Performance Management – Debate and Opinions

This is the first in a series of articles dealing with Performance Management (and more precisely my real interest in Performance Improvement).

This article is structured in the form of a debate that is intended to engage and challenge existing positions and thought patterns. Listed below are four propositions and the Agree and Disagree positions for each proposition.  Included is my position on each Proposition, and I welcome and look forward to hearing which side of the Propositions you support.

Proposition 1:  The once or twice per year performance review does nothing to improve personal performance.

  • Agree: The primary benefit of the annual performance review is to provide a document for the files.  The annual performance review does virtually nothing to engage the employee nor spur an employee’s performance.  The main practice that really drives personal performance is the daily or weekly one-on-one meeting with your manager, management team, and/or internal or external customer.
  • Disagree: The annual performance review meeting and appraisal document are important opportunities to provide feedback that results in significantly improved future performance.  It is also the main opportunity to make sure the employee’s activities are aligned with corporate goals.  Setting goals is a key part of achieving excellent performance.

My view: Even though the proposition is stated in the extreme (i.e. “does nothing to improve…”), I do come down closer to the Agree position.  Setting goals is valuable, but by far the main driver of personal performance is the quality of the relationship and dialog with your manager / customer.  The value of the annual written appraisal is just that it forces the manager to have a conversation and a document in the files.  While it is true that suggestions made during the annual review are treated more seriously than at other times, there are many more opportunities for positive or corrective feedback during the year.  An iterative process of reminders and repetition can drive improvements in personal performance that stick.

Proposition 2:  The dominant driver of organization performance is hiring the right people.

  • Agree: People perform because of who they are, their competencies, and their personal motivations.  Systematic approaches to improving performance lead to only marginal improvements in actual performance.  If you really look at it, people’s day-to-day performance levels do not really change that much.
  • Disagree: Employees can be developed.  Good management practices and training can turn marginal employees into stars.

My view: I go with the Agree position.  Training is useful for providing knowledge and can contribute to some improvement in skills, but will not turn marginal performers into stars.  Bad management practices can certainly drive down personal performance, but I do not believe the opposite is true.  Managers have a disproportionate influence on overall organization performance which is why managerial hires are particularly critical and why systems that reinforce good management practices are so important to the enterprise.

Proposition 3:  Pay-for-performance schemes do not really affect an organization’s performance.

  • Agree: Employees are going to perform at whatever level they can, with or without rating and ranking schemes tied to compensation and bonuses.  Pay-for-performance schemes are simply a means to rationalize pay discrepancies and minimize complaints.  Employees mostly just learn to “game” the system to maximize their pay.
  • Disagree: Money is a real motivator of improved performance.  If employees see an opportunity to make more money, they will excel to get it.

My view: I will take the Agree position again.  Except for sales people and other employees whose pay is largely based on commissions, pay differentials do not motivate better personal performance, i.e. people do not work harder-better-longer to make a 6% raise instead of a 4% raise in base pay.  Bonuses can drive some improvement in personal performance, but only if the potential amount of the bonus is significant and known in advance (i.e. more like a commission scheme).  To press the point, I do not think I have ever seen or experienced a real “pay-for-performance” system (i.e. one that awards significant increases [>=10%] to top performers and no increase for those contributing significantly less).  Human beings are notoriously “relative” – a 5% increase can be good or bad depending on what others are getting.

Proposition 4:  Performance management software systems have little effect on the organization’s performance.

  • Agree: Like virtually all other software tools, performance management software is mostly about recording and reporting what has happened in the past.  They have virtually no effect on actually driving performance improvements going forward.
  • Disagree: Systems can be powerful organization development interventions that can stimulate improved practices and behaviors on the part of managers and employees that have substantial effect on overall performance.

My view: As a software vendor myself, it will be no surprise that I take the Disagree position.  Well-designed systems can do a lot more than just record events and report history.  Over and above the productivity gains and analysis systems provide, interactive systems used by managers and employees enable, nay, require, certain actions by the user to advance the process.  The system designer who is attentive to the power of systems to influence behavior deliberately supports certain entries and avoids others.  Policies and desired practices are embedded in the software.  Using the software “trains” users, and thereby instantiates individual behaviors which can have a substantial impact on organization performance.  Systems that require repetitive interaction can even contribute to the “softer” sides of management that cover trust, accountability, transparency, and the quality of the dialog between managers and their staff. 

What’s your viewpoint on these 4 propositions?  Future articles will propose some ideas for next generation systems that actually improve performance.

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