From Performance Appraisal to Performance Excellence

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1 From Performance Appraisal to Performance Excellence When visiting NASA, President John Kennedy came across a cleaner and asked him what do you do around here? The cleaner replied: I contribute to NASA s effort to enable man to step on the moon. Not only was that cleaner crystal clear about the vision of the institution he worked for, he took great pride in his work and his contribution to the team. The key question here is: What does an organization do to cascade its vision, mission, and core values from the strategic level to the operational level all the way down the organization to reach each individual employee and have him or her contribute to the team? The answer is simple: Competency-based performance management. Performance management, though, is far from being a simple process. Whether in manufacturing or in the service industry, if performance is not properly managed, we see the effects in wastage of time and resources. In the service industry, it is not unusual to come across employee who politely says: I am sorry I can t help you sir. This is not my job, when in fact, that employee represented the company as far as you were concerned. So what is Competency-based performance management? In slang words it is about personalizing performance appraisal rather than making it a generic exercise and reframing the process from year-end performance appraisal to annual performance management- of which appraisal is the sub-process practiced at the end of the performance management cycle. Competencies are basically identified as Knowledge, Skills, and Abilities (physical, mental, behavioral) to do the job. Let us stop for a moment and think about the consequences when individual goals are not aligned with business strategy, or when employee engagement levels are low. Let us guess the effects of inconsistent evaluation criteria and rewards. What do you think happens when top performers see no differentiation from underperformers in performance ratings, opportunities and compensation? We certainly have our hands full with areas that need to be managed, starting with strategy and ending with reward, involving strong leadership and guiding principles & values. Leading Executives to Achieve Progress Page 1 of 7

2 From a strategic point of view, performance management requires clarity of overall company strategy and annual goals at the level of divisions and departments. It assumes having the right organizational structure that follows from strategy. It requires aligning goals vertically and horizontally, to mobilize functional teams and cross-functional teams to all sail in the same direction. More and more stakeholders are demanding the kind of transparency that NASA models. From Vision to Implementation Vision Mission Values Strategy: Strategic Goals Strategy Map: Operational Goals Cascading Measures Measurement System Targets & Initiatives Individual Objectives 19 From an organizational point of view, performance management requires visionary leadership to build the kind of corporate culture that guides desired behavior. It requires good communication skills, decision-making skills, conflict resolution skills, and teamwork. It also requires internal processes that nurture trust & belongingness and efficiency in achieving strategic goals. Leading Executives to Achieve Progress Page 2 of 7

3 Communicat ion Performanc e Planning Teamwork Corporate Culture Decisionmaking Salary Administrati on Performan ce Manageme nt Performanc e Developme nt Conflict resolution Performanc e Appraisal From a managerial point of view, performance management requires good goal setting and planning skills, as well as skills in employee development, coaching, and counseling. It requires a fair performance appraisal system based upon agreed-to key performance indicators. Last but not least, it requires a reward system that relates pay to performance. Many pieces have to come together to complete the puzzle of preparing the organization and motivating employees to pursue the journey of performance excellence, a journey that repeats itself year after year. Leading Executives to Achieve Progress Page 3 of 7

4 Performance Management is a prime responsibility for every manager and supervisor. The process involves a one year cycle, year after year, with the objective of continuous improvement. Generally, the process runs from January to December. It may be aligned with the fiscal year, if the fiscal year is different from the calendar year. From the Job Description to Performance Planning Organizations that have a formal process for performance planning will have every manager meet with each of his/her employees, in January, to discuss that employee s job and prepare a performance plan with SMART goals (specific, measurable, attainable, realistic, and timebound). The performance plan is an extension of the job description, assuming it is well written and current. The plan has to be aligned with the department s goals, which in turn are aligned with the division s goals and organizational strategy. Many managers tend to be discouraged that performance improvement requires major efforts and consequently postpone dealing with it. Sufficient to say that a key principle here is to be satisfied with progressive improvement rather than revert to postponed perfection. The Japanese Kaizen principle is a living example of how small improvements accomplished at the individual level year after year will go far in heading towards performance excellence for the entire organization. The ultimate goal: Performance Development Managers active in developing employees schedule a formal meeting every quarter with each of their direct reports to review progress against agreed to goals. Where the employee is falling short of expectations, the manager takes on the role of coach and mentor or counselor in order to correct behavior or develop skills. At the end of the year, the gap between actual performance and performance expectations will represent the training needs of each individual employee. When the human resources department compiles those needs, by employee, the organization s training agenda is ready. Some training programs are planned by HR for the organization as a whole. Some are handled on the job by the direct boss, depending on the need. The organization s training agenda will include specific job-related skills, language skills, computer skills, supervisory development, management development, interpersonal and behavioral skills. Leading Executives to Achieve Progress Page 4 of 7

5 Turning the performance appraisal process into the motor that feeds the training and development agenda is a powerful tool serving organizational development. A leading Lebanese medical center passed, with flying colors, the HR accreditation standards set by the Ministry of Health for having reached the level of organizational maturity where competency-based training needs in that hospital are identified for each employee in concert with performance appraisal. Performance Evaluation As Zig Ziegler says what is not measured is not managed. Managers who report a successful performance evaluation process identify the following criteria: The evaluation is tied to the key performance indicators in the performance plan and to the organization s core values. The approach is highly individual as opposed to generic and is competency-based. The process is an extension of the everyday communication between supervisor and employee, involving open communication, transparency, and fairness. Last but not least, the evaluation is tied to the reward system, both financial and nonfinancial. The process is never perfect. Nothing is. The key to success is in moving closer towards transparency, fairness, productivity, and effectiveness. Leading Executives to Achieve Progress Page 5 of 7

6 Align employee's day-to-day actions with strategic business objectives Provide visibility and clarify accountability related to performance expectations Document individual performance to support compensation and career planning decisions Establish focus for skill development and learning activity choices Create documentation for legal purposes, to support decisions and reduce disputes Best Practice Performance Management Goals Best Practice Performance Management Activities Deliver regular relevant job feedback Set and communicate clear performance expectations Link performance to compensation clearly Identify organizational career paths for employees Evaluate performance and deliver incentives in a fair and consistent manner Provide appropriate learning and development opportunities Recognize and reward top performers A CEO once asked me how long it takes to institute performance management in an organization. I said 3 years. The surprised reaction subsided when I explained why. The process mobilizes the entire organization from top to bottom. The cycle is a unit of one year. It takes one year to introduce the pillars of the process: performance planning, development, and appraisal. Employees need to be oriented to each pillar or sub-process and their participation invited. The Performance Plan of each employee needs to be based on the related job description (which may or may not need revision). The plan must specify goals that are measurable and therefore the need for specifying key performance indicators per goal. Doing this exercise for the entire organization requires time and effort and a lot of communication, especially the first time around. Leading Executives to Achieve Progress Page 6 of 7

7 The process of performance development needs to be formally conducted and documented, two to three times per year. Performance Development requires training the manager or supervisor on coaching and counseling skills. Performance appraisal requires relating the evaluation to the plan and ensuring that measurement criteria take into account behavioral results as well as achievement of business goal. In the second year, the refinement process starts for each of the sub-processes. Management ensures that the individual performance plan is not only tied to the job description, but is also an extension of the department s goals and the department s key performance indicators. Validation of key performance indicators is conducted to make sure they are realistic and achievable. The previous year s plan and appraisal will provide input for the current performance plan. You have the previous year s accomplishments to benchmark against. Barriers to the process are identified and dealt with. Improvements are made in the processes of documentation, reporting, and communication. Management skills require a dynamic effort of exercising management activities. Good communication skills on the part of the manager involve planning a communication strategy, developing listening skills, interviewing skills, and coaching skills. A lot of training is required in the first two years to prepare managers and HR to play the roles expected of them at each stage of the process. The third year is the start of institutionalizing the process for improving it year after year. The Human Resources department plays a vital role in instituting the process and guiding implementation. Documentation, in employee files, is necessary for each sub-process to promote transparency and continuous improvement. So is reporting the results of each subprocess to track activity and to be able to evaluate each manager and supervisor on their competence in managing employee performance. Performance Management has become a top priority for the HR department to provide the organization with a methodology for cascading strategy from the top level all the way down to the individual level. At the end of the day, organizations don t work; people do. Leading Executives to Achieve Progress Page 7 of 7

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