Performance Management Design

Introduction

“People, not companies, innovate, make decisions, develop and produce new products, penetrate new markets, and serve customers…” (Lam, 2014)

In the recent past, the role of Human Resources (HR) has had a “beleaguered reputation”, as per Ulrich (1998) due to the historical role of “playing policy police and regulatory watchdog”. Conversely, the Human Resources role of today is occupying an ever-increasing part in aligning organizational strategic initiatives to that of its most unique resource: human capital.

Performance Management (PM) is more comprehensive than just performance appraisals as PM “underlines reviewing performance with a view to furthering performance improvements and employee development” (Lam, 2014) in order to help improve and develop the human assets of the organization. Performance Appraisals (PA) are still a very important component of PM, but PM “takes a more holistic approach in managing performance”. (Lam, 2014) Performance Management, at its heart, recognizes that “companies compete with their brains as well as their brawn”. (Haynes, Serpa, & Hitt, 2010)

PM Practises at a Past Employer

Through various annual shareholder messages, XyC promoted diversity, career advancement, and teamwork as key human components for strategic competitive advantage. Human Resource policies were unclearly aligned with supporting these initiatives and the application through to practices was in their early stages. This was likely due to the historical endorsement of decentralized business units, each with discrete cultures that have since been reorganized at an enterprise level to better align systems and synergies between all business units. Because of this, the practices of each business unit under the umbrella divisions all had their own variant of the implementation plan and procedure.

XyC HR policies pointed to a vision that believes a diverse workforce is a basis for success and that innovation came from various perspectives of different cultures, genders, and races coalesced with teamwork. The division's take on diversity seems to place larger importance on the diversity of members; “relating to differences in personality, life experiences, value systems and views and approaches to work”. (Lam, 2014) Nevertheless, there did not appear to be any formal system in place for tracking diversity outside of the five-year Long Range Planning (LRP) to prepare for the conceivable loss of human capital due to retirements and succession planning. Although Leadership Development and building a talent pipeline were regular ‘lip service’ colloquies at management meetings, there was no veritable system to make sure this gap was being addressed outside of the ‘shoot from the hip’ approach of shuffling people around to appease shorter-term business objectives.

In addition and related to diversity, XyC also encouraged promoting employee development; offering advancement opportunities through the recognition of talents and individual contributions. Although there was regular mention of the need for developing talent and filling impending gaps, a well-documented and understood process remained in the development phase. It was also hazy how bonuses, merit pay, and performance recognition were coupled and weighted to the numerous contracts such as Performance Appraisals, Individual Development Plan (IDP), and Performance and Objectives (P & O’s) along with how each of these contracts correlated to each other. The intentions were moving towards a synergy of common competencies, ratings, and timing which will allow smoother lateral talent deployment and development opportunities when vertical opportunities are not available. Organizations require financial capital to flourish plus human capital and “without a clear training and development program, employees may not recognize their value to the organization.” (Lam, 2014)

XyC was an advocate that experience is the best teacher. Through the Performance Appraisal and Individual Development Plan, they urged that seventy percent of training should consist of on-the-job assignments. This is not surprising as Greer, (Lam, 2014) reports that “most development experiences occur on the job or through mentoring”. XyC did also offer Leadership Development programs for high potentials but these opportunities were oddly restricted to individuals under forty years of age.

In view of Human Resources Management (HRM), XyC did promote inclusiveness and encouraged this across various business units along with a diverse range of talents. Employee Engagement was strong through good work design, commitment to employees, and growing systems to retain talent. Knowledge was sponsored via teamwork and collaboration with conference calls being a regular part of everyone's day. However, knowledge sharing and retention systems were near nonexistent. At best, Salesforce.com had been very slowly adopted over the past seven years with modest traction. Without this stored knowledge, how is the next new employee expected to know customer history and details? Workforce Optimization through hiring decisions and effective systems appeared weak. HR involvement was minimal and left to unit managers’ discretion. PA and PM practices were in use in different forms but only recently had an attempt been made at a standardized process. Learning Capacity through the use of automated systems is also near non-existent.

Due to limited systems and practices in the areas of diversity and career planning, it was hard to calculate the impact on other areas of Human Resources. However, a negative impact hypothesis was likely by reason of not being able to maintain consistent and stable systems for workflow, talent retention planning, team, and individual growth planning, and rewards management. As identified by Spitzer (1996, p. 48) “it is better to focus rewards on the critical few behaviors and results, rather than diluting them by rewarding the trivial many” therefore a new (2013) Performance Appraisal form, that was simplified for goal planning was a welcomed addition. But, while theory promotes the application of simplified and narrowed focus measures, the practical application seems to add great amounts of complexity by trying to adapt to everyone’s needs and unique situations instead of applying a holistic view. An example of this added complexity would be the recent addition of ninety technical competency requirements for the onboarding staff in technical sales roles. These competencies were far too numerous and only address Functional Competencies while missing Personal and Fundamental Competencies. (Gangani, McLean, & Braden, 2006, p. 136)

Effectiveness of PM at XyC

While Furnham, (2004, p. 88) does not see any evidence that links Performance Management Systems (PMS) to organizational effectiveness, the adoption of Performance Appraisals and the broader Performance Management is intensifying. Schein (Lam, 2014, p. 32) identifies ten mechanisms to establish a culture. Role modeling and Coaching, What leaders pay attention to, and Leader reactions to critical events are the most important in sending messages to the organization. If a PM system is to be effectively implemented, leaders must therefore invest in a system beyond PA forms that has a robust design and implementation strategy. System maintenance should also be financially “supported through time, effort, and money”. (Furnham, 2004, p. 90) The problematic gaps in the PM system include training needs, assumptions on career growth, alignment with corporate objectives, teamwork, and the applicability to diverse cultures.

Because appraisals and ongoing feedback are a skill, training is a primary task in PM development. The American Management Association (AMA) found that Coaching Skills were the number one critical item for the development needs of leaders. (2005, p. 27) One of the challenges with training individuals relates to the diversity of people's backgrounds and influences and therefore their perceptions. Amar (2004, p. 90) states that there is quite a visible dichotomy between established theory and the application of motivation in knowledge organizations. Therefore, evaluators will require theory and application training to understand their own biases and requirements for routinization of ongoing feedback with regularly updated goals that are “also clearly documented”. (Campany, Dubinsky, Druskat, Mangino, & Flynn, 2007, p. 182)

One vast challenge will be the cultural resistance to change. As noted by Furnham (2004, p. 87), Performance Management Systems “typically offer few rewards and many penalties for doing appraisals” further fueling resistance.

Similar to the training methodology of Army recruits engaged in basic training, effective change management will require three steps. (Lam, 2014) They are; unfreezing mechanisms, changing behaviors for new competencies, and then refreezing through routinization. This change management will require a transformational style of leadership as opposed to the historical, yet still commonly practiced authoritarian types of leadership.

Another gap with Performance Management is that it makes the assumption that every individual desires career growth. Whereas it might be valid that individuals seek a higher level of self-actualization need, (Lam, 2014) Performance Management does not appear to consider that some people prefer to be directed and hence, do not mind having an autocratic leader. (Lam, 2014) With today’s flatter organizations, vertical advancement opportunities are limited. Amar (2004, p. 95) proposes replacing vertical mobility with lateral assignments since “candidates want opportunities to participate in assignments that are not directly related to their current job”. However, lateral opportunity deployment may be limited to very large enterprises that could accommodate without losing talent.

Lam (2014) states that organizations should have a clear mission that gives employees an understanding and appreciation that they play an important role in achieving that mission. Performance Management helps leaders in the process of persuading staff in the process of facilitation toward agreement and understanding (Lam, 2014) of what needs to be done to achieve the organizational goals. Greer (Lam, 2014) suggests that while selecting an appropriate measurement approach is important, it is crucial to obtain employee buy-in because a Performance Management system can only function effectively if its purpose is understood and well supported. So, through the use of Management by Objectives (MBO), leaders can utilize Goal Setting Theory to cooperatively develop goals (Lam, 2014) that align with organizational and business unit objectives and signal “the commitment to a partnership rather than a unilateral arrangement”. (Lam, 2014) However, Hitt (Haynes, Serpa, & Hitt, 2010, p. 443) cautions that alignment to business goals requires system checks and balances “against hubris, greed, short-term focus, and ethical concerns”.

The third gap in Performance Management and Performance Appraisals is the focus on the individual subordinate and rater instead of a team approach. “Teams, not individuals, are the fundamental learning unit in modern organizations.” (Lam, 2014) Since the modern team can comprise virtual bosses exercising influence without authority, it is questionable if one boss has the oversight to recommend beneficial feedback; hence, multiple rater feedback might be required. Virtual teams at XyC were commonplace as they helped “overcome distance, time and space constraints” and are “economical and convenient”. (Lam, 2014, p. 98) AMA (2005, p. 21) also recognizes the need for E-Leaders who are adept at new technologies and can easily and quickly make connections as well as take advantage of diversity and ability to “think global, act locally” (Malhortra, Majchrzak, & Rosen, p. 68)

The fourth gap questions Performance Management Systems' applicability to other cultures, locally and internationally. Adler (1997) has shown variations between cultures' Power Distance and Individualism / Collectiveness, Uncertainty Avoidance, and Career Success / Quality of Life. He further notes the tendency that universalistic cultures to rely on contracts (such as PAs) whereas particularistic cultures rely more on their personal relationship to maintain commitment. As American firms emphasize career success, will this have near the same level of importance and appreciation with increased cultural diversification?  

Blanchard and Stoner (Lam, 2014, p. 72) reveal that world-class organizations are trained and equipped to focus on the implementation of an agreed-upon vision. Performance Management is one tool to help accomplish this goal through the alignment of human capital with organizational interests. Utilizing the four Cs (Lam, 2014, p. 17) to evaluate overall Human Resources effectiveness, Performance Management is promising as it allows for a larger focus than simply short-term ROI financial measurables such as Cost-Effectiveness. PM utilizes supplementary references for consideration such as worker commitment, engagement, and citizenship behavior. Decisions that could negatively affect organizational competence through loss of knowledge and skills become part of a broader discussion than mere financial cost-benefit analysis (CBA).

Suggested Changes for XyC

Some recommended changes in order to enhance the effectiveness of the Performance Management system are the implementation of a chronological sequencing of events, the inclusion of team development tools, and provisions of a simplified user interface. Fig. 1 (Bosch Canada, 2012) provides an example of a Performance Management implementation strategy that has well-timed visual chronological sequencing of the various activities. This is further supported by an automated system managed by Human Resources that provides a system for ongoing feedback mechanisms throughout the year promoting regular proactive adjustments to goals as well as regular recognition.

(Robert Bosch, 2012) Fig.1

With a growing trend toward team development and virtual teams, Performance Management systems need to incorporate a component for multi-rater feedback similar to elements of 360° feedback. Given that “without feedback, a group can change but cannot learn” (London & Sessa, 2006, p. 305) components of PM should incorporate team feedback. Organizations should also consider if and how merit pay is tied to any of the PM tools such as Annual Performance Evaluations. If there are financial ties based on team activities then consideration should be given to promoting behaviors conducive to team growth. Long-term projects should include measurables based on project stage/gates instead of completing objectives to keep eliminating annual spillover and demotivation. After every team and member have goals that align with the business unit “HR could then develop practices to cue and reinforce role behaviors. (Schuler, 1992, p. 92)

To help improve organizational participation and adoption rates of PM, serious efforts should be made to keep the tools holistic as well as simple. “Retrieval and updating of information need to be simple”. (Lam, 2014, p. 19) Forms and processes with overlapping redundancies should be merged or eliminated to eradicate non-value-added activities. Regardless, if using a Microsoft-style document or accessing an online format, training beyond the process will be required.

Luddite adoption rates will significantly increase if already mundane tasks are honed towards extremely simple usability.

Key recommendations for XyC include the standardization and routinization of Performance Management tools with a bias toward a holistic Performance Appraisal system as well as Team Development Tools. “Unless teams can learn, the organization cannot learn.” (Lam, 2014, p. 100) Team Development tools should incorporate After Action Reviews (AARs) or Lessons Learnt templates that become part of the Performance Management process, assessable to all for knowledge sharing, and practiced regularly as part of every project stage/gate. This style of team records will increase knowledge accessibility and organizational learning capacity. Corporate Enterprise strategies should include criteria for system implementation and maintenance that transcends decentralized business units. Constraints such as resource allocation, capital requirements, and management costs should be reviewed against tangible and intangible ROI factors. The senior-level agreement should also be reached on actions to be taken for individuals who refuse to adapt and evolve to corporate initiative changes; beyond training, this might include remedial action followed by dismissal.

Conclusion

Performance Management allows organizations to raise the bar through the identification and reinforcement of behaviors that lead to top performance. (Gangani, McLean, & Braden, 2006, p. 130) Lam (2014, p. 183) writes that while the performance appraisal form has been the main tool for achieving these new objectives of viewing people as assets, it is only a part of Performance Management that aims to foster a culture of cooperation and partnership between management and employees. With Human Resources as a strategic executive partner, transformational organizations will be able to align people to organizational goals through Performance Management practices in order to “motivate and inspire individuals to cause dramatic and useful change”. (Schuler, 1992) Organizational capabilities such as “speed, responsiveness, agility, learning capacity, and employee competence” (Ulrich, 1998) will grow from Performance Management and Human Resource Management roles to aid in the corporate competitive advantage of today and tomorrow's successful progressive winning companies.

APPENDIX:

• AAR = After Action Review
• CBA = Cost Benefit Analysis
• XyC - Fictional Corporation Name
• HR = Human Resources
• HRM = Human Resource Management
• LRP = Long Range Planning
• MBO = Management By Objectives
• PA = Performance Appraisal
• PM = Performance Management
• PMS = Performance Management System
• ROI = Return on Investment

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