The Performance Improvement Blog

Performance Management is Broken

What is intended to pass for performance management in too many organizations today is the annual compulsory performance review. To label this a “performance management system” is to give the process much more credit than it deserves. A perfunctory meeting between a manager and employee once a year to review a standard rating sheet that lists competencies and goals that are probably no longer relevant is not a performance management system.

Elaine Pulakos and Ryan O’Leary have recently published a well-documented paper in Industrial and Organizational Psychology that explains the strengths and weaknesses of common approaches to annual reviews (Elaine D. Pulakos and Ryan S. O’leary, Why Is Performance Management Broken? Industrial and Organizational Psychology, 4 (2011), 146–164.). They examine: 1) linking individual employee goals to overall organizational goals; 2) setting SMART (specific, measurable, attainable, relevant, time-bound) performance goals for each employee; 3) rating performance on a list of pre-defined competencies; and 4) collecting, analyzing, and reporting performance data from multiple sources, such as co-workers, customers, and supervisors. I would add one more: ranking individuals according to their managers' opinions  of their performance (observed or not). The authors didn't include "ranking" in their study probably because they can't believe any organization would actually use such a disruptive method as its performance management system. 

Each of these common approaches sounds good in theory. What could be wrong with aligning goals, having SMART objectives, being judged on the basis of needed competencies, and getting evaluative data from multiple sources (triangulation)? The problem according to Pulakos and O’Leary is in implementation of each method over time. Follow-through is highly time-consuming, is inconsistently applied, and relies too heavily on subjective and capricious ratings of managers. The alternative, according to the authors, is to improve the on-going manager-employee relationship. They write:

…concerns on the part of managers and employees prevent formal performance management systems from working well and have turned them into largely administrative drills that add little value. Contributing to this is the fact that performance management implementations tend to focus on rolling out formal administrative processes and tools (e.g., competency models, rating scales, and automated systems) rather than training managers and employees how to engage in effective performance management behavior (e.g., setting expectations, providing feedback, and helping staff solve problems). However, it is the informal process of engaging in these behaviors day-to-day that determines performance management effectiveness, not the tools and steps that comprise the formal system. (p. 148)

They recommend that organizations stop installing new performance management systems and start paying greater attention to manager-employee relationships. They cite a study by the Corporate Leadership Council that found that managers, not performance management systems, were the key to improving employee performance.

The results revealed that specific manager behaviors are some of the most important drivers of performance. These include (a) helping employees understand what they are expected to do in sufficient detail to deliver it, (b) supporting and helping employees find solutions to problems, (c) playing to employees’ strengths rather than their weaknesses by giving them assignments they can do well, (d) developing employees productively by finding a balance between acknowledging strengths and contributions and addressing development needs, and (e) engaging in regular, informal performance conversations in which managers provide feedback that is fair, accurate, and helps employees do a better job.

In essence, performance management depends on effective communication and trust between managers and employees. A "learning alliance" must form between them in order for both to contribute fully to the organization.  If the purpose of performance management is for managers to check off that an annual performance review has been completed for compliance purposes, then one of the four common approaches identified by Pulakos and O’Leary will do just fine. However, if the purpose is to improve performance, then the focus must be on the quality of manager-employee relationships.  (For examples of effective communication and trust-building, see Communication in High Performance Organizations: Principles and Best Practices.)

 

Mirror, Mirror On The Wall; I Don’t See Myself At All.

As leaders, we tend to overestimate our abilities and underestimate the amount of help we need in order to improve. It’s like looking in a mirror and not seeing yourself the way others see you. Wally Bock, in his post about a Development Dimensions International (DDI) study of front-line leaders, draws three major implications:

You can't trust your mirror. No more excuses. After reading this post you can't fall back on the "nobody ever told me I overestimated my abilities" excuse.

You must commit to the rigorous and discomforting process of getting the true picture of who you are and how you're doing. Seeking feedback must become a habit. Hearing the feedback and acting on it, hard as it is, must be part of your plan. You can get some help from Mary Jo Asmus' excellent post, "The Value of Knowing Exactly Who You Are."

You must commit to the difficult habit of getting better. As you grow and develop, that target will move as Marshall Goldsmith wrote in What Got You Here Won't Get You There.

The process for “getting a true picture of who you are” and for “getting better” is best facilitated by a coach. Bill Ryan, consultant to foundations and nonprofit organizations and research fellow at the Harvard University Hauser Center for Nonprofit Organizations, in an interview with Ruth McCambridge, Editor-in-Chief of The Nonprofit Quarterly, describes coaching as helping an executive answer this question: “If my organization wants to get to Point X, what do I, as a leader, need to do to build on my strengths and manage my weaknesses to help it get there?” If a leader doesn’t want to ask this question or won’t act on the answer, that person is not a good candidate for coaching. If a leader is willing to learn and to change behavior, then that person will likely benefit from coaching. For video examples of how coaching can help leaders change their behavior see the Evelyn & Walter Haas Jr. Fund site. 

Other modes of learning and change could also be beneficial to executives having a more realistic understanding of themselves. Carol Kauffman and Diane Coutu draw distinctions among consulting, coaching, and therapy. Based on a survey of coaches, Kauffman and Coutu created the following model to show the differences and commonalities.  



I think the researchers should have included "counseling" in this model. Professional counselors help people deal with normal life development, such as career, family, and avocation, with the intent that people learn how to successfully manage these common life challenges.  I would put “counseling” between coaching and therapy in the model. It overlaps with coaching in that counselors are “paid to ask the right questions” and counseling “tackles difficult issues at work and at home…focuses on individual behavioral change…explores subjective experience.” Counseling differs from therapy in that it tends to focus on the present, is short-term, and deals with normal life development problems.

Coaching differs from consulting, counseling, and therapy in that the focus is on each executive’s success in the work setting. Coaching is similar to these other professions (consulting, counseling, and therapy) in that they all rely heavily on skillful listening to clients (executive) and reflecting back what is heard and what is meant so that clients can achieve deeper self-understanding and learning. Then when they look in the mirror, they should see themselves, warts and all. 

 

Doing Well By Doing Good

Companies can do well (financially) and not do “good”, e.g., businesses that sell products that are bad for one’s health. Companies can do well and also do good, e.g., businesses that, when they are highly profitable, donate some of that profit to their communities. Or companies can do well by "doing good". These are organizations that make “doing good” a central part of their missions and business models. They do things that improve the well-being of their internal customers (employees, vendors, business partners) as well as external customers (buyers of products and services, shareholders).

There is much disagreement about the corporate value of “doing good”. Wally Bock, in his blog, describes the debate in this way:

In general, the debate about how corporations should act is composed of two groups shouting across the divide in their views. One group shouts "corporations must do good" only to be answered with "profit is good" and "corporations owe something to the community," answered by "corporations should serve their shareholders and no one else." Sigh.

However, the evidence is mounting that doing good is a competitive advantage. Companies are finding that this starts with employees. If a company treats its employees poorly, it’s not going to be able to be successful with customers, vendors, and the wider community. Treat your employees with deep caring and customers and profits will follow. The Container Store, is an example of this phenomenon. Interviews on CBS and CNBC tell the story. Kip Tindell, founder and CEO of the storage and home/office organizing store chain and featured leader on the Real Leadership Series blog, says this about his company’s attitude toward employees:

The average retailer embarrassingly enough only invests eight hours in each first-year employee and we invest 272 formal hours of training with each first-year employee.

In the following CBS News video he describes his company's key values such as “conscious capitalism”:

 

This kind of “doing good” inside and outside the organization, is what Michael E. Porter and Mark R. Kramer call “shared value”.  They explain “shared value” in this way:

The concept of shared value can be defined as policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates. Shared value creation focuses on identifying and expanding the connections between societal and economic progress.

Another organization that makes “shared value” part of its operating principles is SSM Healthcare, the St. Louis based health care system that has 22,000 employees, 5,800 physicians and nearly 3,900 volunteers. It was the first health-care recipient of the Malcolm Baldrige Award for continuous quality improvement. SSM’s mission is to deliver “exceptional patient care (clinical outcomes, safety, satisfaction), exceptional commitment (from employees and physicians), and exceptional financial performance/growth.” The organization has been recognized by Case Western Reserve University’s World Inquiry’s Innovation Bank for innovations that contribute to both societal and business benefit. In the case of SSM, the innovation is a “School at Work” program developed by Catalyst Learning Company to prepare entry-level workers for advancement and further learning. SSM attributes its success to how it treats its employees, physicians, and patients.

Maybe an organization can survive for a time (even a long time) without caring deeply for its internal and external customers, but it won’t be a satisfying environment in which to work, employee engagement will be minimal, and it will not be sustainable. Any organization, whether for-profit  or nonprofit, needs to decide for itself whether its mission is doing well, doing well and doing good, or doing well by doing good.

 

Competition vs. Collaboration

In many organizations today we need less competition and more collaboration. Ron Ashkenas makes this case in a blog post for HBR titled, Learning Not to Compete. He gives examples of organizations in which collaboration, not competition, has become the way to success. He writes:

As organizations have become more global and more reliant on cross-functional processes, teamwork and collaboration are increasingly becoming the currency of success. Organizations can't operate effectively unless people share information, work together to solve problems, and help each other get the job done. So instead of competing with colleagues in other functions, more often than not we need to be cheering them on, supporting them, and actively helping them to flourish professionally. 

Ashkenas writes that the tendency towards competition is hard to change because it begins with our earliest family experiences competing with  siblings for our parents' "attention". What he calls "attention", I would call "love".  And I think the need for "love" goes for organizations as well as families, especially organizations that are run like families. Employees want their bosses and CEOs to respect and care deeply about them. They want to hear the words and see the actions from their leaders that proves this is true. So they continue to compete. 

This learned need to compete is very hard to undo. Some would say that we compete in organizations because of departmental silos (e.g., administration, finance, R&D, operations, sales, marketing, and HR). I would say that we create departmental silos because we have a need to compete. In either case, we need to find ways to break down these silos and collaborate more and compete less. Ashkenas offers some suggestions.

 

 

The Leader Effect

As leaders, we often don’t realize (or choose to ignore) the effect that we have on people in our organizations. Our actions and inactions almost invariably have unintended consequences. Bernie Donkerbrook, writing in the Center for Creative Leadership’s July 2011 newsletter, makes this point:

Everything you do (or do not do) is observed, analyzed and discussed by your people. What you talk about, include on an agenda and get personally involved with - as well as what you choose to avoid or delegate — sends powerful messages. Your employees then draw conclusions and implications about "what it meant" — whether you meant it that way or not!

Everyting a leader does has an effect on others, often unintended. When I do assessments of organizational culture or employee engagement, I find that employee attitudes toward their organizations are heavily affected by the stories they tell themselves about top leaders. I hear comments such as,

• “He meets with Sally’s department a lot but rarely comes and talks to us; Sally must have the inside track for promotion.”
• “I sent Bill an email about the problem and he didn’t respond; I guess he doesn’t want to do anything about it.”
• “They haven’t filled the director’s position; my department must not be a high priority in this organization.”

According to Donkerbrook, three aspects of leader behavior affect the attitudes of employees: 1) what they say; 2) what they do; and 3) what they pay attention to. See his model.

Of course, managers can never fully know how every behavior is interpreted… or misinterpreted. However, we need to be sensitive to our actions and constantly be checking on their impact. I find this is to be especially true for email and text messages. Receivers of these messages are looking at what is written and what is missing and, like a Rorschach test, read into the statements whatever emotion and meaning they want to project onto those words. Leaders need to choose their e-words carefully and not assume that the reader is going to hear the emotion (joy, appreciation, frustration, anger, etc.) or absence of emotion that they are trying to convey.

Donkerbrook’s article reminds me of the Zulu concept of “Ubuntu”, which I learned in a workshop on diversity that I was evaluating. One meaning of this term is to acknowledge the existence and humanity of another person. If a manager doesn’t greet someone who is in proximity or doesn’t show caring and compassion for that employee or simply looks away, that employee will feel diminished by the communication. We all need to feel respected by our leaders. Leaders must find ways to show respect for everyone in the organization, from front-line hourly workers to top-level executives. Otherwise, employees will tell themselves stories about leaders that may or may not be true.