The 5 Principles of Managing Performance 7

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2 Contents Our approach 1 What is performance management? 2 People as assets ( Human capital management ) 3 Defining the job 3 Improving competence 4 Setting targets 4 Motivation and attitude 4 tools 5 Appraisal 5 Appraisal systems 5 So why do organisations have appraisal systems? 6 High challenge, high support environment 7 7 Consultancy support for performance management 7 Using the Hersey Blanchard Situational Leadership model for managing performance 8

3 Our approach It is not easy to set up and run an effective system for managing performance. The starting point is to decide what the strategy for the business actually is. What is its broad context? What are its longer-term goals? This will shape how it wants to manage people and teams. There are three imperatives: to be clear about the accountability of each job. What is expected from it? There must be measurable outcomes to make sure that each jobholder understands those accountabilities, expectations and outcomes to set out an agreed set of measures of success for the person in the job, and the controls necessary to review progress such as formal and informal reviews. Organisational structure, accountabilities and job design Values Knowledge Business strategy Operational and financial measures and controls Core processes and systems Culture should be pivotal, as it drives organisational performance, pay (usually), training and development, promotion, and (sometimes) dismissal. But most organisations are dissatisfied with the way they operate it. should not be a complex, paper-driven system. 1

4 Most systems have some form of annual appraisal. But all too often it is seen as bureaucratic - as a burden imposed by Human Resources (HR) rather than as a spur to the business. Annual appraisal is not necessarily the right timeframe, unless the cycle of work is best measured annually. But some work may have a shorter (or longer) cycle. Project-based team working, for example, needs more frequent review. Not all working groups have the same timeframe. If these time-spans are not taken into account, the system for managing performance will not be fully effective, because it is not synchronised with the business. Nor should appraisal be an isolated event, whatever the timescale. It is a continuous process - and a fundamental part of a manager s job. Appraisal is not only the formal review. It has other components, such as: a pat on the back, for a one-off success the opposite of this, for a lack of success a performance/disciplinary process coaching. The purpose of all these is to motivate people to achieve the objectives of the organisation. Any system for managing performance must fit the particular organisation and its parts. There is no template. It should not be a complex, paper-driven system. It must be initiated by the senior managers and owned by the business, not by HR. It must be synchronised with the business cycle. It must measure the things that are important for business success. What are they? Skills in managing performance (the how ) are more important than the system ( the what ). So start with the people who will do the managing. What is performance management? The term performance management wrongly implies that it is a discrete activity, like setting budgets or introducing new products. Managing performance is what managers do. If they do it well, the people who report to them will do their own jobs more effectively. 2

5 Managing performance is about getting the best out of people helping them to achieve the organisation of the organisation. People as assets ( Human capital management ) When a business acquires new assets, such as plant and equipment, it: evaluates different options, specifications, reliability and payback monitors operating performance, schedules regular maintenance, and makes upgrades to improve productivity de-commissions and replaces the plant at the end of its operating life. But when a business acquires a new employee, it: offers only a vague job description or instruction goes through a subjective and unstructured selection process or the random formation of a team provides no clear objectives sets up no proper review of performance or development. What influences the performance of people? clear accountability and targets competence motivation and attitude organisational factors. The manager s job is to provide the environment in which people can perform. Defining the job Start with the business strategy. Establish the organisational structure. Determine the jobs required. Agree on the accountabilities. Ensure that the main processes and systems are in place. Provide operational and financial measures and controls. 3

6 Improving competence Understand the skills required of the job: technical/professional skills and behaviours. What are the standards that must be met? Can you describe them? Develop the appropriate skills. Offer training, coaching and mentoring etc. Measure the improvement how? Be prepared to remove anyone who cannot achieve the required standards. Setting targets Targets should be SMART: specific; measurable; achievable; realistic; and time-related - and consistent with the strategy for the business. Seek improvement, beyond day-to-day activities: continue to operate the plant efficiently is not a target improve process efficiency by [x%] by [date] is a target. Ensure that achievement does not detract from the performance of others. Motivation and attitude These are matters of conduct, not of capability. Factors that might influence motivation are: pay and benefits (absolute, or relative to others) pay progression non-monetary recognition career opportunities the attitudes and cooperation of others relationship with the manager respect communication job security discipline 4

7 organisational constraints (such as lack of autonomy) personal or domestic situation inherent personality traits. tools Performance appraisal systems. Competence frameworks. 360-degree feedback. Use of tool or model (Hersey Blanchard). Matrices of skills. Managerial audits. Assessments of personality, ability and aptitudes. Organisational analysis, such as labour turnover, grievances or absence. Appraisal Appraisal should be a continuous process. An appraisal review should be a health-check. It provides an opportunity: to recognise achievement to review the environment (competence, motivation etc) to plan training, development and succession to reset objectives. Annual might not be the appropriate time-frame. It depends on the cycle of work (project-based jobs?) Appraisal systems Generally do not work well, because they: are bureaucratic, complex and inflexible (structure, frequency) provide no follow-up between formal reviews spotlight the performance of the manager as well as of the employee causing discomfort all round. 5

8 The qualities we seek in leaders (initiative, flair, vision ) are generally not consistent with making them follow formal, structured, detailed systems. That is why senior managers often ignore them. Appraisal systems try to apply scientific rigour to the measurement of performance. But human nature gets in the way. Managers ignore the concept of normal distribution. differentiation of performance ratings. There is little Appraisal reviews rarely produce new information. They are often just an exercise in fitting preconceived views into the performance rating categories. It is remarkable how often the first interpretations of new evidence have confirmed the preconceptions of its discoverer. (John Reader, Missing Links, referring to anthropologists). So why do organisations have appraisal systems? As a control mechanism for senior managers. To justify the distribution of salary rises (PRP). To convert information on people into quantitative data (many managers prefer numbers to people). To force managers to sit down with their employees at least once a year. HR sees it as part of its intellectual capital. 6

9 High challenge, high support environment CHALLENGE High Antagonism Isolation Contribution High Performance Low SUPPORT High Apathy Laziness Comfort Low Esteem Low Building Blocks Reward Sanctions Monitoring Improvement Goal setting Deliverables Accountabilities Foundations Individual Trust Respect Manager Consultancy support for performance management Collinson Grant can help: to set the business strategy and set up the organisational structure to define the jobs and competences required to design the process for managing performance 7

10 to introduce tools or methods to design reward mechanisms to coach managers (individuals or teams) to measure performance to change the culture (where the environment inhibits high performance) to restructure. Organisations need to review how they manage performance when: the current system has fallen into disuse or disrepute an acquisition requires the integration of two systems money for salary rises is restricted to high performers a new Managing Director wants to introduce new values and measure compliance the company wants to select high performers for senior positions, or poor performers for redundancy they have no system and think that they should start one. Using the Hersey Blanchard Situational Leadership model for managing performance Managing people singly or collectively is made easier when the managers and staff can refer behaviour and style to a commonly understood model. Hersey Blanchard is one such. Managers or leaders should adapt their style to the follower s development (or 'maturity') - how ready and willing (that is, competent and motivated) the follower is to do the required tasks. The four leadership styles (S1 to S4) match the development levels (D1 to D4) of the followers. The emphasis that leaders place on the task in question and/or on the relationship between the leader and the follower depends on the development level of the latter. 8

11 Style Hersey and Blanchard s Situational Leadership Model Leadership style in response to follower s development Low Task/directive High behaviour R4 R3 R2 R1 S3 Participating S2 Selling High Relationship/ Supportive Behaviour S4 Delegating S1 Telling Low S1: Telling/directing Follower: R1: Low competence, low commitment/unable and unwilling or insecure Leader: Focus on the task rather than on the relationship When the follower cannot do the job and is unwilling or afraid to try, the leader takes a highly directive stance, explaining what to do but with no great concern for the relationship. The leader may also provide a working structure for the job and for how the person is controlled. The leader may first find out why the person is not motivated and if there are any limitations in ability. These two factors may be linked. A lack of belief in personal capacity can sap confidence and reduce ability. If the leader focused on the relationship, the follower might become confused about what must be done and what was optional. So the leader takes a firm stance - 'Do this' - which makes all the required actions clear. S2: Selling/coaching Follower: R2: Some competence, variable commitment/unable but willing or motivated Leader: Focus on the task and on the relationship A follower who can do the job, at least to some extent, and who may even be over-confident, might be de-motivated or resistant if told what to do. So the leader needs to 'sell' another way of working - to explain and to clarify the decisions. So the leader spends time listening, advising, and, where appropriate, coaching the follower in the necessary skills. 9

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