other objectives.

Ensure that for each objective assigned or negotiated each team player will:

o Define results in terms of measurable outcomes, not activities that are the means to those

results.

o Incorporate the individual goals into larger business objectives. Focusing on higher-level

results is more effective.

This removes excuses and encourages dialogue between team members to achieve the results. Furthermore,

because these results are "higher level” they are also more frequently shared by members of a department. Be

sure the employee checks out such shared objectives with the others involved avoiding working at cross-

purposes.

Make sure the objective is achievable, given the employee's resources and skills. To avoid setting an

unachievable objective, help employees identify potential obstacles they need to consider. If an employee

hesitates to accept a challenging objective, show that person a clear path to success.

Clarify a time frame and the priority for each objective.

Not all objectives are equally important for the overall success of the work unit, and the employee. Be sure to

focus each team players attention as to what is critical and what is important. Help the employee develop a

realistic and achievable time lines for producing completed work on time and on budget.

Step 4Keep a copy of the agreed-upon job model/profile on each employee’s personal file and that you give one to

each team player.

MEMO SENT BY MANAGER


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Memo: Objective setting memo (discussing and negotiating objectives)

To: [Employee name]


Subject: [Year 1/2/3 Objectives]

Date: [Date]

Over the next week, I would like you to think about your objectives for [insert time period, e.g. the second

quarter]. My own objectives are not finalised, but the attached draft may help you form your objectives. I've also

attached our overall business goals for [insert year] and an "Objectives Worksheet" to assist you.

On [insert date], we can discuss the department goals and your individual objectives. Within three days following

our meeting, I would like you to complete your objectives. Completing this early in the year will get us off to a

good start in [year].

Please feel free to contact me before our meeting if you have questions.


Attachment: [Insert year 1/2/3 Business Goals]

Discussion: The performance contracting process described in this manual appears very “democratic”. Does

this not compromise the setting of challenging performance criteria?


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Objective Setting Worksheet

Job title Process for establishing objectives

1. Collect information2. Define mission statement3. Identify customers/key receivers4. Identify outputs5. Determine quality criteria6. Determine indicators7. Negotiate a performance contract

1. Collect information

2. Mission statement:

WHY DOES THIS JOB EXIST? What products, services or information are provided? To whom? What is unique about this job? Why are these products, services or information provided? What would be missing if this job did not exist?

(3) CUSTOMER/KEY RECEIVER (4) OUTPUT (5) QUALITY CRITERIA (6) INDICATORS

WHO IS THE CUSTOMER? Is the customer

external or internal? Is the customer critical

for the success of the job?

Is the customer the next person in the process?

WHAT DOES THE CUSTOMER WANT? What does the

customer receive? What products,

services or information are provided?

Do you have the authority to produce the output?

WHAT ARE THE CUSTOMER’S REQUIREMENTS? Do they describe

quality, not minimum standards (i.e. filter purpose and user conformance to requirements)?

Do they reflect the customer’s point of view?

Do they include qualitative and quantitative criteria?

WHAT EVIDENCE OR CLUES WILL TELL YOU WHETHER THE OUTPUT HAS BEEN PRODUCED AS SPECIFIED IN THE QUALITY CRITERIA? Are indicators appropriate for

the output being measured (qualitative or quantitative)?

What documents/reports will provide the evidence that outputs were produced?

What visible indicators can be used for assessment?

Whose judgement is important to obtain?


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4. TRACKING PERFORMANCE AND TAKING CORRECTIVE ACTION

4.1 Tracking results against objectives and renegotiating outputs

Performance management would be incomplete without systematically tracking performance on a regular basis,

preferably once every quarter. The purpose of tracking and review is to determine progress on the extent that the

team and individual are meeting the objectives of the company and those they set for themselves. The outcome

of tracking and discussions with their managers trigger a process of corrective action should the employee be

found to under-perform. This may include giving additional training, providing resources such as computer

equipment, ensuring team integration, resolving of conflict and other aspects which may have hindered the staff

member in doing his or her daily work. Vitally important, it also makes provision for renegotiating the outputs and

objectives. Performance criteria are not cast in concrete.

Each periodic performance review is meant to trigger a process of corrective action bringing the staff member

back on track in the short term and creating a performance development path ensuring that competencies are

fully developed and exploited for the growth of the individual and success of the business.

As with the performance contracting process the employee and his team are given ample opportunity to review

their own performance and prepare themselves for a discussion with their manager. Two-way communication is

the umbilical cord that keeps the performance management system alive.

Discussion: Doesn’t this approach provide an opportunity for the employee to come up with a list of excuses

and shift the blame for poor performance?

4.1.1 Review ProcessStep 1Send this memo together with a performance planning and review document periodically to direct reports as a

means to maintain an ongoing dialogue about objectives setting and performance standards. Request each

employee to schedule a 45 minute discussion to review progress, and renegotiate outputs and objectives where

needed.


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Step 2During the discussion ask the employee to review progress for each output/objective, noting key events and

contributions by others. If the result was not achieved, ask for detailed reasons. Placing the goal achievement in

the context of the overall mission of the business increases the value of the achievement.

When all employees contributed to an objective, but individual differences in contribution were great, it is

advisable to highlight special efforts or accomplishments. For team goal accomplishment, focus on the

individual’s contribution (or lack of contribution) that had an impact on results and performance.

Look at the next performance period, and focus on what has not changed, namely, primary business values and

principles. Reinforce the primary business values and principles. Repeating these often will eventually instill them

into employees' minds.

Step 3Introduce the reason for new business goals, or discuss the fact that the old goals are still pertinent. Provide

opportunities for discussion. Be sure that all decisions and pertinent facts are noted on the review document. Be

sure to let the employee know that the rating will form part of an overall assessment of performance at the end of

the year/review period.

Step 4Keep a copy of the revised job model/profile on each employee’s personal file; be sure to keep a signed copy of

the review document on the each employee’s personal file.

MEMO SENT BY MANAGER


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Tracking Results against objectives and renegotiating outputs/objectivesTo: [Employee name]


Subject: Results against Objectives

Date: [Date]

We are nearly at the end of [insert time period, e.g. the year, the quarter]. Please schedule a 45-minute

performance planning and review discussion with me at a convenient and quiet area/office. Be prepared to:

Review progress for each output/objective, noting key events and contributions by others.

Review team goal accomplishment, and your contribution (or lack of contribution) that had an impact on

results and performance.

Look at the next performance period, and decide which outputs and objectives should stay the same and

which need to change.

Attached is a copy of the Evaluation of Outputs Worksheet, and a Performance Planning for Next Period

Worksheet, both of which should be completed before the review discussion. Photocopy/print as many pages of

these worksheets as you need.

I appreciate the work you have done this [insert time period] and look forward to the review discussion that you

will lead.


Attachment: Performance Review Worksheet, and Performance Planning Worksheet

WORKSHEETEVALUATION OF OUTPUTS


46

Assess your performance for the prescribed items.Refer to your performance contract and review all outputs with their own quality criteria and indicators in mind.

Write the number that represents your level of performance for each output.Review the entire list and circle the rating for this period.

First/Second/

ThirdReview: From: To:

Comments:

Key objective 1

Key objective 2

Key objective 3

Rating

3

2

2

/ / / / / / Rating

Employee Signature

Date Mgr/Sup Signature Recommended

Date Approval Signature

Date 1 2

3 4

Priorities Competencies


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PERFORMANCE PLANNING FOR NEXT PERIOD Complete this section at the end of a performance cycle in preparation for the next one. Request your manager/supervisor to provide tentative priorities for the next performance cycle. Prepare a draft job output model for discussion/negotiationPRIORITY ISSUES/PROPOSED OUTPUTS

THE PROCESS IN BRIEF

Performance review and planning is aimed at moving the organisation towards a meritocracy in which advancement and reward is based primarily on merit. Reviews and evaluation form part of the existing management process of objective setting, planning, implementation, evaluation and replanning. The essence of effective reviews and evaluation is to provide team members with a clear indication of how they are performing in terms of agreed outputs and objectives.

The process: Consists of ongoing assessments and formal

reviews, which lead to a surprise-free overall evaluation.

Helps you to evaluate your progress towards meeting the commitments contained in your performance contract.

Provides you and your manager with the opportunity to discuss and where necessary replan your performance contract and renegotiate performance priorities.

Takes into account your accomplishments, your implementation of the organisation’s Mission, Strategy and Philosophy and those strategic priorities applicable to your job.

Assists you to develop and maintain a strategic vision of your job.

This document serves as a record for the reviews and an overall evaluation of performance. For each review, you and your manager should assess and discuss your performance on a cumulative basis for that period. Both of you independently complete the relevant part of each copy of this form and then discuss and assess your performance. Finally, your manager discusses your assessment with his/her manager and consolidates the discussion data on his/her copy. This will be shared with you at a follow-up discussion in order to reach agreement on your overall rating/evaluation.

There are four levels of performance, each represented by a number. The primary consideration in assessing performance is the agreed objectives based on your job model. The numbers and their headings are as follows:

1 Exceptional2 Commendable3 Competent4 Unsatisfactory

The numbers and headings are offered as guidelines to assist you in making fair and consistent performance assessments. The success of this process depends on your skill in applying judgement to review and evaluate performance accurately.Please note:

Filling in this form is not performance management – it is a tool to guide you in the process.

Communication about objectives, performance, performance change and development is essential for achieving excellence.

Regular, quality communication about objectives, performance, problems and improvement needs is a key asset in producing a high performance organisation.

Communication about performance must be direct, focus on long and short-range effects of which subordinates and units are doing, and is the shared responsibility of managers and subordinates.

Both day-to-day and periodic formal review discussions are important forms of performance management.

Follow the instructions at the top of each page.


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4.2 Performance improvement planning

This type of plan is used to address performance issues that have been identified by the manager and/or

employee and communicated in an appraisal/performance-related memo or in conversation. The following guide

takes the employee and manager through the two-part process of completing a Performance Development Plan.

Part 1 leads the employee through a first draft, while Part 2 covers the manager's review, the manager-employee

discussion, and an agreement to action.

4.2.1 Guide to writing a performance improvement plan (PIP) Part 1: Employee InstructionsStep 1Before beginning the plan, review the sections in the performance appraisal (or other document) where potential

improvement areas have been identified. It is important that you understand and agree with the basic issues and

expectations before setting up developmental activities, so be sure to get clarification from your manager if you

have any questions.

Step 2Write down 1-3 developmental goals related to areas you want to improve or performance issues identified by

your manager.

Step 3List 2-3 activities that will help you reach each goal. Be sure to specify how and when you will start and complete

each activity.

Step 4List any resources you will need to complete your development activities. Resources may include other people's

time or expertise, funds for training materials and activities, or time away from your usual responsibilities.

Step 5Indicate how you will measure the accomplishment of each developmental goal, using 2-3 different indicators

when possible.

Step 6Identify ways in which your manager will support your development activities. Manager support often includes

personal guidance (advice, review of progress) and some type of influence (e.g., introducing you to key people in

the company, putting you in charge of the next team meeting, or giving you additional resources).

Step 7Describe when and how progress checkpoints will occur (e.g., memos, phone calls, meetings, etc.) and what

developmental activities will be completed or discussed at each checkpoint.

4.2.2 Guide to writing a performance improvement plan (PIP) Part 1: Part 2: Manager ReviewReview the employee's suggested improvement plan before the performance plan meeting. This plan is a good

indicator of how well the employee understood the performance issues you had identified. Validate the


49

employee's assessment and plan by providing comments and activity suggestions. Identify any development

areas the employee may not have recognised.

Questions to ask How well do you think the employee understands the performance issues and expectations for

improvement? Do the developmental goals and activities connect directly to the performance issues you

identified?

If the employee misunderstands or disagrees with your assessment of their developmental needs, try

the following steps:

Review the facts - the behaviour you observed, the results they achieved, and the impact on

the organisation- and make sure that the employee acknowledges them as facts,

Describe why that behaviour or those results need to change

Identify suggested changes and describe how they will help the employee contribute to meeting

team or organisational needs.

Are the developmental activities detailed and action-oriented? Are they realistic given the available time

and resources? What is your confidence level that the employee can complete the activities?

Do you know of other activities that would help the employee reach developmental goals? What has

helped you in the past in this area?

Can you provide the resources identified? What is the chance (%) that resource needs have been

underestimated?

Are you comfortable with the measurement criteria for each developmental goal? Can you make them

more quantifiable?

Are you genuinely committed to delivering the help that your employee is requesting? Or, are you

promising more than you can deliver in the given time frame?

Have you and the employee agreed on dates for checking progress, how progress will be measured,

and what changes will be made if progress is behind schedule?

Discussion: Would you agree that by taking the above process seriously we are starting to manage our

organisations better; i.e. shift from ”process” to “people”?

Template: Performance Improvement Plan

Step 1Write down 1-3 developmental goals related to areas you want to improve or performance issues that have been

identified by your manager.


50

Development goals

Step 2List 2-3 activities that will help you reach each goal. Be sure to specify how and when you will start and complete

each activity.

Goal

Activity

How to accomplish

Starting date

Date of completion

Goal

Activity

How to accomplish

Starting date

Date of completion

Print/photocopy additional pages as required

Step 3:List any resources you will need to complete your development activities. (May include other people's time or

expertise, funds for training materials and activities, or time away from your usual responsibilities).

Resources

1.

2.


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3.

Step 4:Indicate how you will measure the accomplishment of each developmental goal, using 2-3 different indicators

when possible.

Measurement Criteria

1.

2.

3.

Step 5Identify ways that your manager will support your development activities.

Management Support

1.

2.

3.

Step 6:Describe when and how progress checkpoints will occur (e.g., memos, phone calls, meetings, etc.) and what

developmental activities will be completed or discussed at each checkpoint.

Progress Checkpoints

Checkpoint 1.

Date

Time

Type of Follow Up (i.e. meetings)

Progress Expected

Activity Change / Addition (if needed)

4.3 Career Development Plans (CDP)

A career development plan is a tool to keep individual's skills and interests aligned with organisational needs, and

to build employee commitment to the organisation. When the employee and manager complete it cooperatively, it

can have a major impact on an employee's motivation, personal growth, and overall contribution to the company.

Employee career development can make the difference between watching the best people move up in the

organisation and watching them move on to a new career or to your competitors. Career development plans may

be written with the following objectives in mind:


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Growth in the current job. Expanding skills and job satisfaction for employees who are at the top of their

career path or who do not have a desire to move beyond their current position.

Promotion and succession planning. Preparing an employee for a promotion, including the replacement

of the employee's manager.

4.3.1 Guide to writing a career development plan - Part 1: Employee InstructionsStep 1Write down your primary career interest. A primary career interest is usually described in terms of a general

vocation. For example, "My primary career interest is marketing within the insurance industry."

Step 2Identify long-term professional goals (including positions desired within the company). Long-term professional

goals are often conveyed in terms of specific positions ("become a marketing manager") or major

accomplishments ("rewrite a policy document in plain English"). List any lateral/sideways moves or promotions

that will help you meet your long-term professional goals. For example, "I want to move from sales executive to

product manager, and finally to marketing manager."

Step 3Identify the short-term goals that contribute to long-term interests and the challenges that must be overcome in

order to reach these goals. Identify barriers, both personal and external, that prevent you from accomplishing

your short-term goals, and then create ways to overcome them.

Step 4List 2-3 activities that will help you reach each goal. Be sure to specify how you will accomplish the activity,

including any resources you might need, and when you will start and finish it. (Resources may include other

people's time/expertise, funds for training materials and activities, or time away from your other responsibilities).

Step 5Describe tasks in your current job that are contributing to long-term goals and that you would like to emphasise or

perform more frequently.

Step 6Describe tasks in your current job that are not contributing to your long-term goals. Suggest ways to minimise,

remove, or delegate them to others.

Step 7Write down any additional skills, knowledge or experience you would like to acquire that may directly or indirectly

help you in your current job or future positions.

Step 8Describe when and how progress checkpoints will occur (e.g., memos, phone calls, meetings) and what

developmental activities will be completed or discussed at these times.

4.3.2 Guide to writing a career development plan - Part 2: Manager Review

Questions to ask


53

Are you aware of your employee's career interests and values? Do you know which of your employee's

strengths contribute to these career goals and what areas need to be developed?

Do you feel that the short-term goals your employee has suggested are unrealistic, given the employee's

abilities or other external factors? Is there anything standing in the way of the desired goals?

Convey what you know about organisational realities to help the employee set short-term goals. If you

think there are outside barriers, which will inhibit the attainment of their goals, describe them and help

the employee work around them.

Do you know of other activities that would help the employee reach the developmental goals? What has

helped you in the past in this area? Help the employee select at least one development activity for each

short-term goal.

Are there people you know who could help your employee meet their career development goals? Can

you provide the resources identified? Help the employee meet their goals by offering your ideas,

contacts with people, and resources. Think of at least one person who could help the employee in a

mentor or advisor role.

Can you make changes to the employee's job to replace routine tasks with new work that is more closely

aligned with the employee's goals?

If you agree with the employee's suggestions for expanding their responsibilities, work with them to

define any additional knowledge or experience they will need to meet the new set of expectations. Also

take a close look at how their workload will be affected, and discuss any responsibilities they will need to

give up.

When employees mention tasks they no longer want to be involved with, ask them for specific

suggestions on how to get the same result without their involvement, e.g. delegate, eliminate, or find

more efficient ways of accomplishing the tasks.

Have you and the employee agreed on dates for progress checkpoints and what will be measured at

each one?

Template: Career Development Plan

Primary Career InterestStep 1:Write down your primary career interest.

1.

2.

3.

4.

Step 2Identify long-term professional goals (including positions desired within the company).


54

1.

2.

3.

4.

Step 3Identify the short-term goals that will contribute to long-term interests and the challenges that must be overcome

to reach these goals.

1.

2.

3.

4.


including any resources you might need, and when you will start and finish it.

Career Development Activities

Short Term Goal

Activity

How to Accomplish

Starting Date

Date of Completion

Short Term Goal

Activity

How to Accomplish

Starting Date

Date of Completion



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1.

2.

Step 6Describe tasks in your current job that are not contributing to your long-term goals. Suggest ways to minimize,


1.

2.



1.

2.

3.



Progress Checkpoint

Date and Time of Checkpoint


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Progress

Secondary Career Interest:Step 1:Write down your secondary career interest.

1.

2.

3.

4.

Step 2Identify long-term professional goals (including positions desired within the company).

1.

2.

3.

Step 3Identify the short-term goals that will contribute to long-term interests and the challenges that must be overcome

to reach these goals.

1.

2.

3.


including any resources you might need, and when you will start and finish it.


Short Term Goal

Activity

How to Accomplish


57

Starting Date

Date of Completion


Short Term Goal

Activity

How to Accomplish

Starting Date

Date of Completion




1.

2.

Step 6Describe tasks in your current job that are not contributing to your long-term goals. Suggest ways to minimize,


1.

2.




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1.

2.

3.



Progress Checkpoint

Date and Time of Checkpoint

Progress

Discussion: This concept of career development planning looks great on paper. But what is the scope of CDP

in an SMME?

4.4 Disciplinary Action

4.4.1 PolicyThe management of performance does not always go smoothly and at times poor performance can be become a

disciplinary issue. This section includes a simple and legally defensible corrective action/disciplinary policy

supported by a line-manager friendly procedure and supporting paperwork to record the process at all stages.

Causes for dismissal are as follows:

4.4.1.1. CompetenceIncompetence must relate to the kind of work the employee was required to do. This is not easy to define,

especially with more senior employees and executives whose job functions and goals may be hard to describe

and explain. Where targets and performance goals have been identified by the employer and clearly

communicated to the employee, such targets and goals and any subsequent changes in them must be

reasonable. Once they are reasonable and the company offers the employee all necessary assistance to achieve


59

them, then a continued failure by the employee would constitute good grounds for a dismissal. As mentioned

above, this requires the employer to provide adequate assistance, resources and training.

Where an employee has been informed that his/her work is not of an acceptable standard, he/she must be given

reasonable time within which to improve. The work environment must also be conducive to such improvements.

4.4.1.2. ''Qualifications'' for the job When an employee does not have the required competence or qualifications to perform the work for which he/she

was employed, a dismissal may be deemed fair. This is especially so where the competence or qualifications are

required in terms of legislation, e.g. the Companies Act, Municipal Finance and Management Act and others.

However where a dismissal is due to alleged incompetence an employer will be expected to have provided

assistance to the employee to achieve the required standard, e.g. training necessary to perform the job.

Equally, when an employer is in business to provide professional services such as accountants, attorneys

auditors, investment advisors; etc., qualified personnel are a legal prerequisite. Employees are hired as qualified

personnel and if later it is discovered that they do not, in fact, hold the relevant qualifications, their dismissal

would be based on grounds that they did not hold the qualifications claimed and that they are essential

requirements to job performance. Should an employer hire an employee on the basis that he/she will obtain a

certain qualification and this is not achieved within a reasonable time period, the employee could be fairly

dismissed.

If an employer dismisses an employee for lack of appropriate qualifications or incompetence, then it will need to

show that a particular qualification or standard is essential to the job. Therefore the relevant job descriptions and

specifications need to be updated. As a precaution, all job descriptions and specifications should be reviewed at

least once a year to ensure their relevance. If a job description or specification exists that is found to be out of

date, this may be considered evidence that the required qualifications are not essential.

Best practice would indicate that to avoid dismissals based on lack of qualifications, employers should request a

copy of the originals of any certification at the recruitment stage, that is, prior to commencement of employment.

4.4.1.3. CapacityAn employee's incapacity to do the job for which he/she was hired can result in dismissal. Attendance problems

are a common cause of incapacity e.g. failure to attend work regularly or persistent lateness. Frequent short term

absences can be justified as reasons for dismissal where:

The absences occurred over a significant period.

There was reason to conclude that this pattern would not improve in the foreseeable future. Allowing the

absences to continue was unacceptable as it established the wrong precedent for other employees.

Appropriate disciplinary action had been taken, i.e. the employee had received warnings of the

consequences of failure to improve the attendance record.


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Other forms of short-term absence can include a variety of illnesses or regular absences on Fridays and Mondays

or after a long weekend. This is not acceptable and as long as the employer exercises reasonableness and

observes due procedures and warnings, dismissal may follow.

In the case of absence as a result of alcohol or substance abuse, the employer should in the first instance treat

these as it would an illness. The employer should make every effort to elicit the cause and refer the employee to

the appropriate treatment facility to try and combat the dependence. If the absences continue after treatment, or if

the employee refuses to seek help, the usual Disciplinary Procedure should be used. If the problem persists, it

may result in dismissal.

While there is no legal requirement for medical report/ test results affirming the incapacity, it is always wise to

have all relevant information available before making a decision to dismiss. Equally, there are no legal definitions

of an unacceptable length of absence. If an employer has exercised reasonableness and made the necessary

enquiries about possible return to work and forms the view that no solution is likely, then he/she will have no real

option but to dismiss and argue the reasonableness of the decision before the CCMA. There will always be some

uncertainty as to whether an employer is entitled to dismiss.

Some employees believe that if they are on 'sick leave' indefinitely and have submitted the required medical

certificates, they cannot be dismissed. This is not the case. Lengthy absences with no foreseeable return to work

date can justify a dismissal on grounds of incapacity. Employment contracts or handbooks should allow for

examination of the employee by the company doctor in order to examine the employee's fitness for work or

otherwise.

4.4.1.4 Ensure following the right proceduresThe processes and paperwork presented so far in the workbook will help to ensure that the correct procedure will

have been followed. In summary the process is as follows:

Evaluate performance against the

Job description

Key performance areas

Work standards

Performance targets

Standard operating procedures

Extraneous factors (e.g. economic slump)

Performance improvement plan

Follow up to review whether there is improvement; if not

Poor performance review

Final counselling

Dismissal


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4.4.2 Rights of employees facing dismissal: The right to a fair and impartial hearing

The right to know the case against you

The right to have and the opportunity to use representation

The right to reply to the accusations

The right to have the case investigated and heard without prejudice

The right to appeal

Constructive Dismissal

Employee Assistance Programme

Discussion: It is becoming increasingly difficult to dismiss non-performing staff in our labour law dispensation.

Yet, would you agree that dismissal due to non-performance is a neglected option in performance

management?

4.4.2 Overview of documentation4.4.2.1 Verbal Warning: The Verbal Warning Guide helps the manager prepare for a discussion with an employee whose performance is

beginning to fall below guidelines or expectations. The Verbal Warning Worksheet provides a structure for the

manager to write down key concerns and develop a strategy to ensure a productive discussion.

4.4.2.2 Informal Warning: The Informal Warning Memo is used to remind the employee of standards they need

to meet and alert them to the consequences of continued non-compliance. It demonstrates a manager's desire to

see improvement, and is appropriate when an employee's performance is not meeting guidelines or expectations,

either due to a chronic problem or short-term error.

4.4.2.3 Formal Warning: Use a Formal Warning Letter as a stronger impetus toward improvement on the part

of the warned employee, and to take formal action towards termination in the case of no improvement. It should

be used when an employee has been given an informal warning and performance continues to fall below

guidelines or expectations established in the earlier memo.

4.4.2.4 Final Warning: Use the Final Warning Letter to notify an employee that if their performance does not

improve, they will be fired. It is to be used after the employee has been given a Formal Warning and has

continued to perform below guidelines or expectations established in the earlier memo. It can also be used when


62

a single action is sufficiently negligent to warrant this level of warning (but not severe enough to warrant

immediate termination).

4.4.3 Checklist - when to take corrective actionTalk to the employee before taking corrective action if the:

Employee's behavioural problem can easily be corrected.

Employee has not complied with previous corrective discussions.

Problem behaviour is in the early stages and needs to be redirected.

Problem or behaviour can be positively corrected outside of the progressive disciplinary process.

Take immediate corrective action if:

The employee disregards previous corrective discussions and agreements.

Negative behaviour patterns are affecting key work results.

Individual/group performance has declined due to disruptive behaviour.

The individual's behaviour threatens the well being or safety of others.

The employee deliberately or repeatedly violates company policies.

4.4.4 Guide to the corrective discussionBy having a corrective discussion with an employee before moving into the progressive disciplinary process, you

can stay focused on improvement and maintain a cooperative atmosphere. Following are some basic guidelines

for an informal performance discussion.

Step 1Select an appropriate time and place. Provide a time for discussion that is private and uninterrupted. Have the

discussion as soon as possible following the occurrence(s) so the employee clearly understands the event and

the need for improvement.

Step 2

Specify the events, actions and behaviours that concern you. Use supporting facts. Explain why you are

concerned. Describe the impact of the employee's behaviour on the team and organisation.

Step 3Ask for the employee's perspective of the situation. Keep the employee focused on the event or behaviour.

Listen to the employee's reasons, perceptions, and feelings.

Step 4

Look for solutions and employee commitment. Ask the employee for realistic solutions; if they cannot think of any,

offer suggestions. Get the employee's commitment to a solution. Make reference to the potential positive effects

of the commitment.

Step 5

Support the employee's solutions. Recognise your employee's strengths and ability to make needed changes.

Follow-up shortly after your discussion to offer support for progress and identify additional actions for the

employee to take.


63

4.4.5 Verbal Warning WorksheetDescribe the problem (how does the action or behaviour differ from standards)

Is the employee aware of standards? Yes / No

Is there any written documentation, which shows the employee, is aware of the standards (signed agreements,

job description, objectives, etc.)? Yes / No

Are there any mitigating factors (e.g., business conditions, conflicting directions, time pressures)? Yes / No

Review employee file for prior documentation (Performance Appraisals, Other documentation

4.4.6 Informal Written WarningThe Informal Warning Memo is used to remind the employee of standards they need to meet and alert them to

the consequences of continued non-compliance. It demonstrates a manager's desire to see improvement, and is

appropriate when a non-exempt employee's performance is not meeting guidelines or expectations, either due to

a chronic problem or short-term error.

4.4.7 Guide to writing an informal warning memoStep 1

Express concern over performance deficiencies and their impact on unit goal attainment or on company values

Be specific about extent of problem (e.g., what, how often and when, impact on unit productivity)

Refer to prior conversations or other events, which would increase employee's awareness of expectations or the

problem itself (e.g., performance appraisal or interim appraisal, company handbook statements, unit agreements

about mission or values)

Be specific about any coaching or management support already given (e.g., classroom training, on-the-job

training, formal or informal coaching sessions).

Step 2Explain specific expectations for performance in the future.

Step 3 If your company has an Employee Assistance Program, mention it.

Step 4Reiterate your willingness to support the employee's improvement efforts.

Step 5Inform the employee of your grievance review procedure.

Step 6Obtain the employee's signature and date.


64

MEMO FROM MANAGER

Informal Warning - Performance IssueTo: [Employee name]


Subject: Informal Warning – Performance Issue

Date: [Date]

(Mention performance standards not being met and if applicable any previous informal discussions about them).

I want to remind you of our standards regarding [performance issue, e.g. work quality]. When we

negotiated/discussed these standards on [insert date], you indicated that you were aware of them by signing the

[document, e.g. performance contract/job model/job profile] (attached).

(Describe performance problem)

[Insert name of employee], you are an important member of our team, and we cannot reach our goals if you don't

meet the [performance standards/expectations]. During [time period, e.g. the last three months] you [list the

quality standards not being met etc].

Stress the need for improvement, and offer your support

[Insert name of employee] you need to take this issue seriously and should strive to improve your [performance in

specific area]. During the [time frame, e.g. next three months], I will be monitoring your [performance, e.g.

attendance]. Please let me know if there are any obstacles preventing you from [meeting expectations, e.g.

getting to work on time]. I am ready and able to assist you.

Offer 3rd party involvement, obtain signature

Name: [Insert Name]

Date: [Insert Date]

Signature: ___________________________________

cc: [Manager's manager, Managers in related areas]

4.4.8 Guide to writing a formal warning memoUse a Formal Warning Letter as a stronger impetus toward improvement on the part of the warned employee,

and to take formal action towards termination in the case of no improvement. It should be used when a non-


65

exempt employee has been given an informal warning and performance continues to fall below guidelines or

expectations established in the earlier memo.

Step 1 Provide historical background

"Informal warning was given," etc. State what happened despite the warning, describe how often and when,

discuss continuing impact on personal/unit productivity. Be specific about any coaching or management support

given during the Informal Warning period e.g., classroom training, on-the-job training, positive or instructive

coaching sessions.

Step 2

Explain specific expectations for performance in the future

Step 3State that your company has an Employee Assistance Program, and advise that use can be made of the

programme. For example: "If problems outside work are contributing to these performance issues, you should

feel free to contact our Employee Assistance Program, at [give number]. This is a confidential and free service

available to all employees."

Step 4Give the employee a chance to give their opinions. For example: "If you disagree with this memo or would like to

discuss it further, you should contact [manager's manager, or Human Resources Manager].

Step 5Reiterate your willingness to support the employee's improvement efforts. For example: "I am available to

discuss with you any factors that may be affecting your performance." However, make sure that you do not

compromise your expectations.

Step 6Inform the employee of your grievance review procedure. If your company has any grievance review procedure,

(e.g., peer review boards, ombudsman, etc.), let the employee know that he or she can bring up the issue in that

forum.

Step 7Obtain the employee's signature and date. The employee may add comments if they wish. If they refuse to sign,

write, "refused to sign", date it, and make copies for your manager, the employee, and the employee's personnel

file.

MEMO FROM MANAGER

Formal Warning - Performance IssueTo: [Employee name]


Subject: Formal Warning – Performance Issue

Date: [Date]


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(Mention previous performance discussions and cite continued problems)

On [Insert date] you were placed on Informal Warning due to [state problem]. At that time, you were clearly told

of my expectations for your performance and your need to improve. Despite the informal warning, [state event 1,

2, 3 have continued to occur]. We previously discussed the negative effects that [state problem] are likely to have

on the departmental productivity.

(Describe consequences)

As a result of [state event 1, 2, 3] you are now being placed on a Formal Warning. During the [next period, e.g.

next three months] you will be ineligible for any salary increases, promotions or transfers. You will be expected to

maintain standards [re-state standards/expectations], and should be aware that failure to do so could result in

further corrective action or termination.

(Offer support)

In our prior discussion, we identified ways to meet [insert standards required] and I am willing to assist you

further. Please let me know if there are any obstacles preventing you from [required performance].

(Offer 3rd party involvement, obtain signature)

If you would like to discuss this memo with [help, e.g. Personnel], please contact [person's name]. Please sign

below to indicate that you have received this memo and understand the company's expectations.

Name: [Insert Name]

Date: [Insert Date]

Signature: ___________________________________

cc: [Manager's manager, Managers in related areas]

4.4.9 Guide to writing a final warning memoUse the Final Warning Letter to notify an employee that if their performance does not improve, they will be fired.

It is to be used after the employee has been given a Formal Warning and has continued to perform below

guidelines or expectations established in the earlier memo. It can also be used when a single action is sufficiently

negligent to warrant this level of warning (but not severe enough to warrant immediate termination).

Step 1Provide historical background. "Informal and Formal warnings were given," etc. (e.g., state what happened

despite the warning, describe how often and when, discuss continuing impact on personal/unit productivity). Be


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specific about any coaching or management support given during the Informal and Formal Warning periods (e.g.,

classroom training, on-the-job training, formal or informal coaching sessions).

Step 2 Explain specific expectations for performance in the future.

Step 3State that "there must be immediate and sustained improvement on the issue," and that "failure to improve may

lead to immediate termination."

Step 4If your company has an Employee Assistance Program, state this and advise that use be made of the programme

For example: "If problems outside work are contributing to these performance issues, you should feel free to

contact our Employee Assistance Program, at [give number]. This is a confidential and free service available to

all employees."

Step 5Give the employee a chance to give their opinions. For example: "If you disagree with this memo or would like to

discuss it further, you should contact [manager's manager, or Human Resources Manager]."

Step 6:

Reiterate your willingness to support the employee in their improvement efforts. For example: "I am available to

discuss with you any factors that may be affecting your performance." However, make sure that you do not

compromise your expectations.

Step 7Inform the employee of your grievance review procedure. If your company has any grievance review procedure,

(e.g., peer review boards, ombudsman, etc.), let the employee know that he or she can bring up the issue in that

forum.

Step 8Obtain the employee's signature and date

The employee may add comments if they wish. If they refuse to sign, write "refused to sign," date it, and make

copies for your manager, the employee, and the employee's personnel file.

MEMO FROM MANAGER

Final Warning - Performance IssueTo: [Employee name]


Subject: Final Warning – Performance Issue

Date: [Date]

(Mention previous performance discussions and cite continued problems)

On [Insert date] you were placed on a Formal Warning due to [state problem]. At that time, you were clearly told

of my expectations for your performance and your need to improve. Despite the warning, [state event 1, 2, 3 have


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continued to occur]. We previously discussed the negative effects that [state problem] are likely to have on

departmental productivity.

(Describe consequences)

As a result of [state event 1, 2, 3] you are now being placed on a Final Formal Warning. During the [next period,

e.g. next three months] you will be ineligible for any salary increases, promotions or transfers. You will be

expected to maintain standards [re-state standards/expectations], and should be aware that failure to do so could

result in further corrective action or termination.

(Offer support)

In our prior discussion, we identified ways to meet [insert standards required] and I am willing to assist you

further. Please let me know if there are any obstacles preventing you from [required performance]. Offer 3rd

party involvement, obtain signature.

If you would like to discuss this memo with [help, e.g. HR, please contact [person's name]. Please sign below to

indicate that you have received this memo and understand the company's expectations.

Name: [Insert Name]

Date: [Insert Date]

Signature: ___________________________________

cc: [Manager's manager

Discussion: The warning process appears to take an extensive period of time. What challenge does this

present to an SMME?

4.5 The concept of 360 degree feedback

4.5.1 IntroductionImplemented with care and training to enable people to better serve customers and develop their own careers,

360 degree (multirater) feedback is a positive addition to a performance management system. Three hundred

sixty degree feedback is a method and a tool that provides each employee the opportunity to receive


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performance feedback from his or her supervisor and four to eight peers, reporting staff members, co-workers

and customers. Most 360 degree feedback tools are also responded to by each individual in a self assessment.

Three hundred sixty degree feedback allows each individual to understand how his effectiveness as an

employee, team member, or staff member is viewed by others. The most effective 360 degree feedback

processes provide feedback that is based on behaviours that other employees can see. The feedback provides

insight about the skills and behaviours desired in the organisation to accomplish the mission, vision, and goals

and live the values. The feedback is firmly planted in behaviours needed to exceed customer expectations.

People who are chosen as raters generally interact routinely with the person receiving feedback. The purpose of

the 360 degree feedback is to assist each individual to understand his or her strengths and weaknesses, and to

contribute insights into aspects of his or her work needing professional development. These features will manifest

themselves in well-managed, well-integrated 360 degree feedback processes.

4.5.2 Positive factors of 360 degree feedback Improved feedback from more sources: It provides well-rounded feedback from peers, reporting staff,

colleagues, and supervisors. This can be a definite improvement over feedback from a single individual.

Three hundred sixty degree feedback can also save managers’ time in that they can spend less energy

providing feedback as more people participate in the process. Co-worker perception is important and the

process helps people understand how other employees view their work.

Team Development: Helps team members learn to work more effectively together. Teams know more

about how team members are performing than their supervisor. Multirater feedback makes team

members more accountable to each other as they share the knowledge that they will provide input on

each member’s performance. A well-planned process can improve communication and team

development.

Personal and Organisational Performance Development: 360 degree feedback is one of the best

methods for understanding personal and organisational developmental needs.

Responsibility for Career Development: For many reasons, organisations are no longer responsible

for developing the careers of their employees. Multirater feedback can provide excellent information to

an individual about what they need to do to enhance their career.

Additionally, many employees feel 360 degree feedback is more accurate, more reflective of their

performance, and more validating than prior feedback from the supervisor alone. This makes the

information more useful for both career and personal development.

Reduced Discrimination Risk: When feedback comes from a number of individuals in various job

functions, discrimination because of race, age, gender, and so on, is reduced. The effect of a supervisor

rating performance based on her most recent interactions with the employee, is also minimised.

Improved Customer Service: Especially in feedback processes that involve the internal or external

customer, each person receives valuable feedback about the quality of his product or services. This


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feedback should enable the individual to improve the quality, reliability, promptness, and

comprehensiveness of these products and services.

Training Needs Assessment: 360 degree feedback provides comprehensive information about

organisation training needs and thus allows planning for classes, cross-functional responsibilities, and

cross-training.

4.5.3 Negative factors of a 360 degree feedback system Inadequate design process: Often, a 360 degree feedback process arrives as a recommendation from

the HR department or is shepherded in by an executive who learned about the process at a seminar or

in a book. Just as an organisation implements any planned change, the implementation of 360 degree

feedback should follow effective change management guidelines. A cross-section of the people who will

have to live with and utilise the process should explore and develop the process for the organisation.

Failure to Connect the Process: For a 360 feedback process to work, it must be connected with the

overall strategic aims of the business. Once competencies have been identified and/or comprehensive

job descriptions defined, feedback must be given on their performance of the expected competencies.

The system will fail if it is an add-on rather than a supporter of your organisation’s fundamental direction

and requirements.

Insufficient Information: Since 360 degree feedback processes are currently usually anonymous, staff

receiving feedback has no recourse if they want to further understand the feedback. They have no one

to ask for clarification of unclear comments or more information about particular ratings and their basis.

Focus on negatives and weaknesses: Good managers focus on employee strengths, not

weaknesses.

Rater inexperience and ineffectiveness: In addition to the insufficient training organizations provide

both people receiving feedback and people providing feedback, there are numerous ways raters go

wrong. They may inflate ratings to make an employee look good. They may deflate ratings to make an

individual look bad. They may informally band together to make the system artificially inflate everyone’s

performance. Checks and balances must prevent these pitfalls.

Paperwork/Computer Data Entry Overload: Traditional evaluations require two people and one form.

Multirater feedback ups the sheer number of people participating in the process and the consequent

organisation time invested.

Discussion: The trend towards 360 degree feedback is becoming increasingly prevalent. How practical is

this process in an SMME?


http://humanresources.about.com/cs/strategicplanning1/a/strategicplan.htm

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5. REWARD, REMUNERATION AND COMMUNICATION

5.1 Reward strategy

5.1.1 IntroductionReward and recognition of performance are the single most powerful instruments management has with which to

change, establish and reinforce those outputs and behaviours of employees through which strategic business

objectives and results are achieved. The key is not money itself. Rather, it is viewing money and all forms of

reward as the language of the business: it is the use of reward in all forms to communicate what is important in

terms of high performance. The more visibly this is demonstrated, the more effective the communication. The

overall objective of the reward strategy is to improve company and work unit performance through staff by

enabling line managers to integrate the management of performance and reward through the application of

variable reward, thereby increasing productivity and performance, whilst decreasing overall company risk.

Building a pay-for-performance culture may seem like an abstract vision for some companies; however, it’s

considered a top tool by senior executives for achieving better financial results. And for good reason: a strong

pay-for-performance culture has the ability to unlock employee performance potential, keep your “superstars”

happy, and ultimately drive a healthier bottom line.

5.1.2 The key business benefits of pay-for-performance Goal AlignmentPay-for-performance is a key mechanism to align employees’ goals with business objectives because it inks

rewards to performance which is most critical to your company. Communicating and tracking each

employee’s progress against company objectives is imperative and delivers a host of positive results:

Employees are more productive and focused on achieving key company goals

A shared responsibility between employees emerges by cascading goals with others in the company

Managers can stay in touch with employees’ progress throughout the year and offer immediate

reinforcement or coaching to keep performance on track

Most employees become more engaged and motivated by understanding how their daily activities help drive

overall business health; this unquestionably results in both individual and company-wide success.

Increased MotivationAnother overarching benefit to pay-for-performance is developing a culture in which employees are energised to

perform at maximum levels. Jack Welch, former CEO of GE and a leading expert on driving performance,

believed the ultimate goal of managing is not to get an employee to perform as expected, but to have them

willingly go beyond the call of duty because they want to.


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A pay-for-performance system is a key element in getting employees to excel at maximum (and beyond) levels.

How? By combining clear direction, quality feedback and tangible rewards, workers also receive recognition — a

key component to job satisfaction and employee dedication. This builds a more satisfying relationship where

employees are inspired by knowing management truly values their efforts.

Improved RetentionIt’s no secret that the key to retaining the best and brightest is recognising and compensating top performers.

According to Giga Information Group, retention can be improved by meritocratic management — or pay-for-

performance — by up to 27%. In a well-planned pay-for-performance system, managers have easy access to all

the information they need to reward individuals for actual performance. This allows them to track employee’s

progress against performance goals and reward efforts according to defined expectations. Employees are, in

essence, empowered to be in control of their financial situation, which many HR experts site as a key to

maintaining the tenure of top-performers. In addition, overcompensation of underperformers is avoided — a

mistake that frequently leads to “superstar” workers leaving with complaints of unfair treatment.

Cost SavingsFinally, a pay-for-performance culture can help your company save money in a way you may not think of:

avoiding overcompensation. Companies can waste literally thousands of rands a year by rewarding individuals

whose performance doesn’t help achieve key business objectives. The ongoing accountability developed in a

pay-for-performance culture helps avoid this pitfall.

5.1.2 Ensuring Pay-For-Performance will be successful It’s important to realise that there is no one-size-fits-all approach to developing a pay-for-performance culture. To

be successful, one has to “think custom” and tailor a system to your unique business needs and existing HR

processes. The HR professionals who contributed to this guide have said answers to the following questions

provided invaluable feedback in setting expectations and shaping a meaningful pay-for-performance culture:

Are the tasks that people are working on driving the business? How can you tell?

Are managers engaged with their employees throughout the year to make sure they execute their

objectives?

Are individuals executing against what is expected? Who is and who isn’t executing?

Are managers objectively ensuring that bonuses, raises, and promotions are given to those high

performing individuals that they can't afford to lose?

Another note on ensuring success: pay-for-performance is not a one-way street where management sets up a

system and employees simply follow suit; there are key psychological and emotional realities that have to be in

place. In fact, it is common for companies to ask the right questions and build the right system without thinking

about the “human side” of pay-for-performance. For a successful performance-driven culture to be adopted, it is

important to gauge the attitude of employees. In general, employees have to:

Desire higher pay


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Have the skills and capabilities to improve performance

Trust the company to administer the plan fairly, and pay if they improve performance

Think of this as employee “buyoff” into a pay-for-performance system — a factor regarded as mandatory by

companies that have successfully implemented pay-for-performance.

Discussion: What is the scope for pay-for-performance in your profession/organisation?

5.2 Remuneration model

The following factors are taken into account in determining remuneration levels:

Job valueJob evaluation is a process whereby the relative worth of various jobs within an organisation is determined

objectively, and jobs are ranked so as to make it possible to achieve internal and external parity, by applying a

recognised job evaluation system. The job content determines whether a specific job is placed on a job band

within the general structure or within the professional structure.

Market valueIn order to achieve external parity, comparisons with specific markets are continuously drawn, thereby comparing

individual packages and developing remuneration scales for the respective job bands. These remuneration

scales establish a realistic and competitive price for labour. During the annual review of package scales, a

strategic decision is made with regard to the position the organisation wishes to occupy in respect of the market.

During the annual remuneration review exercise remuneration information is made available to enable decision-

makers to determine the market-relatedness and internal parity of their subordinates' packages.

Individual valueIn order to compare individual packages and where necessary achieve employee parity, the worth of each

employee must be determined within the specific job as well as other jobs so that employees can be remunerated

equitably and differences in the remuneration of individuals can be explained factually. The worth of an employee

determines what his/her position on the remuneration scale of a specific job band should be. The following

factors are taken into account:

Performance/Outputs/Measures: The individual's outputs, measured by the performance management

process, carry the most weight in determining individual remuneration levels. Consistently high


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performance with achievement of outputs over a long term should ensure high remuneration.

Employees' potential is also taken into account and is the product of estimated ability as well as

competence. Estimated ability refers to conceptual and management skills which have not yet been

demonstrated whilst competence refers to knowledge and expertise gained, which can be deduced from

previous outputs/experience. These factors will also be considered, but are of a secondary nature in

determining individual remuneration levels.

Specific occupation and skills: Where there is a shortage of specific occupations or skills in the company

and the market, a market premium in temporary remuneration may be considered to attract and/or retain

these skills.

5.3 Performance communication

5.3.1 Foundation of performance managementPerformance communication refers to direct, shared responsibility, output focused communication in the

workplace. It is communication that is open, above board, honest, respectful and deliberate. Performance

communication occurs when the managers and employees commit to and take responsibility for working out

performance problems together and understanding each other, and use communication skills necessary to do so

through purposeful discussion.

5.3.2 Principles of performance communicationThe following performance communication principles act as the glue that holds all performance systems together.

These are:

Don’t wait to be asked: Performance communication that is direct, deliberate, shared responsibility, output

focused communication is central to business success. This is especially true in an information and service

economy where people and not machines get the work done. When someone has something to say, or when

someone has a need to know, it is critical that each person states his/her views or questions directly and as soon

as possible.

Performance communication is a two - way street: When information is on the table, problems can be solved

and choices about future assignments or development actions, even disciplinary actions, can be made in good

faith. Some information and feedback may be hard to deal with, but nothing drains energy and trust like half-truths

and avoidance. Direct communication is an employee right and a management responsibility. It is also an

employee responsibility and a management right.

Judgment calls: Judgment and subjectivity are a reality of business life and are reflected in communication.

Manager and the employee must be able to formulate and express valid judgments and opinions based on

sufficient, accurate information. In the context of communicating about performance, however, people must also

become aware of their biases and acknowledge them as they affect their own judgments and opinions.


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Performance communication is a human process: No form, policy, or procedure can ensure performance

communication that works. Nor can a form, policy, or procedure interfere with it, if all parties understand and are

committed to a performance culture and attitude that is not reliant on blindly following ‘rules’ and procedures at

the expense of delivering superior performance.

5.3.3 Communicating at formal and informal performance reviews Performance reviews and feedback discussions are an intense form of communication for both managers and

employees. On the one hand, managers need to communicate conclusions about performance –about outputs,

competencies, and style. In order to do this, he/she must observe behaviour, draw conclusions from

observations, prepare to support conclusions with data, and then communicate the feedback constructively and

without game playing. The employee, on the other hand, wants to know where he/she stands, but may find some

or all of the feedback hard to take. Employees need to listen, clarify the feedback, observe his/her own behaviour,

describe the observations, and then make a commitment to appropriate actions.

Feedback discussions are necessary for successful performance reviews. When effective, these feedback

conversations, evolve out of shared responsibility, employ the deliberate use of communication skills, are output

focused, and direct. When not managed well, these discussions can damage the communication climate and

make it even more difficult to communicate in the future.

5.3.4 Action ideas for giving and receiving feedback/reviewing performance

Organise your thoughts Those giving feedback often have difficulty organising their thoughts. And the person receiving feedback may be

confused by what the feedback giver is saying, especially when the feedback is given in a manner that is difficult

to follow. Both the person giving feedback, as well as the person receiving it, can benefit from having a structure

to follow while giving or actively listening to feedback.

As a feedback giver, you can make your feedback more effective and more useful to the receiver - if you structure

it. A feedback receiver can make sure that the feedback giver is relaying all the important messages by listening

for key information and asking questions if that information is missing or confusing.

As a feedback GIVER, structure your feedback so that it answers the following questions. As a feedback

RECEIVER, listen for the following information:

What did the feedback giver observe in the situation that prompted a decision to give some feedback?

Why is this information important for the receiver to know?

What does the feedback giver think would improve the situation in the future?


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Once this information is on the table, the feedback receiver and giver have substantial issues to discuss, and their

conversation can be a productive problem-solving session that gets at important issues and works toward their

resolution.

Keep the human touchFeedback communication occurs between two people. This means that it is always a partially subjective process

that can't be automated, or substituted by a form or a computer. In order to work, feedback communication must

involve judgment, questioning, empathy, and personal commitment. It is important to be as objective as possible

when trying to describe and assess performance. It's also essential to recognise and stop communication games.

But, these efforts will be only as effective as the level of trust that exists between managers and employees. Both

must talk about their concerns, opinions, and reactions -they must include the human element in their

discussions. And they need the skills of giving and receiving feedback communication.

Managers: Clarify how you feel about discussing outputs, competencies, and style. What do you look forward to?

What pitfalls do you want to avoid? What concerns you most about how you or your employees may

approach a discussion?

In a meeting or in individual discussions with employees, communicate that you want performance

reviews to follow the principles of quality performance discussions.

Don't expect performance feedback discussions to be perfect or to proceed according to the book. Do

expect the skills both you and your employees bring to review discussions to steadily improve.

Conducting a performance review is a human and complex process. If you or your employees make a

mistake, slip into a game, or talk when listening is required, forgive them and yourself and move on.

Avoiding the issue won't help improve the quality of feedback discussions. Acknowledging and accepting

the human component will.

Employees: Clarify how you feel about participating in performance review discussions. What do you look forward

to? What pitfalls do you want to avoid? What concerns you most about how you or your manager may

approach the discussion?

Talk with your manager about the concerns, and express yourself in the first person.

Do not expect performance review discussions to be perfect or your manager's skills to be flawless. Do

expect, however, that both of you will steadily improve your communication skills as you develop a

broader perspective and as you become more familiar with each other's communication style.

Focus on outputs, competencies, and styleDiscussing and evaluating performance is a complex task because the things that individuals do from day-to-day

have both short- and long-term implications. This means you must discuss not only what the employee has

accomplished, but also how the accomplishments were achieved and what impact they had on others in and


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outside the organisation/work unit. It also means discussing the knowledge and skills the employee used, or

should have used, in situations where his/her competencies were key factors. The way to discuss

accomplishments and their impact is to focus performance reviews on the three dimensions of performance:

outputs, competencies, and style.

Managers: Initiate formal review discussions when your company requires them. Encourage employees to ask for

performance reviews

Prepare to discuss the employee's performance by answering these questions: To what extent has the

employee accomplished his/her goals and carried out the job's responsibilities? What skills and

knowledge are strengths for the employee in the current job? What needs development? How does the

employee's style aid and/or inhibit the ability to get work done with and through others? What specific

examples from his/her performance can you cite to support your conclusions about outputs,

competencies, and style?

Effectively use communication skills. Listen, support, and ask questions so that you thoroughly

understand how the employee sees his/her own performance. Be willing to change your conclusions if

the employee's feedback warrants it. But also be ready to assert your conclusions and retain them if you

feel your judgment is sound. Remember, you are paid to draw conclusions about performance.

Never punish responsible, honest, open communication. The breach of trust that such action can cause

can haunt you far into the future.

Employees: Initiate a formal performance review when you want to discuss your manager's and your own overall

view of your performance. Don't feel you have to wait for your manager to decide to have a review

Prepare for your performance review discussion. Draw conclusions about the quality of your own

performance: To what extent have you accomplished your goals and carried out your job

responsibilities? What skills and knowledge are strengths for you in your current job? What needs

development? How does your style aid and/or inhibit your ability to get work done with and through

others? What specific examples from your performance will you cite to support your conclusions about

your outputs, competencies, and style?

Effectively use communication skills when you discuss your performance. Listen, empathize, and ask

questions so that you thoroughly understand your manager's feedback. Accept your manager's feedback

about how he/she sees your performance. If you disagree with your manager's conclusions or have

additional perspectives, state them and support them with specific examples from your performance

5.3.5 Delivering and digesting tough messagesMany managers and employees say the hardest part of their job is delivering and digesting messages about

performance problems or other issues that could lead to termination or other serious consequences if not

addressed. Difficult as it is, when performance problems exist, tough messages must be delivered and digested


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directly, clearly, and immediately. Sidestepping, avoiding, and game playing may delay the confrontation, but they

inevitably make a problem situation worse.

Do not wait to address performance problems: Discuss performance problems before they become crises.

One of the most common ways of dealing with performance problems - for manager and employee alike is to

avoid them and hope they go away. Addressing performance problems is a key part of a manager's role. A

manager's failure to confront employee performance issues is itself a performance problem. Whether the

manager is comfortable with it or not, confronting problems is part of the manager's job. This does not mean that

employees are not accountable for their performance. Ideally, the employee should be the first to raise problems

for discussion and feedback. Also, employees are likely to be more receptive to, and to act on, feedback and

problem solutions if they have initiated the discussion.

Managers: Don't wait. Set a time to discuss and resolve the issues as soon as you become aware of behaviour or

results that may jeopardise ( I) performance rating; (2) your willingness to delegate to the employee and

involve him/her in more challenging work; (3) how you talk about the employee with third parties; and (4)

the employee's career options.

Encourage the people who work with you to recognise problems. If your employees cannot manage a

problem themselves, let them know it's appropriate to discuss situations with you - before they become

serious issues. Then, be sure you do not punish their initiative.

Employees: Keep a watchful eye on your own performance – your outputs, competencies, and style. When you

detect problems, decide to do something about them immediately and do not wait.

Initiate discussions about performance problems. If you raise the problem first, your manager will likely

be less anxious about being direct. You will probably get more support and will not need to be defensive

as if the manager raised the issue.

Focus on solving the problem:Even when performance problems appear to be related to style, it is unrealistic to make broad, unsubstantiated

negative statements about an individual and hope that improvement will occur. The feedback you give and

statements you make about the performance problem must be firm, fair and strong. This is especially true when

the problem is very serious and when major changes must be made in a short time. However, when feedback

contains a tough message, it is especially important that it be focused on the problem and be as specific and well

substantiated as possible.

It is the responsibility of the discussion initiator to establish the initial focus of the discussion. Throughout the

conversation, however, both manager and employee must work together to assure the results will be

constructive.


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Managers: Spend the first few minutes of the meeting describing your concerns, talking about the consequences

you feel may occur if the problem persists or worsens, and laying out your evidence that a problem

exists.

Listen to the employee's concerns, conclusions, and evidence. Ask questions. Be sure you understand

his/her views before you draw formal conclusions.

By the end of the discussion, be sure you and the employee have the same understanding of how you

view the problem and its potential consequences.

Employees: Spend the first few minutes of the meeting describing your concerns, making your concerns about future

consequences you feel may occur if the problem continues, and laying out evidence that a problem

exists.

Listen and ask questions to be sure to understand the manager’s concerns, conclusions, and evidence.

Be sure you understand his/her views before you draw formal conclusions.

By the end of the discussion, be sure you and the manager have the same understanding of how you

view the problem and its potential consequences.

Obtain a commitment from the employee to change:Although it's the manager's responsibility to be clear about his/her view of the problem and the consequences of

not resolving it, it's the employee's job to plan and implement actions for improvement and development. The

point is, the employee's commitment to action and ability to act are key to solving the problem. If the employee

doesn't personally commit to changing his/her behaviour and its results, or if the employee can't carry out action

plans because he/she lacks the skills or resources, then improvement plans will be useless.

The employee's commitment can come from fear of consequence, from wanting to do the job better, from having

participated in solving the problem and making an agreement to improve, or from just being clearer about the

issues to address and situations to change. Whatever its source, the commitments and actions must be the

employee's.

At the end of a discussion of performance problems, a manager and employee should check out the employee's

current awareness of the problem, its consequences, and his/her intentions to act. One possible outcome of an

effective discussion of performance problems is that the employee will claim ownership of the problem and

commit to working to solve it (if, in fact, it is the employee's problem). Another possible outcome is that the

employee will decide not to improve or change - a decision that is his/her right to make.

When this happens, the manager, representing the organisation, can take the actions that result from the

employee's decision.


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Exercise: Role play

Equipped with the aforementioned techniques of feedback, stage an annual review session in your group.

Compile a scenario of performance indicators against which the staff member will be evaluated. Choose a “victim” and the “boss” from among your group. The remainder of the group must evaluate the process of giving and receiving feedback that transpired.

Discussion:

General challenges and limitations experienced by delegates in creating, implementing and monitoring a

performance management system.

Methods found by particularly SMMEs to overcome such challenges

The trends being witnessed by delegates in the advances of performance management in their respective

professions/businesses

Affordability of digitally driven performance management systems, e.g. cloud computing, software as a service


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(SaaS) and similar systems provided by international vendors.


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6. CHALLENGES AND LIMITATIONS OF PERFORMANCE MANAGEMENT

6.1 Introduction

Invariably, the topic of performance management on the agendas of board and executive committee meetings

throughout commerce, industry and the public sector is greeted with enthusiasm. The decision is unanimous: “we

must have it.” An ad hoc committee gets appointed to investigate the implementation of such a system and a

proposal is expected at the next meeting. In a large organisation with a substantial talent management budget,

the committee members obtain proposals from two or three vendors that are not shy to quote a Rm or so. In

smaller organisations the HR manager mobilises a few colleagues and staff to find ways of converting the current

annual review process into a performance management system of sorts.

Soon the board discovers that designing, implementing and keeping a performance management system running

require a considerable investment in time and money. From the outset it is complicated to calculate a return on

investment (ROI). Few executives are willing to take the responsibility for managing the system; it becomes a

debate as to the level in the organisation at which the system should become operational. The question arises

what the attitude of the unions is going to be and whether supervisors are sufficiently literate to deal with the

documentation. As the ad hoc committee reports back to the board, enthusiasm for the whole project starts to

wane and a simplified version of the initial grand design gets implemented with little or no success. What follows

is a list of potential challenges that the ad hoc committee must be aware of.

6.2 Potential Challenges of implementation

6.2.1 Lack of buy–in from CEOThis speaks for itself. If the CEO is not the “champion” of the performance management system it has no chance

of success.

Solution: As a project team keep the CEO and executive committee informed and motivated by communicating early and

regular successes.

6.2.2 Line management inertiaLine managers are generally reluctant to become involved in implementing and running a performance

management system. .Often it is a lack of understanding due to the perceived complexity of the system. It

requires a new approach to managing staff, with the emphasis on consultation in goal setting and work output

negotiation and frequent feedback and daily communication about performance.

Solution: Put line managers through change management programme

Keep the performance documentation simple such as that exemplified in the workbook


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Ensure a gradual take on of the system; e.g. selecting one or two teams at a time; initial performance

contracting followed by tracking; followed by corrective action; etc.

6.2.3 Alignment of goalsIt will require considerable effort at the outset to align team and individual work output units, KPIs and

competencies to the overall strategic objectives of the organisation. In several international research reports a

percentage as high as 95% is being quoted as indicating the degree to which the rank and file in a business are

unaware of that organisation’s vision, mission and strategic objectives.

Solution: Follow the performance contracting and tracking procedures and paperwork described in the workbook

diligently.

Ongoing performance communication.

6.2.4 Defining KPIs and measures This process is somewhat of an art and requires an analytical mind. It is a time consuming process but is

fundamental to the success of the performance management system. Particularly important is to find the correct

measures for the KPIs to ensure that they are indeed the evidence of the result that you are measuring. Also

ensure that the KPIs are related to the overall goals and strategic objectives of the business.

Solution: Get staff involved to formulate their own KPIs and measures as part of the performance contracting

process

Make certain that KPIs are non-punitive as staff will not give their support if they perceive that measures

will be detrimental to their bonus, pay, self-worth or status.

Ensure that job descriptions and job specifications are up to date.

Consult websites such as www.kpilibrary.com and www.staceybarr.com for meaningful guidelines

6.2.5 Defining competenciesWhat has been said about KPI formulation applies to defining and evaluating competencies.

Solution:It is vital to remember that the evaluation of competencies is subject to human judgement; see policy statement

no 6.


http://www.staceybarr.com/

http://www.kpilibrary.com/

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6.2.6 Over-ambitious system designThis particularly applies to fully integrated digital systems which have many functions to offer almost on an off the

shelf basis. Running on full functionality from the word go is courting disaster. The multitude of inputs required

and reports delivered will bewilder the novice user to the extent that he/she will leave it unused.

Solution: The correct approach is to take on one business process at a time. For instance, choose one strategic

goal and set accurate KPIs and measures and monitor achievement

Ensure that lower level skills staff possess sufficient computer literacy.

6.2.7 AlienationOnce management and staff have been involved of setting up the bare bones of a system they expect to receive

meaningful information from the outset. This does not necessarily materialise in the short term. It will start

delivering management information over an extended period of time as more departments start contributing and

more strategic goals are loaded on the system. Early contributors may start losing interest.

Solution: Frequent information about progress being made must be communicated to all role players.

6.2.8 Pay for performanceExpect considerable reluctance from chronically underperforming staff and outright resistance from trade unions.

Staff pulling their weight will find the concept highly motivating as for once they will be compensated for their

effort and stop having to “cross-subsidise” their less productive colleagues. However many jobs do not have

easily measurable performance outputs on which reward can be based.

Solution: Start implementing with jobs where reward can easily be aligned to performance: i.e. sales, production

output

Find appropriate non-monetary rewards for other types of superior performance delivery.

6.2.9 SMME take onThe above challenges apply to all sizes and types of organisations. The question is are SMMEs better off or

worse off when implementing and running a performance management system. Naturally an SMME must have a

minimum size in terms of manpower, clientele, asset base and financial resources to warrant a performance

management system. Once it has the critical mass it would be at an advantage compared to the larger

organisation. “Line of sight” between staff and the CEO is shorter and alignment of personal goals, competencies,

KPIs a greater reality. Implementation and full functionality will take place in a shorter period of time. However,

manpower resources are at a premium in the smaller organisation and it would be difficult to second a person full

time to project manage a complete performance management system in one go.


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Solution: Gradual take on

Maximum involvement of peers and staff

Volunteering

7. TRENDS IN PERFORMANCE MANAGEMENT

In every conceivable industry internationally performance management is driven by the quest for

Greater productivity

Lower cost

Superior product

Customer service excellence

Scarcity of talent

to name just a few business management imperatives.

In South Africa in the public sector, “service delivery” is the operative word. Legislation in the form of the Public

Finance and Management Act and the Municipal Systems Act makes the implementation of a performance


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management system mandatory. In the private sector maximum effort is expanded on survival, growth, return on

investment, corporate social responsibility, job creation and other socio-economic factors. This takes place in a

low growth economy and in competition with global market players active in South Africa.

Hence boosting the performance of all factors of production in an organisation is vital and the implementation of

performance management systems has become a priority in management intent.

The philosophy and operating mechanisms of the performance management system advocated in this learner

guide make it possible to engage staff maximally. They become partners in formulating the strategic objectives of

the organisation, setting goals for their own job achievement and career development and measuring

achievement and receiving reward in line with their performance. According to a leading international analyst in

the human capital industry, Josh Bersin (2009), the business impact of a consistent, company-wide performance

management process is significant. He has found that “organisations with a performance management system in

place have experienced less downsizing, lower turnover among high performers and have obtained nearly twice

the revenue per employee as organisations with no formal or consistent performance management practices.”

The system becomes the means to self-management and self-actualisation of management and staff at all levels,

creating a learning organisation aimed at continually improving itself for the benefit of its customers, communities,

employees and other stakeholders. It gradually evolves into a system that produces vital metrics by which

management can keep the organisation on track and steer it on the road to sustainability.

Information and communication technology vendors recognised the inherent benefits of the manually driven

performance management system and took it to the next level of its evolution. They managed to integrate several

management information sub-systems into a seamless performance management system providing real time

information on human resource performance by company/division/department/work unit/individual.

The benefit of and need for this information has become entrenched in management thinking. Now, globally

performance management systems are becoming part of the armory of management in organisations of all types

and sis. The adoption of performance management as a vital management tool is equally growing in South Africa,

both in the private and public sectors.

Bersin, Josh. Talent Management Factbook 2009, Bersin & Associates.


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8. THE ROLE OF TECHNOLOGY IN AUTOMATING PAPERWORK*

8.1 Introduction

While many large organisations have already moved to adopt technology to support the performance

management process, small and medium sized businesses are less likely to have done the same. Performance

processes can be significantly streamlined by making use of software platforms. Yet, for most companies in the

SMME segment, paper-based performance management processes are still the norm.

Performance management technology solutions are not just for large organisations; these tools can also help

small to medium-size companies with the following aspects:

Improving efficiency and compliance: Automation helps managers to provide constructive feedback

to employees on a more frequent basis, in less time. Manual processes are error prone, and errors could

lead to serious compliance issues.

Making performance reviews relevant: Technology can transform performance management from a

once a year event into an ongoing process that also includes development plans and learning

opportunities.

Maximising productivity and paying for performance: Top performing employees are valuable

assets. Technology solutions can nurture better performance, focus individual efforts on key business

strategies, and make it easier to recognise and reward superior performance.

8.2 Improving administrative efficiency and reducing risk

Technology can reduce the administrative inefficiencies and headaches that are part of manual performance

management process. Research shows that automating the performance management process can reduce

operational costs by one fifth. Where do these cost savings come from?

Reducing errors: Some of this efficiency is the result of reducing errors inherent in the manual process,

including data entry errors and appraisal forms that become lost in interoffice mail or in desk drawers.

Saving a manager’s time: When managers sit down to develop a performance review key points about

the performance and behaviour from months past can be difficult to remember. A centralised repository

for managers to log confidential notes on an ongoing basis can reduce the time it takes to finish an

appraisal. Writing assistants built into the tool can make it easy to draft an appraisal filled with accurate,

objective information about performance, not subjective manager opinions.

Consistency: A consistent framework for performance scores and measurement for employees within

similar job functions reduces the likelihood of discrimination. Automation makes it easier to create an

appraisal process that is fair and equitable to everyone.

Creating a paper trail: Having easy access to historical reviews that poor performers have signed off

can be used as due diligence information to support employee separation and limit legal exposure. With


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a paper-based process the organisation may not have the right records available. Automation can

provide access to these appraisals and also serve as a communications archive between managers and

employees.

Providing writing help: Sometimes managers write things in reviews that make HR staff cringe.

Performance reference software prevents such problems by including writing tips and legal word filters

that prevent managers from including words that are inappropriate and that expose the company to legal

liability.

8.3 Making performance reviews relevant

Technology can make employee development an ongoing process and not a once a year event. Although the

formal annual review is still very much a standard, researchers found that organisations with technology driven

performance management processes are 47% more likely to reinforce the formal annual reviews with informal

reviews at least once per quarter.

Most organisations would find it impossible to support a performance management process with multiple reviews

throughout the year with a paper-based process, especially if the review is based on manager observation and

subjective opinion. However, true performance management should be more than a manager's subjective opinion

of an employee’s work over the past year. Instead, it should be a multifaceted continuous process that includes

the following components:

Metrics-based performance evaluation: Automated performance management with evaluation driven

by KPIs not only aligns employee effort with organisational strategy, it measures performance against

quantifiable data. Establishing KPIs that are relevant to both high-level goals and operational priorities

allows an organisation to measure individual performance relative to these goals. Research shows that

metrics matter. Companies that use KPIs to draft performance management are twice as likely to

achieve best in-class results from performance management. Best in-class companies are also 1,7

times more likely to incorporate daily performance metrics into the day-to-day operations of the

business. Technology turns performance management into an everyday event by:

Giving both employees and managers needed insight: Both employees and managers can

monitor individual performance relative to goals throughout the year and modify effort if needed.

Giving employees the tools to get the information they need throughout the year, is also an

excellent way to improve employee engagement and retention.

Automating goal tracking and reporting: With this level of insight, businesses will not wonder

who the top, middle and bottom performers are - they will be able to tell at a glance. Businesses can

also ensure cross company goal alignment and measure performance across different departments

and locations.

Driving accountability at all levels: business leaders can benefit from real-time insight into how

employees are executing strategy and can improve organisational agility in an uncertain economy.


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Development plans: Employees should have an opportunity to close the gaps in knowledge and skills

or develop strengths.

Learning opportunities: An organisation should connect development programmes to training

opportunities and then track and prove a measurable correlation between training programs and

increased employee performance.

8.4 Maximising productivity and paying for performance

Top performing employees are valuable assets to an organisation. Although it may seem obvious to say so, some

organisations underestimate the value of their best employees. However, top performers almost always exceed

the performance of average workers by at least 25%. A technology driven performance management system will

help identify the top performers at a glance.

For businesses in the small to medium-sized market identifying and retaining top performers is essential,

especially in hard to fill professional and leadership positions. Performance management technology not only

makes it easier to recognise the superstars in an organisation, it provides a process to improve the performance

of average and low performers. Benefits include:

Paying the people who are driving success: Identifying top performers makes it easy to single out

employees who have earned bonuses and raises. However, it also provides managers with a valuable

tool to have specific constructive conversations with average performers that want to know what it takes

to succeed.

Minimising salary misallocation and misunderstandings: In business today, organisations are under

pressure to make every rand count. Pay for performance reduces misallocation of budget to employees

that did not achieve goals and reduces misunderstandings by clearly explaining performance standards.

Identifying talent gaps: Identifying top performers not only allows you to recognise and reward

outstanding performance, it also allows business leaders to identify knowledge and skill gaps.

Businesses can then address these deficiencies in critical business roles through mobility, development

or recruiting

* Extracted from “Performance Management Solutions for the Midmarket Organisation: Why Bother?”

Authored by performance management systems technology vendor Cornerstone on Demand and made available

by its South African representative Kalleo Learning of Randburg.


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