Oh no—it’s the end of the year —now I will have to do performance reviews

Leslie A. Weatherly, SPHR, (2004) Getting It Right From the Start, Retrieved June 4, 2004, from www.shrm.org.

How do I manage performance?

Increasingly companies are analyzing ways to improve organizational and individual performance.A recent article written by Leslie A. Weatherly on performance management analyzed four recent studies on performance management and concluded the following concepts.

Performance Management—Critical Success Factors

• Mirror your corporate culture and values. Ensure that the core values and beliefs important to your organization are fully integrated into your PERFORMANCE APPRISAL SYSTEM.
• Design development and planning phase. Make provisions for executive involvement by having visible CEO/owner and senior management support from the outset.
• Focus on the right company performance measures. Agree as a team on those “vital few” measures (the core 10 to 20) that will give your organization a clear line of sight and the highest degree of confidence it needs to determine how well it is doing in relation to major goal achievement.
• Link job descriptions to the PERFORMANCE APPRISAL SYSTEM. Ensure that your employees can see the direct relationship between the job competencies they are required to bring to the job, their job descriptions, and the goals and objectives targeted in their performance plan.
• Differentiate performance fairly and objectively. The ability to differentiate performance is critical. Performance differentiation requires the appraiser to acknowledge that there will, in all likelihood, be gradations of employee performance.
• Train managers in performance management. Make an upfront investment in training to ensure that managers have the skill sets required to participate fully in the PERFORMANCE APPRISAL SYSTEM planning process. This should include all members of line management to ensure that everyone is on the same page, is speaking the same language, and are using the same tools and techniques.
• Link compensation to the PERFORMANCE APPRISAL SYSTEM. According to a USC study, the relationship between rewards system practices and performance appraisal effectiveness is strong for all performance management items. The study found, however, that the strongest relationship item is appraisal results and salary increases. “Apparently, tying the results of performance appraisals to financial rewards does lead to the performance appraisal system being effective. The finding that effectiveness is higher when rewards are tied to appraisal results is important, because it contradicts the frequently made argument that appraisals are more effective when they are not tied to financial rewards.”⁹
• Differentiate linkage to total rewards system. If there is a secondary or tertiary total rewards component to your PERFORMANCE APPRISAL SYSTEM, it is imperative that this aspect of the plan be communicated and linked effectively right from the start. To be effective, reward programs must be aligned with performance, must be communicated and must be understood to have a motivational effect.
• Hold managers accountable for the communication process. Although communication is everyone’s job, ultimately someone must be responsible. Require managers to actively search out, offer and acquire performance feedback on a regular basis.
• Set clear expectations for employee development. Employee development will be crucial to the success of the PERFORMANCE APPRISAL SYSTEM. As such, it is not unusual for organizations to establish a required minimum number of employee development hours per annum per employee to facilitate this process.
• Track effectiveness of PERFORMANCE APPRISAL SYSTEM. The system should be structured to ensure that company and employee performance goal alignment can be confirmed at any point in the performance management cycle, and the probability of meeting targeted performance objectives can be calculated. This will permit confirmation of cost management and ROI goals and objectives, which should be preset throughout the reporting cycle.
• Adjust the PERFORMANCE APPRISAL SYSTEM as required. Based on the results of the periodic analysis of the company PERFORMANCE APPRISAL SYSTEM, the system measures (“vital few”) should be adjusted for each requisite reporting period. This information must be communicated back, in turn, to line management in a timely manner.

How do we do that?

• Graphic Rating Scales (GRS). GRS lists a number of factors, including general behaviors and characteristics (such as attendance, dependability, quality of work, quantity of work, and relationships with people) on which an employee is rated by the supervisor. Supervisors rate individuals on each factor, using a scale that typically has three to five gradations (e.g., unsatisfactory, marginal, satisfactory, highly satisfactory, outstanding). Thus, the system allows the rater to mark the performance of an employee on a continuum. Because of its simplicity, graphic rating scales tend to be one of the most frequently used forms of performance appraisal.
• Ranking. Ranking consists of listing all employees from highest to lowest in order of performance. The primary drawback of the ranking method is that the extent of the differences in performance among the individuals is generally not well defined. Points may be assigned to indicate the size of the gap to overcome this drawback.
• Forced Distribution. In forced distribution, the ratings of the employees in a particular group are disbursed along a normal bell-shaped curve. The supervisor would apply a certain percentage of the ratings within his or her group to each performance level on the scale, based on the number of employees within his or her group. In order for this method to be fair and equitable, it must assume that the widely known bellshaped curve exists in a given group in relation to job performance. As a general rule, the spread of performance appraisal ratings does not typically resemble the normal distribution of the bell-shaped curve. Instead, 60% to 70% of the workforce of an organization rates in the top two performance levels. While this pattern could reflect above average to exceptional performance on the part of many employees, it could also reflect leniency bias, i.e., a tendency by the supervisor to rate at the high end of the rating scale.
• Behaviorally Anchored Rating Scales (BARS). BARS attempts to assess an employee’s behaviors instead of characteristics. Descriptions of possible behaviors are matched against those that the employee most commonly exhibits. The assessment tool contains sets of specific behaviors that represent gradations of performance used as common reference points or anchors for rating employees on various job dimensions. Developing a BARS assessment tool is expensive and time-consuming. It is based on extensive job analysis and the collection of critical incidents (examples of very good and bad performance information) for a particular job.
• 360-Degree Feedback. 360-degree feedback is the process of collecting perceptions about a person’s behavior and the impact of that behavior in the workplace from that person’s work associates. These individuals typically include an employee’s supervisor and other members of line management, direct reports, fellow co-workers, internal and external customers, and vendors and suppliers. Other names for 360-degree feedback are multirater feedback, multisource feedback and group performance review. This form of assessment is favored, in particular, for employee development purposes.

Management by Objectives (MBO). MBO is a process through which goals are set collaboratively for the organization as a whole, various departments and/or subfunctions, and each individual member. With MBO, individuals are evaluated, usually annually (although interim meetings to certify progress are recommended), on the basis of how well they have achieved the results specified by the goals. MBO, or goal setting, is particularly applicable to nonroutine jobs, such as those of managers, project leaders and individual contributors

Periodically Assess the Performance Appraisal System
An annual audit of your PERFORMANCE APPRISAL SYSTEM should be performed to ensure that it is aligned with its culture and business strategy. OnCallPSN can assist in the processing by evaluating the following examples of categories. Our PERFORMANCE APPRISAL SYSTEM reflects our company’s mission and values; it reflects our desired company culture.

• Does our PERFORMANCE APPRISAL SYSTEM have the full commitment and active participation of our CEO and senior management team?
• Is our business strategy clear, including our key business drivers and the metrics used to track them (e.g., financial, operational, employee engagement, customer and client)?
• Do our managers understand how to cascade our company goals down through the organization to ensure that they are effectively linked to individual employee goals?
• Are individual goals are truly linked to our business drivers, and effective two-way communication links are clearly established?
• Does our performance appraisal process distinguishes between observable behavioral dimensions and the frequency of those behaviors (examples: appraisals based on core competencies or the mastery of certain behaviors)?
• Does Our PERFORMANCE APPRISAL SYSTEM incorporate feedback from multiple sources (e.g., 360-degree feedback and/or another form of multirater feedback)?
• Does our PERFORMANCE APPRISAL SYSTEM outlines clear standards of performance and rewards eligibility for high performers, solid performers and marginal performers in the following scenarios:
  • Merit increases.
  • Annual incentives.
  • Long-term incentives.
  • Discretionary incentives.
• Does our PERFORMANCE APPRISAL SYSTEM provides an ongoing comprehensive training program for:
  • Managers conducting performance appraisals.
  • Individuals being appraised.
• Does our PERFORMANCE APPRISAL SYSTEM provide additional support services for professional and career development to managers and employees?
• Does our existing technology supports our PERFORMANCE APPRISAL SYSTEM objectives as designed (i.e., in accordance with system requirements) to include:
  • The various raters and reviewers we wish to involve in the process.
  • The capture of information throughout the performance cycle (including planning, forecasting, progress review, end-of-year evaluation).
  • Sharing data across HR and other business applications (including pay, learning and development, workforce, and succession planning).
  • Providing the necessary level of data security and archiving.
• Is our PERFORMANCE APPRISAL SYSTEM capable of real-time analysis of performance data to identify trends in relation to:
  • Performance differentiation.
  • Pay differentiation.
  • Performance gaps/developmental needs.

Upon completion of the self-assessment, you should have a good starting point to begin to weigh the strengths and weaknesses of your PERFORMANCE APPRISAL SYSTEM.

OnCallPSN can help you improve your PERFORMANCE APPRISAL SYSTEM.For assistance contact Tom Theard Principal Advisor 260-407-1713.

FOOTNOTES BIBLIOGRAPHY

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