There are a lot of claims about what determines success in an organization. Some assert that managerial communication is key, other say it is the drive for results, and still others say it’s driven by innovation.1 Taken as a whole, regardless of the claim, success lies in individual performance – whether individuals are communicating, producing results, or innovating, it is people that are driving the system. A well designed and implemented Performance Management System (PM System) will help enhance this vital individual performance.
So how do you ensure that your PM System works well and actually enhances individual performance? You could order a few of the 46,152 books on performance management from Amazon.com, or you could read a few of the nearly 5,000 scholarly articles on the subject. Either way, make sure you pick the right ones – which will require you sifting through hundreds of reviews, abstracts, recommendations, and… feeling unmotivated yet? Not to worry, you can forego the headache by reading on. This article contains the Top 10 critical factors in an effective PM System. The following recommendations can serve as a baseline and a measure for where your system is now, and can also serve as a guide for becoming even more effective.
1. Start with Strategy.
Your PM System is the tool for putting your organization’s strategy into action.2 It should make clear how each employee is directly contributing to the overall goals of the company. Having one overarching purpose and aim is more likely to lead to buy-in and goal achievement than lots of unconnected individual goals,3 so a good PM System will link all of the objectives back to the strategy. Starting with the strategy is also helpful when rating people and giving feedback. It allows you to focus on what areas of development are most important for the business strategy – if there is a discrepancy between the strategy and what an employee is being assessed on, the feedback is more likely to be seen as unfair, and your people are more likely to be unhappy with the system.4 But, if you start with strategy, it is natural for people to work on those items because they are behaviors directly tied to the business objectives.
2. Involve Employees.
If you’re just starting off, or are re-vamping an old system, involving job incumbents in the process of creating and implementing a PM System is going to produce significantly better results than a “tell-and-sell strategy.”5 All the worry and effort to get “buy-in” can be eliminated by bringing your employees in on the process and taking their suggestions and feedback seriously. The people doing the actual work of the company have hands on experience with the kinds of things that truly drive performance on the ground.
In fact, participation in the process is related to motivation and to actually improving performance.6 Involve staff in the selection of your PM materials and not only will you get increased motivation, employees will likely see the system as more fair and equitable as a whole, decrease resistance, and increase satisfaction. 7
3. Make it a Contract.
In spite of the economic times, people are not staying with organizations like they used to. The fifty-year veteran “company man” is a thing of the past, largely because pension and retirement are no longer a guarantee. There is emerging evidence that employees sense a new psychological contract between themselves and their employers: people will stay and add benefit to the company as long as the company adds benefit to them.8 Individual workers want to know, “If I promise to complete certain behaviors, what behaviors will you promise?” Because of this psychological contract, it is important that a PM System be seen as a contract between employee and employer, and if there is disagreement, just as in true contractual arrangements, there must be space for the employee to formally present his or her thoughts and appeals.9 Setting up your PM System as an agreement between employee and employer, with stakeholder input, will help even more to drive individual performance.
4. Measure true Behaviors.
Personality traits, as opposed to behaviors, are not under the control of the individual, and being measured and assessed on traits may make the system unfair because you’re asking employees to change something they can’t actually change.10 If you use competencies, define them behaviorally as well. What behaviors can be physically viewed and recorded by a supervisor? When the supervisors rate them, they should also be using scale anchored by behavioral examples.11 Someone will always try to contest their score because “my manager and I just don’t get along.” Mitigate these biases by making sure to measure true behaviors with an effective scale.12
5. Mix in some Behaviors with your Production Measures
Production measures emphasize things like results and output, and may seem easier and more straightforward to work with than judgmental measures, but this is not always the case. “Objective” production measures have a low test-retest reliability and are vulnerable to grievance.13 They are especially unreliable in highly complex jobs, likely because results-only measures don’t focus on the behaviors necessary to obtain those results.14 Mixing in some behavioral measurements will help get the most accurate measure of performance.
6. Measure Accurately.
When supervisors rate for the purpose of administration (which they do in performance management), they tend to be more lenient and less accurate with their ratings.15 The good news is that rater training can increase accuracy as well as satisfaction with the system.16 Offering Frame of Reference (FOR) training for your managers may be your best solution to overcoming rating error.17 Calibration meetings between managers can also decrease some of this leniency when a manager has to justify his or her rating in front of a group of peers.18 Finally, for the best accuracy, don’t use a huge scale to measure behaviors – keep the options to somewhere between 5 and 9. Any more or less will significantly decrease reliability and accuracy.19
7. Reward the Behaviors You Want to See.
This may sound obvious, but all too many organizations say they want teamwork but reward individual effort; they say they want candid feedback but reward conformity.20 People do what they’re rewarded for – they will devote more time to and work harder toward goals that are rewarded.21 In your PM System, it is imperative to reward what is being measured. Managers are less likely to reward high performance (and reinforce those desired behaviors) if the rewards aren’t tied to what is actually measured.22 Reward what you want to continue, and be aware of undesirable behavior that is inadvertently being rewarded.
8. Provide effective Feedback.
Giving feedback, especially when it’s addressing poor performance, can be emotionally charged and very personal. We all have a self-serving attribution bias – naturally, we like to attribute positive events to internal reasons (it’s because I’m so smart) and negative events to external causes (it’s because I have a bad boss).23 This bias makes it tough to give feedback, yet it’s still important. The best feedback is actionable – something the individual can do something about.24 This way, even if the negative situation really was the boss’s fault, the employee can still do something about it. Provide ideas for what to do after the feedback by giving a list of next steps to take, or coaching for improvements.25 This will help you get the most out of your PM System.
9. Be Fair.
Even though we tell our kids that “life’s not fair,” it seems that fairness tends to win out. When PM Systems are taken to court, the overwhelming majority of court decisions come down on the side of fairness.26 Unfortunately, validity and reliability are second to what the court deems fair and equitable. To avoid litigation, it is best to view performance appraisal as a “test” that must comply with the Uniform Guidelines on Employee Selection Procedures (1978). The PM System should be objective and based on the job analysis that was done for your selection tests.27 Measure consistently, measure what you select on, and assess job-related factors; if you’re measuring something completely different, you might face legal trouble in the future. In addition, most of the guidelines above impact perceptions of fairness, so to the extent that you implement them you will increase your chances of having a fair system.
10. Be Practical.
A characteristic of the most effective HR interventions is that they are useful, effective, and simple.28 Practicality is a key in implementing an effective PM System.29 The downfall of many unsuccessful interventions is that they are cumbersome, long, and impractical. Systems where the costs outweigh the benefits are likely to fail, as well as systems that have high costs in terms of supervisor and employee time. A PM System that is clear, simple, and practical will be of the most benefit to both your organization and the people within.30
The reality is that no matter what you do, there will always be some employees who won’t like what you do. And thanks to the fundamental attribution bias, everyone will assume that they are above average performers anyway.31 Nevertheless, implementing these Top 10 critical factors can help you create a system that the majority of people are going to appreciate and truly benefit from. There are, of course, other details to consider beyond these ten recommendations, so go out and read what you need to read and gather the information you need to gather, just don’t forget, Performance Management is about the people doing the work – make it work for them.
If you have more questions about effective performance management systems feel free to call one of Ergometrics’ consultants at 425-774-5700.
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5 Kleingeld, A., Van Tuijl, H., & Algera, J. A. (2004). Participation in the design of performance management systems: A quasi-experimental field study. Journal of Organizational Behavior, 25, 831-851. doi: 10.1002/job.266
6 Cawley, B. D., Keeping, L. M., & Levy, P. E. (1998). Participation in the performance appraisal process and employee reactions: A meta-analytic review of field investigations. Journal of Applied Psychology, 83, 615-633. doi: 10.1037/0021-9010.83.4.615
7 Beer, M., Ruh, R., Dawson, J. A., McCAA, B. B., & Kavanagh, M. J. (1978). A performance management system: Research, design, introduction and evaluation. Personnel Psychology, 31, 505-535. doi: 10.1111/j.1744-6570.1978.tb00460.x
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17 Woehr, D. J., & Huffcutt, A. I. (1994). Rater training for performance appraisal: A quantitative review. Journal of Occupational and Organizational Psychology, 67, 189-205.
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19 Landy & Farr, 1980
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23 Mezulis, A. H., Abramson, L. Y., Hyde, J. S., & Hankin, B. L. (2004). Is there a universal positivity bias in attributions? A meta-analytic review of individual, developmental, and cultural differences in the self-serving Attributional bias. Psychological Bulletin, 130, 711-747.
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29 Beer, M., Ruh, R., Dawson, J. A., McCAA, B. B., & Kavanagh, M. J. (1978). A performance management system: Research, design, introduction and evaluation. Personnel Psychology, 31, 505-535. doi: 10.1111/j.1744-6570.1978.tb00460.x
30 Kleingeld, A., Van Tuijl, H., & Algera, J. A. (2004). Participation in the design of performance management systems: A quasi-experimental field study. Journal of Organizational Behavior, 25, 831-851. doi: 10.1002/job.266
31 Mezulis, A. H., Abramson, L. Y., Hyde, J. S., & Hankin, B. L. (2004). Is there a universal positivity bias in attributions? A meta-analytic review of individual, developmental, and cultural differences in the self-serving Attributional bias. Psychological Bulletin, 130, 711-747.