Performance Management System(Performance appraisal) - What gets measured gets done
Performance management (PM) includes activities which ensure that goals are consistently being met in an effective and efficient manner. PM has wider connotation than performance appraisal.
Performance management systems
Performance management is a systematic approach that involves a range of activities undertaken to get the best performance from people to achieve agency and team objectives and individual goals.
Cycle
Performance management is a continuous process of setting employee goals, monitoring their progress against the goals, evaluating outcomes, and then recognising their performance.
The entire process is supported by the giving and receiving of feedback.
Objectives
Performance management systems address the following key areas:
Performance discussions
Performance discussions are a means by which managers develop and review individual work goals with their employees, and discuss development needs to support and enhance work performance. These collaborative discussions between manager and employee are fundamental for building and managing performance.
The form and focus of performance discussions vary according to the stage of the performance management cycle, but the principles remain the same. There should be at least one discussion for developing the employee’s performance plan, and at least one – but preferably two or three – discussions to review the employee’s achievements.
Catch-ups
Informal meetings, or ‘catch-ups’, between formal performance discussions allow you to discuss work in progress, address any current concerns or barriers, help the employee prepare for a new or challenging task, and explore development activities.
Catch-ups avoid surprises in the formal performance discussions and provide an opportunity for you to discuss issues with employees before they progress into something larger.
Record keeping
Record keeping should support performance management, not drive it. As record keeping varies from agency to agency you should check what is required by your own agency. Performance plans need to be recorded as the basis for monitoring and reviewing performance. Key accomplishments and successes should be recorded along with the performance assessment and identified development needs.
Records of discussions and performance plans should be accessible by both managers and employees. Any questions or concerns should be raised with your HR unit.The planning phase
The planning phase is a collaborative effort between the employee and manager when you both agree on performance plans. In this phase, the initial performance discussion provides the forum to agree on individual goals that align with agency objectives, and also establish capability and development needs.
The action phase
Once you and your employees have agreed on the performance objectives and standards they can then work towards those objectives and standards.
The review phase
The review phase allows for the evaluation and review of actions and plans that have been put into place. The review phase involves a performance discussion to assess achievement against the planned goals, track development progress and resolve any issues.
Creating a Mission
Statement, Setting Goals
A mission statement is a guiding
light for a business and the individuals who run the business. It is usually
made up of three parts:
- Vision - big picture idea of what you want to
achieve.
- Mission - general statement of how you will
achieve your vision.
- Core Values - how you will behave during the
process.
Each of these three elements is an important aspect of
the businesses guiding light.
Once you have developed your mission statement, the
next step is to create the following items:
- Goals - general statements of milestones you need
to meet to achieve your vision.
- Objectives - specific, time-sensitive statements
for achieving your goals
- Strategies/Action Plans - specific implementation
plans of how you will achieve your objectives and goals.
Mission Statement
Elements
Below are definitions of the three mission statement
elements. An example of the statements for a value-added business is included
for clarification. XYZ is a company that starts value-added businesses.
Because of its unique nature, it is important that XYZ create a meaningful
mission statement to convey its purpose to it leaders, staff and members.
Vision - A vision statement is a
mental picture of what you want to accomplish or achieve. For example, you may
want to develop a profitable winery or a successful organic dairy business.
A vibrant rural
economy driven by value-added agriculture.
The vision statement should be concise and easy to
remember. Because it is easy to remember, it is easy for everyone in the
organization to focus on the vision. When people focus on the vision, their
daily activities are automatically directed towards achieving the vision.
Mission - A statement of mission is a
general statement of how you will achieve your vision. There is a very close
relationship between the vision and mission. The mission is an action statement
that usually begins with the word “to”. Once again it is a very simple and
direct statement that is easy to understand and remember.
XYZ Mission - To create
and facilitate the development of value-added agricultural businesses.
Core Values - Core values define the business in terms
of the principles and values that the business leaders will follow. They
provide the bounds or limits of how the business leaders will conduct their
activities while carrying out the vision and mission.
Core Values:
- Provide economically sound business opportunities
for our members.
- Practice high ethical business standards.
- Respect and protect the environment.
- Produce high quality products that are safe for
consumers.
- Meet the changing needs and desires of consumers.
The Role of Goals and
Objectives
Once you have developed your vision, mission and core
values, you can then develop the goals and objectives needed to achieve your
vision.
Goals - Goals are general statements of what you want
to achieve. So they need to be integrated with your vision. They also need to
be integrated with your mission of how you are going to achieve your vision.
Examples of company goals are:
- To improve profitability
- To increase efficiency
- To capture a bigger market share
- To provide better customer service
- To improve employee training
- To reduce carbon emissions
A goal should meet the following criteria:
- Suitable: Does it fit with the vision and
mission?
- Acceptable: Does it fit with the values of the
company and the employees?
- Understandable: Is it stated simply and easy to
understand?
- Flexible: Can it be adapted and changed as
needed?
Make sure the goals are focused on the important
properties of the business. Be careful not to set too many goals. You run the
risk of losing focus. Also, design your goals so that they don’t contradict and
interfere with each other.
Objectives - Objectives are specific, quantifiable,
time-sensitive statements of what is going to be achieved and when it will be
achieved. They are milestones along the path of achieving your goals. Examples
of company objectives are:
- To earn at least a 20 percent after-tax rate of
return on our net investment during the next fiscal year
- To increase market share by 10 percent over the
next three years.
- To lower operating costs by 15 percent over the
next two years by improving the efficiency of the manufacturing process.
- To reduce the call-back time of customers
inquiries and questions to no more than four hours.
Objectives should meet the following criteria:
- Measurable: What will happen and when?
- Suitable: Does it fit as a measurement for achieving the goal?
- Feasible: Is it possible to achieve?
- Commitment: Are people committed to achieving the objective?
- Ownership: Are the people responsible for achieving the objective included in the objective-setting process?
Performance management systems to be effective, they should have the below characteristics :
Effective in driving achievement of key corporate objectives,
Simple,
Consistently managed across the business,
Supported by merit pay, and
Adapted to your company's culture.
1. Drive Corporate Objectives
The whole purpose of managing performance is to get the right stuff done. It is about focusing limited resources on critical objectives. It is about aligning the business to achieve key objectives - putting wood behind the arrow, so to speak. All other outcomes are secondary. If your company's performance doesn't improve as a result of implementing your performance management system, then it isn't worth doing.2. Simplicity
Most companies make performance management way too difficult. Keep it simple, and you vastly increase your odds of success. I'm a fan of 3-point rating systems. You either hung the moon (1), did your job (2), or failed (3). I once worked in an organization that had a 5-point rating system with 10-point decrements. That's a 50-point system! Employees would literally spend hours and hours arguing that they were a 3.8 instead of a 3.6. A 10-page hard copy document used to conduct reviews doesn't help either. void these kinds of complications.Encourage or mandate very regular performance discussions (I mandate 2 annually and encourage weekly or monthly status checks between a worker and their manager). Again, remember the goal is to get critical things done, not to bully employees. It's a team effort between manager and worker, not a beat down. Limit reviews to 30 minutes or an hour. If regular performance conversations are taking place, then they shouldn't take very long. There should never be surprises in a formal, annual review. Regular dialogue prevents surprises.
Only work on 3 objectives simultaneously adding new ones as old ones are completed. The official performance reviews are annual; the objectives are not. Who the heck knows what will matter a year from now?! Have everyone map each personal objective to the company's core objectives to promote focus and alignment. Focus on strengths; ignore weaknesses…unless a weakness is getting in the way of a primary strength. (Reading suggestion: Now, Discover Your Strengths by Marcus Buckingham. Some give Peter Drucker credit for first articulating a strengths-based management approach.) Adopting a strengths-based approach actually helped me almost enjoy performance reviews. Really.
3. Consistency
Consistency in implementation is critical to successful performance management processes. If one department rates everyone as stellar, and another only gives out a stellar rating once every few years, it will be impossible to get employees to take the process seriously. The head of the organization must have passion for the process and be involved in its implementation to drive consistency. Without attention from the top, everyone will implement the process differently or just go through the motions without fully leveraging the benefits of consistency. Some training needs to take place to get everyone on the same page, but it doesn't need to involve rocket science or become a bureaucratic hell. Solid, team-oriented, open succession planning will align management and promote consistency as well. A consistent process will help increase your performance management system's credibility and effectiveness. It gets easier and less intrusive with time.4. Merit Pay
Merit pay that rewards top performers is essential to the success of any performance management system. By rewarding the performance you want, you will clearly convey that you back your performance system with cash. Not everyone is equally motivated by money, but paying for top performance sends the quick, clear message that there are tangible outcomes for those who perform. Rewarding repeat top performers with advancement is also effective yet less immediate. When employees know that they are rewarded for superior performance, they will take the process seriously, and overall performance will increase. Will assessments always be perfect? No. Will paying for superior performance motivate driven employees? Yes! Companies who proactively manage performance perform better. It is as simple as that. (This Sibson Consulting study validates the effectiveness that systematic performance management can have.)5. Culture
Performance management systems must be tailored to your company's culture. If your company is casual, you can have ultra casual performance reviews with super simple forms and processes. Mandate that reviews be done offsite. Set the tradition that the manager treats for lunch for year-end reviews. Put some music on during the review if you are in your office. Get creative and make it interesting or fun in any way you can! Review your core values, and make sure your performance management system supports your principles. Include your values in your performance management system to encourage the culture you want. I include a simple second page to the core review that captures how a person reflects the values of the company and make it worth about 10% of the total review.Performance management doesn't have to be tedious. Everyone wants to win. Winning is the only truly effective morale enhancer. Managing performance is about getting the right things done to win and be successful. What would you add to the list? What have you done to make performance management more effective and less burdensome?
Some interesting performance management articles:
http://ow.ly/ucNRg: Three Reasons Performance Management will Change in 2013 - by Sylvia Vorhauser-Smith, Forbes. Although written for 2013, she provides an honest view of performance management with some valuable advice for modern performance management.
http://ow.ly/ucO8w: An article that references research showing that companies with strong performance also tend to have strong performance management programs. The article also offers some best practices resulting from other research. It dates from 2007, however, its points still apply.
http://ow.ly/ubLvS: A Success Factors article that offers more best practices and advice based on additional research.
The greater danger for most of us lies not in setting our aim too high and falling short; but in setting our aim too low, and achieving our mark. Michelangelo
6P AND 5R Metrics for Performance Measurement
“What you sow is what you reap” or rather the quality of your output is just as good as the quality of your input and the processes used to transform the input to output. Thus, to achieve a target/goal, businesses need to have the right match of inputs/resources and processes which would aid in effective transformation of the inputs to outputs. Changes or variables in the inputs and the processes of the system will have an impact on the output as a consequence.
Consider for instance the transformation of a seed to a plant.
A seed needs the right conditions to germinate and to grow into a plant. It requires water, air, a suitable temperature, sunlight and the right soil to survive and grow. Thus, these favorable conditions are the inputs required to transform a seed to a plant.
Again, results or business performances/outcomes can be measured in a number of ways, eg Profits, customer delight, revenues etc. These outcome experiences are referred to as the 5Rs – Outcome Attributes
Thus, Stakeholder delight can pertain to both ‘means’ and ‘ends’– Assets and Experience. This is why it is important that a leader focuses on both the “build” and “outcome” aspects of his/her business. In a knowledge-based industry, such as ours, a focus on developing businesses to compete in tomorrow’s marketplace (i.e. build) is as important as sustaining market share today (i.e. outcome).
6Ps
|
5Rs
|
Outcome Experiences
| |
Value Creation / Resources
|
Value Realization and Extraction
|
Means
|
Ends
|
Input
|
Output
|
Metrics Framework
The Ps and the Rs are referred to as the ‘attributes’ of a business.
6Ps
People: Grow Leaders Faster than Competition
Each business must have the right number of people with right skills.
Ask key questions:
• Does my business have the right number of people?
• Do the people in my business have the requisite skills?
Process: Demystify Knowledge
Processes serve as a mechanism that aids value creation and is the formal, defined and documented structure of activities.
Ask key question:
• Do I have well documented processes for my businesses and do I have mechanisms to ensure knowledge capture?
Product: Put Technology to Work
Represents automation of all possible processes and minimizing manual intervention.
Ask key questions:
• Have I automated all possible activities within my business?
• Do I continue to have a dependency on manual systems?
Proliferation: Don’t Reinvent the Wheel
Refers to maximizing ‘reach’ and ensuring penetration across all possible stakeholders so as to maximize value of our soft assets; It also refers to Institutionalization and standardization of best practices, enhancing repeatability and minimizing duplication of efforts across businesses and Satyam.
Ask key questions:
• Have I reached out to all possible beneficiaries?
• Have I shared my best practices across Satyam?
• Have I incorporated others’ best practices into my business?
Patent: Find a Better Way
Uniqueness and innovation introduced, which enables continuous improvement when compared to competition & prevalent practices within the organization.
Ask key questions:
• Is my ‘business’ clearly differentiated from those of my competitors?
• Am I doing things better than yesterday?
Promotion: Let Perception lead Reality
‘Branding’, ‘Communication’, ‘Collaboration’ and ‘Relationship Building
Ask key questions:
• Am I periodically communicating about the successes of my business, to my stakeholders?
• Am I making my stakeholders excited about my business - by passionately demonstrating its capabilities?
5Rs
FasteR: Compress Cycle-Times
Refers to ‘Cycle Time’ reduction (e.g. time taken for Visa processing).
Ask key questions:
• Have I reduced the cycle time?
BetteR: Always Exceed Customer Expectations
Refers to improving the quality of deliverables and reducing defects. Emphasis is on the ability to deliver an overall improved experience to the recipient of the value - internal & external.
Ask key questions:
• Have I improved my Customer Delight score?
CheapeR: Use your Limited Resources Well
Increasing ‘Profitability’ is the primary focus – (e.g. through enhanced productivity, resource / cost optimization or higher pricing resulting in increased margins).
Ask key questions
• Have I reduced my ‘operational’ cost?
LargeR: Maximize Scale Opportunities
Refers to Increase in ‘Scale’ and ‘Size’ – (e.g. Revenues in a business).
Ask key questions:
• Is my business growing?
SteadieR: Be Predictable
Reduction in ‘Variability’, especially in businesses where transactional volumes are high. (e.g. Payroll SLA Adherence, ELTP Recruitment etc.)
Ask key questions:
· Is my business delivering results in a consistent manner?
Hoshin Karni - Direction Management.Goal Setting. Performance Management.- To be considered for KRA setting
Goal Setting is an important part of performance management.
While setting goals, the following points need to be kept in mind :
SMART - Specific , Measurable , Attainable, Relevant, Time Specific
BHOG - organization-wide goal which is audacious, likely to be externally questionable, but not internally regarded as impossible.
SMART vs BHOG : Balance of fear of failure and hope of success
Once goals are set based on above principles, they have to be deployed meticulously using tools like Hoshni Karni.
Hoshin kanri- Direction management through Strategy deployment tools. Dr. Yoji Akao, used a Deming cycle (Plan-Do-Check-Act) to create goals, choose control points (measurable milestones), and link daily control activities to company strategy.
Weightage of individual KRA based on cause and effect relation with corporate goals for the year
Monthly Appraisal system
At Coca-Cola India,
managers are no longer pressured to accomplish annual performance
reviews. In alignment with the global vision of the parent company, — to
make performance enablement the new approach to work—Coca-Cola India has revamped its performance management system, making it a monthly affair with dynamic goals.
If GE and Microsoft were the first movers to do away with performance ratings, Coca-Cola has taken the leap by moving to a monthly feedback mechanism.
The beverage major has moved to an agile method of working where conversations between line managers and employees now happen on a monthly basis to see whether the individual is on track or a course correction is required. Under the new system, the manager can change and calibrate goals on a monthly basis.
“This is important to mobilise people to deliver goals that matter the most. The flexibility in framework enables everyone to put their best foot forward,” said Manu Narang Wadhwa, VP-HR, Coca-Cola India and South West Asia.
The new system of appraising employees covers the corporate business unit of Coca-Cola India, which has around 300 associates. Over the last seven months, around 80-85% managers have synced with the new system and are giving monthly feedback.
Coca-Cola India has 25,000 employees. The new system may be scaled up eventually in a gradual manner.
Globally, the parent, which wants to become a total beverage company, has repurposed its vision “to get ready for tomorrow today”, given that the world all around is changing. The beverage giant has tweaked its strategy to cater to shifting consumer preferences and growing health consciousness. The new performance enablement is a pre-requisite for bringing about such changes and a culture of agility.
“The old performance management system, where goals were set annually, provided limited opportunity to offer real-time feedback. Given today’s business dynamics in a VUCA world, organisations need to have a dynamic system so that goals can be improved upon and individual performances bettered as per requirement,” said Wadhwa.
The new system that Coca-Cola India has adopted takes away the fixed mindset of having a single goalpost for an employee in a year.
“Today’s millennial workforce does not believe in one-time planned feedback. So we have done away with the lengthy process of long form filling that used to happen when performance management system was done on an annual basis. We have also introduced an upward feedback mechanism. Employees now have an equal voice to drive the change,” said Wadhwa.
Around 70-75% employees have offered upward feedback at Coca-Cola India. More companies are doing away with annual appraisals in favour of frequent feedback mechanisms. Annual appraisals are usually tedious and put pressure on managers to complete the task of appraising employees for the entire year in a short span. Over the last few years, a number of companies like Accenture, KPMG, Deloitte has moved towards ongoing conversations on performance.
If GE and Microsoft were the first movers to do away with performance ratings, Coca-Cola has taken the leap by moving to a monthly feedback mechanism.
The beverage major has moved to an agile method of working where conversations between line managers and employees now happen on a monthly basis to see whether the individual is on track or a course correction is required. Under the new system, the manager can change and calibrate goals on a monthly basis.
“This is important to mobilise people to deliver goals that matter the most. The flexibility in framework enables everyone to put their best foot forward,” said Manu Narang Wadhwa, VP-HR, Coca-Cola India and South West Asia.
The new system of appraising employees covers the corporate business unit of Coca-Cola India, which has around 300 associates. Over the last seven months, around 80-85% managers have synced with the new system and are giving monthly feedback.
Coca-Cola India has 25,000 employees. The new system may be scaled up eventually in a gradual manner.
Globally, the parent, which wants to become a total beverage company, has repurposed its vision “to get ready for tomorrow today”, given that the world all around is changing. The beverage giant has tweaked its strategy to cater to shifting consumer preferences and growing health consciousness. The new performance enablement is a pre-requisite for bringing about such changes and a culture of agility.
“The old performance management system, where goals were set annually, provided limited opportunity to offer real-time feedback. Given today’s business dynamics in a VUCA world, organisations need to have a dynamic system so that goals can be improved upon and individual performances bettered as per requirement,” said Wadhwa.
The new system that Coca-Cola India has adopted takes away the fixed mindset of having a single goalpost for an employee in a year.
“Today’s millennial workforce does not believe in one-time planned feedback. So we have done away with the lengthy process of long form filling that used to happen when performance management system was done on an annual basis. We have also introduced an upward feedback mechanism. Employees now have an equal voice to drive the change,” said Wadhwa.
Around 70-75% employees have offered upward feedback at Coca-Cola India. More companies are doing away with annual appraisals in favour of frequent feedback mechanisms. Annual appraisals are usually tedious and put pressure on managers to complete the task of appraising employees for the entire year in a short span. Over the last few years, a number of companies like Accenture, KPMG, Deloitte has moved towards ongoing conversations on performance.
(This article was originally published in The Times of India)
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