MASTER OF BUSINESS ADMINISTRATION Performance Management

Transcription

1 MASTER OF BUSINESS ADMINISTRATION Performance Management Contact details: Regenesys Business School Tel: +27 (11) Fax: +27 (11)

2 Version Control: 6.3_e_f Date of Publication: June 2014 Publisher: Regenesys Management Place of Publication: Sandton Document Change History Date Version Initials Description of Change 26 November 3.1 LC Review and updating of guide December 4 MS SME review December 5 LVN Edited January LC Amendments per SME suggestions 11 January PL Final approval 22 August LK Formatted to new template. Referencing updated. 26 September 5.1_e_f FVS Re-versioning (due to upgraded version control system) 2013 Formatting 2 December 6 CT Rewrite January _f FVS Format to new template 10 April CT Minor revisions including new articles from Emerald 5 June CT Include feedback from TS and subject matter expert (Abhinanda) 18 June e LS Edited 18 June _e_f SK Final formatting This Study Guide highlights key focus areas for you as a student. Because the field of study in question is so vast, it is critical that you consult additional literature. Copyright Regenesys, 2014 All rights reserved. No part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form, or by any means (electronic, mechanical, photocopying, recording or otherwise) without written permission of the publisher. Any person who does any unauthorised act in relation to this publication may be liable for criminal prosecution and civil claims for damages.

3 CONTENTS 1. WELCOME TO REGENESYS INTRODUCTION TEACHING AND LEARNING METHODOLOGY ALIGNING ORGANISATIONAL, TEAM AND INDIVIDUAL OBJECTIVES ICONS USED IN THIS STUDY GUIDE STUDY MATERIAL FOR THE MODULE RECOMMENDED RESOURCES RECOMMENDED READING PRESCRIBED ARTICLES RECOMMENDED MULTIMEDIA ADDITIONAL SOURCES TO CONSULT LEARNING OUTCOMES CONTENT SCOPE AND LEARNING GUIDANCE PERFORMANCE MANAGEMENT A SYSTEMS APPROACH WHAT IS PERFORMANCE MANAGEMENT? PURPOSE OF A PERFORMANCE MANAGEMENT SYSTEM PERFORMANCE MANAGEMENT CHALLENGES ADVANTAGES AND DISADVANTAGES OF PERFORMANCE MANAGEMENT SYSTEMS THINKING SYSTEMICALLY ABOUT PERFORMANCE MANAGEMENT THE LINK TO REWARD SYSTEMS LEGAL CONSIDERATIONS TRENDS IN PERFORMANCE MANAGEMENT PERFORMANCE MANAGEMENT PROCESSES PERFORMANCE MANAGEMENT CONCEPTS THE PERFORMANCE MANAGEMENT PROCESS MEASUREMENT APPROACHES MEASURING PERFORMANCE COLLECTING MEASUREMENT DATA ON RESULTS AND BEHAVIOURS PERFORMANCE MANAGEMENT SKILLS THE ROLE OF SUPERVISORS OR MANAGERS GOAL SETTING SKILLS ENSURING THE SYSTEM IS EFFECTIVE, EFFICIENT AND ECONOMICAL THE ROLES OF OBSERVATION, RECORDING AND MEASUREMENT ONE-TO-ONE MEETINGS FEEDBACK AND COACHING SKILLS IMPLEMENTING A PERFORMANCE MANAGEMENT SYSTEM CORPORATE PERFORMANCE MANAGEMENT COMMUNICATION AND APPEALS PROCESS PILOT RUN MONITORING AND EVALUATION SETTING PERFORMANCE GOALS AND INDICATORS AND CONDUCTING PERFORMANCE APPRAISALS AND REVIEWS REFERENCES APPENDIX 1: CASE STUDY DEALING WITH POOR PERFORMANCE GLOSSARY OF TERMS... 94

4 List of Tables TABLE 1: WHAT MAKES PERFORMANCE MANAGEMENT EFFECTIVE? TABLE 2: EFFECTIVE VS INEFFECTIVE PERFORMANCE MANAGEMENT SYSTEMS TABLE 3: PERFORMANCE MANAGEMENT IN THE NEW WORLD TABLE 4: DETERMINANTS OF PERFORMANCE TABLE 5: FOCUS AREAS FOR SENIOR EXECUTIVE PERFORMANCE MANAGEMENT TABLE 6: COMPARATIVE VS ABSOLUTE MEASUREMENT SYSTEMS TABLE 7: SAMPLE THRESHOLD COMPETENCE - NEGATIVE AND POSITIVE INDICATORS TABLE 8: DIFFERENCE BETWEEN TRAINING AND COACHING TABLE 9: HIGH-LEVEL VIEW OF CORPORATE PERFORMANCE MANAGEMENT SYSTEMS List of Figures FIGURE 2: PERFORMANCE MANAGEMENT SYSTEM PURPOSES FIGURE 3: PERFORMANCE MANAGEMENT SYSTEM PROCESS FIGURE 4: PERFORMANCE MANAGEMENT PROCESS PRE-REQUISITES FIGURE 5: JOB PERFORMANCE IN CONTEXT FIGURE 6: MEASURING RESULTS PROCESS FIGURE 7: EMPLOYEE ENGAGEMENT - THE HEART OF THE PERFORMANCE MANAGEMENT SYSTEM FIGURE 8: NOT TWO PEOPLE, BUT FOUR PARTICIPANTS... 69

5 1. WELCOME TO REGENESYS Have a vision. Think big. Dream, persevere and your vision will become a reality. Awaken your potential knowing that everything you need is within you. Dr. Marko Saravanja At Regenesys, we assist individuals and organisations to achieve their personal and organisational goals, by enhancing their management and leadership potential. We approach education and development holistically, considering every interaction not only from an intellectual perspective but also in terms of emotion and spirituality. Our learning programmes are designed to transform and inspire your mind, heart and soul, and thus allow you to develop the positive values, attitudes and behaviours, which are required for success. Having educated over students based in highly reputable local and international corporations across over 100 countries since Regenesys' inception in 1998, we are now one of the fastest-growing and leading institutions of management and leadership development in the world. Regenesys ISO 9001:2008 accreditation bears testimony to our quality management systems meeting international standards. Regenesys is accredited with the Council on Higher Education. Our work is rooted in the realities of a rapidly changing world and we provide our clients with the knowledge, skills and values required for success in the 21st century. At Regenesys, you will be treated with respect, care and professionalism. You will be taught by business experts, entrepreneurs and academics who are inspired by their passion for human development. You will be at a place where business and government leaders meet, network, share their experiences and knowledge, learn from each other, and develop business relationships. You will have access to a campus, in the heart of Sandton, with the tranquillity of a Zen garden, gym and meditation room. We encourage you to embark on a journey of personal development with Regenesys. We will help you to awaken your potential and to realise that everything you need to succeed is within you. We will be with you every step of the way. We will work hard with you and, at the end celebrate your success with you. Areas of Expertise Regenesys Business School 1

6 2. INTRODUCTION Welcome to the module on Performance Management. This module is located within the context of human resource management and the wider systems within which organisational performance takes place. The future is not like the past or the present the world is not predictable. Managers and their employees are increasingly being challenged by change. Change brings with it new organisational structures which have consequences for performance management, eg structures that are not bound by place; and where teams are formed, dissolved, and reformed based on changing business needs. In many organisations, the classic employee/line manager relationship has all but disappeared as organisations continue to flatten. Today we even see organisations that have dispersed with the management role altogether removing the barrier between employees, teams, and customers (eg Gore). How do performance systems continue to function under these conditions? In some cases, performance reviews are being reduced to the simplest of evaluations eg anonymous peer reviews based on four criteria: technical ability, productivity/output, group contribution, and product contribution and in others they are becoming highly customised systems focusing on knowledge workers each of whom has his or her own customised performance criteria the workforce-of-one principle. The increasing pace of technological change is facilitating new ways of managing performance real-time performance management data, eg restaurant chains are using their point of sale technology to display leader boards showing individuals' minute-by-minute revenue performances and high performing individuals are being rewarded with shifts of their choice (value-based approach). Millennials or Generation Y employees (the digital natives) are demanding new ways of working; they are demanding real-time, remote collaboration and instant feedback for them annual (or even bi-annual) feedback is insignificant. Despite all the changes, performance management systems must continue to create a cohesive alignment between the work of individuals and teams and the organisation's strategic objectives. Clear goals; specific objectives; a fair and responsive performance management system; and management's ability to coach effectively in increasingly flattened work environments continue to underpin performance management success. This Study Guide begins by exploring the concepts of performance management from several viewpoints a systems approach (Section 7.1). Students are encouraged to think systemically about performance and the factors that drive employee performance. As the Study Guide progresses, one clear factor emerges employee engagement it is a top priority and performance management has a role to play. Regenesys Business School 2

7 Section 7.2 turns to performance management processes with a keener look at performance itself. This section includes measurement approaches including collecting measurement data on both results and behaviours. As with all management functions, there are inherent skills that facilitate a cohesive and coherent system. A selection of these has been included in Section 7.3. Arguably, goal setting is at the heart of a performance management system; significant attention has been given to this including motive and the effect this has on performance. The Study Guide concludes with some of the challenges surrounding the implementation of a performance management system (Section 7.4). This section begins with a high-level view of a range of corporate performance management systems and the implications for human resources. As with all our modules, our aim is to awaken your potential by inspiring reflective and critical thinking insightful thought that would lead to new or improved, responsible and sustainable organisational performance. 2.1 TEACHING AND LEARNING METHODOLOGY Regenesys uses an interactive teaching and learning methodology that encourages self-reflection and promotes independent and critical thinking. Key to the approach utilised is an understanding of adult learning principles, which recognise the maturity and experience of participants, and the way that adult students need to learn. At the core of this is the integration of new knowledge and skills into existing knowledge structures, as well as the importance of seeing the relevance of all learning via immediate application in the workplace. Practical exercises are used to create a simulated management experience to ensure that the conceptual knowledge and practical skills acquired can be directly applied within the work environment of the participants. The activities may include scenarios, case studies, self-reflection, problem solving and planning tasks. Training manuals are developed to cover all essential aspects of the training comprehensively, in a user-friendly and interactive format. Our facilitators have extensive experience in management education, training and development. Please read through this Study Guide carefully, as it will influence your understanding of the subject matter and the successful planning and completion of your studies. Regenesys Business School 3

8 2.2 ALIGNING ORGANISATIONAL, TEAM AND INDIVIDUAL OBJECTIVES This module will draw on a model developed by Regenesys Management, which demonstrates how the external environment, the levels of an organisation, the team and the components of an individual are interrelated in a dynamic and systemic way. The success of an individual depends on his or her self-awareness, knowledge and ability to manage successfully these interdependent forces, stakeholders and processes. The degree of synergy and alignment between the goals and objectives of the organisation, the team and the individual determines the success or failure of an organisation. It is, therefore, imperative that each organisation ensures that team and individual goals and objectives are aligned with the organisation s strategies (vision, mission, goals and objectives, etc); structure (organogram, decision-making structure, etc); systems (HR, finance, communication, administration, information, etc); culture (values, level of openness, democracy, caring, etc). Hence, an effective work environment should be characterised by the alignment of organisational systems, strategies, structures and culture, and by people who operate synergistically. REGENESYS' INTEGRATED MANAGEMENT MODEL Regenesys Business School 4

9 3. ICONS USED IN THIS STUDY GUIDE Icons are included in the Study Guide to enhance its usability. Certain icons are used to indicate different important aspects in the Study Guide to help you to use it more effectively as a reference guide in future. The icons in this Study Guide should be interpreted as follows: Definition The definitions provide an academic perspective on given terminology. They are used to give students a frame of reference from which to define a term using their own words. Examples The example icon is used to indicate an extra/additional text that illustrates the content under discussion. These include templates, simple calculation, problem solution, etc. Video clip or presentation This icon indicates a URL link to a video clip or presentation on the subject matter for discussion. It is recommended that students follow the link and listen/read the required sources. Interesting source to consult The source icon is used to indicate text sources, from the Internet or resource centre, which add to the content of the topic being discussed In a nutshell This icon indicates a summary of the content of a section emphasising important issues. Calculations This icon indicates mathematical or linguistic formulae and calculations. Self-reflection Students complete the action of selfreflection in their own time. It requires students to think further about an issue raised in class or in the learning materials. In certain instances, students may be required to add their views to their assignments. Tasks The task icon indicates work activities that contact students must complete during class time. These tasks will be discussed in class and reflected upon by students and facilitators. E-learning students can use these tasks simply to reinforce their knowledge. Note This icon indicates important information of which to take note. Regenesys Business School 5

10 4. STUDY MATERIAL FOR THE MODULE You have received material that includes the following: Study Guide; Recommended reading; and Assignment. These resources provide you with a starting point from which to study the contents of this module. In addition to these, other resources to assist you in completing this module will be provided online via the link to this module. Guidance on how to access the material is provided in the Academic Handbook that you received when you registered for this qualification. 5. RECOMMENDED RESOURCES A number of recommended resources have been identified to assist you in successfully completing this module. 5.1 RECOMMENDED READING The following textbook is recommended and should be used to complete the module: Aguinis, H. 2013, Performance Management, 3 rd ed., Cape Town: Pearson Education. Please ensure you order or download your textbook before you start with the module. Regenesys Business School 6

11 5.2 PRESCRIBED ARTICLES Anitha, J. 2014, 'Determinants of employee engagement and their impact on employee performance', International Journal of Productivity and Performance Management, 63 (3), Farry, M. 2014, 'PhotoBox focuses on employees' strengths', Human Resource Management International Digest, 22 (1), isixsigma.com, 2013, 'What is Lean Six Sigma?' (accessed 10 April 2014). Jääskeläinen, A., and Laihonen, H. 2012, 'Overcoming the specific performance management challenges of knowledge intensive organisations', International Journal of Productivity and Performance Management, 62 (4), Maley, J., and Kramer, R. 2014, 'The influence of global uncertainty on the cross-border performance appraisal', Personnel Review, 43 (1) Additional articles that may prompt discussions and further assist you in completing this module will be saved on Regenesys Online under the relevant course. Please visit the site regularly to access these additional sources. 5.3 RECOMMENDED MULTIMEDIA Anthony, D. nd 'Developing an effective performance management appraisal system', [video clip] (accessed 2 December 2013). Author unknown, 2012, 'Be Nice to Penny: Performance Review', [video clip] (accessed 8 April 2014). MindTools, 2012, 'The McKinsey 7S Framework: Learn How to Align all Parts of Your Organisation', [video clip] (accessed 10 April 2014). RandomButDeadly, 2009, 'The Performance Appraisal', [video clip] (accessed 2 December 2013). Regenesys Business School 7

12 5.4 ADDITIONAL SOURCES TO CONSULT As a higher education student, you are responsible for sourcing additional information that will assist you in completing this module successfully. Below is a list of sources that you can consult to obtain additional information on the topics to be discussed in this module: Emerald NetMBA: MindTools: Brunel Open Learning Archive: ProvenModels: 12manage.com: Alliance Online: The Free Management Library: The Charity Village: This is an online database containing journal articles that are relevant to your modules. Please refer to the attached Emerald manual to assist you to download required articles. Information on how to access Emerald is provided to you in your Academic Handbook. You will receive access to the database once you register as a student. This is one of several web addresses that provide a selection of MBA constructs and discussion. It is one of the better of these addresses. MindTools.com is a very useful source of ideas, constructs, management models, etc with even more useful commentary and description. A Brunel University support-site that provides an easily accessible library of ideas, concepts, constructs techniques, tools, models, etc ProvenModels' Digital Model Book presents digitalised management models categorised in a clear, consistent and standardised information structure to improve the usability and reusability of management literature. Management models are important generalisations of business situations when applied in context and are powerful tools for solving business issues. This is a website on which one can access numerous models as well as global comments on the models and principles. This could also serve as a place where you could voice your ideas and get feedback from all over the world. The Alliance for Non-profit Management's general introduction to strategic planning is built around 15 questions that cover just about all aspects in brief. (Click on Strategic Planning ) The Free Management Library can be used to improve your organisation, and for your own personal, professional and organisational development. This is by far the most comprehensive overview of all aspects of strategic planning covering all stages of the process. A series of twelve very short articles, by Ron Robinson, an independent Canadian consultant, appeared on Charity Village between November 2001 and October These articles are refreshing in that they do not advocate a one best way for all types of non-profit organisations. They discuss various way of approaching the strategic planning process. There are many more sites and articles available that can help you to successfully complete this module. You are encouraged to post the website addresses or URLs of any additional interesting sites that you come across on the Regenesys Learning Platform. In this way, you can assist other students to access the same wonderful information that you have discovered. A word of caution not all information available on the Internet is necessarily of a high academic standard. It is therefore recommended that you always compare information that you obtain with that contained in accredited sources such as articles that were published in accredited journals. Regenesys Business School 8

13 6. LEARNING OUTCOMES Upon completing this module, students should be able to: Critically explain performance management terminology, concepts, definitions, models and techniques; Understand and interrogate how performance management interrelates with the organisation s strategy, culture, structure and systems; Examine the role of the manager/leader in implementing a performance management system; Evaluate the critical success factors of a performance management system; Set performance goals and indicators and conduct performance appraisals and reviews; and Manage change within the context of introducing a performance management system. Regenesys Business School 9

14 7. CONTENT SCOPE AND LEARNING GUIDANCE A number of topics will be covered to assist you in successfully achieving the learning outcomes of this module. It is important to study each of these sections to ensure that you expand your knowledge in the subject and are able to complete the required assessments. The sections that will be dealt with include: Section 1 Section 2 Section 3 Section 4 Performance Management A Systems Approach Performance Management Processes Performance Management Skills Implementing a Performance Management System A more detailed framework of what is required for each of these topics follows under each section heading. A number of questions to probe discussion and guide you towards comprehension and insight are also provided. The timetable under each section heading provides guidance on the time to be spent to study each section. It is recommended that you follow the given timetable to ensure that you spend the appropriate amount of time on each section. Following the timetable will ensure that you have covered the required sections relevant to each assignment and have appropriate time to prepare for the examination. Regenesys Business School 10

15 7.1 PERFORMANCE MANAGEMENT A SYSTEMS APPROACH Timeframe: Learning Outcomes: Recommended Book: Recommended Articles: Section Overview: Minimum of 20 hours Understand and interrogate how performance management interrelates with the organisation s strategy, culture, structure and systems; and Evaluate the critical success factors of a performance management system. Chapters 1, 3 and 10 in Aguinis, H. 2013, Performance Management, 3 rd ed., Cape Town: Pearson Education. Jääskeläinen, A., and Laihonen, H. 2012, 'Overcoming the specific performance management challenges of knowledge intensive organisations', International Journal of Productivity and Performance Management, 62 (4), The objective of this opening section is to explore the concept of performance management and examine some of the challenges and considerations. Clearly, there are competing views notwithstanding the challenges of managing millennials and culturally different contexts What is Performance Management? Several current (and sometimes competing) views exist on performance management. Consider the following from five thought leaders (in Ziskin, 2013): "Performance management has become everything and therefore nothing. It serves so many purposes compensation, feedback, talent development, succession, etc that it may not serve any purpose very well." (Collins in Ziskin, 2013) "It's an ongoing relationship to balance the need to evaluate people with the need to develop them. It's not about bromides, forms, scores, tools or systems." (Boudreau in Ziskin, 2013) "Performance Management is about aligning behaviour in a way that increases organisational effectiveness." (Wright in Ziskin, 2013) "Performance management is a continuous process of identifying, measuring, and developing the performance of individuals and teams and aligning performance with the strategic goals of the organisation." (Aguinis, 2013:2) "I think we need to look at performance management from three levels: cultural, systems and personal. At the cultural level, it's about whether the organisation judges people based on meritocracy (results) hierarchy (power) or relationships (connections). At the systems level, it's about determining whether people meet or miss objectives. At the personal level, it's about assessing the individual's dedication to deliver both financial and social results." (Ulrich in Ziskin, 2013) Regenesys Business School 11

16 Task Questions Warm-up questions 1. Using your own experiences of performance management, critically reflect on each of the above definitions. 2. Why do you think there is such a wide disparity between the views on performance management? Or, are they inferring the same principles? 3. What are the common themes in the definitions? 4. Reflect on the alignment of these themes with Regenesys' Integrated Management Model. When some of these thought leaders were asked what would make the biggest difference to performance management effectiveness, their viewpoints were mixed: TABLE 1: WHAT MAKES PERFORMANCE MANAGEMENT EFFECTIVE? Collins Culture of openness, honesty and real feedback; holding people accountable. The process begins and ends with good leaders. All resources should be directed at investing in developing leaders to lead rather than spending money on new performance management systems and tools. Boudreau Effectiveness rests in the skills and motivations of the people involved (not in the performance management system itself). Ii is important to create a shared framework and priorities between managers and their employees. Ulrich The four generic steps of performance management have remained relatively stable over time: Wright o Set standards; o Assess against those standards; o Allocate consequences; and o Provide feedback. Improvements in the effectiveness of performance management have come from: o Enabling external stakeholders to provide input on standards and performance; o Making the performance discussion more about the future than the past; o Using technology to simplify the process; o Tailoring the consequences to better reflect individual employee contributions and value; and o Accommodating both team as well as individual feedback. "Bad tools, bad evaluations, bad feedback and bad links to reward systems lead to bad performance management." Task Questions (Ziskin, 2013) Using what you have learnt from the five definitions and the content in Table 1, formulate a single paragraph that draws together an insightful description of what might constitute a performance management system in your organisation, or one with which you are familiar. Be prepared to justify your description. Regenesys Business School 12

17 7.1.2 Purpose of a Performance Management System To begin the discussion on performance management as a system, reflect on the following: Systems thinking is a way of interpreting elements connected together to form a whole; A system always has a purpose. Sometimes the purpose is evident to (or shared by) all and sometimes the purpose differs in the perceptions of the people who are involved in it; When an element is added, removed or changed in one part of the system, the whole is affected; Systems that contain people continually interact with the environment (cause and effect relationships; they are open systems). A performance management system is likely to mean different things to different organisational leaders. It all depends on what they deem to be the purpose of the system what it is that needs to be achieved. To some it may be the reconciling of the development of people versus their performance evaluation (Boudreau in Ziskin, 2013). It could also be reconciling performance feedback with compensation (Collins in Ziskin, 2013), or it may all be about future performance requirements. In our introduction to the module, we mentioned two extremes: The simplifying of tools (reducing performance management to the simplest of evaluations, eg the four criteria of technical ability, productivity or output, group contribution and product contribution) and implementing a system to manage such objectives; and Customising unique tools to specific jobs, roles, situations and individuals (single customised performance systems for knowledge workers the workforce-of-one principle) Wright (in Ziskin, 2013) argues that these polarised views continue to be sources of debate. They are clearly influenced by the purpose for which organisations implement performance management. Notably, the costs and benefits of both extremes are likely to be different. It could be argued that a simple 4-question performance system is cost effective but the benefits may be less meaningful. And, conversely, the individually customised performance system is likely to be costly but could yield very significant benefits to both the employees and the organisation. Aguinis (2013:2-3) focuses on purpose of performance management systems as being: A continuous process: There is an ongoing process of setting goals and objectives and observing the performance. This includes feedback and coaching where appropriate. An alignment with strategic goals: This means congruence with organisational goals to achieve sustained competitive advantage (the employees' contributions to the organisation are made explicit). Aguinis (2013:3) distinguishes between the purpose of "performance management" and "performance appraisal". The emphasis here is on "a performance management system that involves employee evaluations once a year without an ongoing effort to provide feedback and coaching so that performance can be improved is not a true performance management system." Regenesys Business School 13

18 This distinction is very important. Performance appraisal is the systematic description of an employee's strengths and weaknesses; Performance appraisal is only one component of a performance management system; The performance management system includes continuous conversations between managers and employees in which feedback is exchanged and coaching is given; and The performance management system is continuous and is aligned to strategic goals. Task Questions 1. Explain the difference between single components in a performance management system, eg the appraisal process, and a comprehensive performance management system. 2. Given the costs versus benefits of performance management systems Ulrich (2013) argues that he would "kill performance management complexity and simplify the process. Sometimes, the process becomes the end itself, and there is a means/end inversion." Do you agree with his argument? Why or why not? 3. Both Collins and Boudreau (2013) argue in favour of putting more emphasis into teaching and developing leaders and employees to achieve the maximum benefit from the performance feedback discussions. Critically evaluate the strengths and weaknesses of this argument. 4. Reflect on the following excerpts from Bersin (2013) and then answer the questions that follow the text. Time to scrap performance appraisals? More and more companies have decided to radically change (or scrap) their existing performance appraisal processes (eg Adobe, Kelly Services). Bersin's (2013) research shows that annual reviews are "an artefact from traditional topdown organisations where we had to weed out the bottom performers every year". He explains, that through the annual rating, management determines talent, decides who gets more money, who will be promoted, and whom they want to let go. This traditional view is based on the premise that "we can't totally trust managers so we are going to fit people into these rating scales". And, in some cases organisations implement forced distributions that mandate a percent of employees be rated at the bottom and only a limited percent at the top. Bersin (2013) emphasises the well publicised problems with these processes, including: Employees want regular feedback (daily, weekly); once a year is too late; regular coaching is the key to alignment and performance. It is impossible to judge an entire year of work from an individual at one time; this leads to awkward and uncomfortable reviews for both manager and employee (Where do you start? And, depending on the strength of the employee or manager the conversation can be guided to isolated instances of performance). One manager cannot adequately rate a person without the input of peers and other managers (manager and employee do not work in a vacuum). Some employees will turn out to be a poor fit (and consequently poor performers) and this should be addressed sooner rather than later. Some departments really do have a lot of high performers so forced ranking serves to eliminate/put down great people and damage the culture. Employees are inspired and motivated by positive and constructive feedback the appraisal (perceived judgement) process almost always works against this. Regenesys Business School 14

19 The most valuable part of the appraisal is the "development planning" conversation (what can be done to improve performance and most importantly employee engagement in their responsibilities and contributions to the organisation) this is often left to a small box at the end of the review form. Given that companies do not want to eliminate the process, but rather resolve the issues, Bersin's (2013) research offers the following keys to success: Develop a feedback-rich culture and set of tools (informal, formal, online, and regular); Talk about performance regularly and let employees create their own goals on a regular basis; Force managers to provide ongoing feedback and teach them how to have honest conversations; Assume that employees already know something about their own performance, and force them to self-assess; Everyone wants to succeed when a person isn't performing it's important to get to the root cause (and help the employee find a better fit); Beware of pay for performance plans as these can create perverse behaviour (people focus on their own goals at the expense of the organisation; in sales related roles this process can work well, but in terms of customer service and production roles this can create problems); Give leaders a cultural framework and set of values to work from (evaluate against these higher level frameworks such as spiritual intelligence); and Reward talent production (in terms of managers, encourage them to produce good work and most importantly produce good talent). 1. Given the picture painted by Bersin (2013), critically evaluate the purpose of performance appraisals? Should they remain as a component of the broader performance management system? Justify your argument. 2. How does Bersin's (2013) research change the way you think about the purpose of performance appraisals in your organisation? 3. Bersin's research infers that greater responsibility should be placed on the employee, eg setting of own goals, selfassessment. How does this differ from the traditional purposes of performance reviews? Do you agree with this approach? What management models (from your other modules) support this view? How does this contribute to a systemic view of performance management? 4. Is it conceivable that performance reviews can shift from judging performance (typing in ratings) to facilitating performance? Assuming the response is "yes", redefine the "purpose of performance appraisals as a component of a wider performance management system". Regenesys Business School 15

20 7.1.3 Performance Management Challenges Performance Management Data is used for Multiple Purposes Performance management data feeds into multiple HR activities, including compensation and promotion decisions, feedback and development planning. In each cases the data is used differently. Perceptions about how the data is going to be used can shape the attitudes and responses of managers and their employees and potentially create bias (Collins and Bell, 2013). For example, a manager may be less inclined to give lower ratings to one of their employees when performance data is used as an input to determine a salary increase or bonus (the manager might be acutely aware of the financial position of the employee). Put yourself in the shoes of an employee: Would I be less likely to listen to and internalise developmental performance feedback if I was concerned that this rating would negatively affect my pay or promotion opportunities especially if I (my family) was counting on a better than average increase? Research shows (Collins and Bell, 2013) that feedback and coaching is a key driver of employee engagement. This means that focusing on compensation at the expense of feedback may be detrimental to driving higher employee engagement and potentially higher organisational performance. Employee Engagement through Performance Management Hewitt (2013) defines engagement as: "The psychological and behavioural outcomes that lead to better employee performance." (Hewitt, 2013) Current research shows that four out of ten employees globally are currently not fully engaged (Hewitt, 2013). The 2013 Global Assessment Trends Report (Fallaw and Kantrowitz, 2013) puts engagement or retention at the top of the "Priorities for HR" in 2013/2014. Regenesys Business School 16

21 Size and Complexity of Multinationals Collins and Bell's (2013) research shows that the size and complexity of Multinational Enterprises (MNEs) introduces inaccuracies (or biases) in the performance management process. Performance itself is defined differently depending on the maturity of the market (eg performance in Germany may be defined differently to an emerging economy) and cultural differences can impact the ability or willingness of managers to have performance discussions with employees thus making it difficult to calibrate performance ratings across such an enterprise. Further, there is a growing prevalence of flatter organisations, matrix structures, team-based work structures, and fluidity and flexibility in employee role assignments. This necessitates that data is co-ordinated and collected from multiples sources (sometimes even involving customers). This places a significant burden on the primary manager, notwithstanding that these stakeholders may pay less attention to accurate assessments and or be reluctant to run the risk of alienating the employee with less than favourable feedback. Rating Scales Research by Collins and Bell (2013) points out that rating scales can get in the way of effective discussions as neither manager nor employee feels comfortable about using the lower end of the scale. The data from their research also emphasises that performance management assessments are typically conducted close to year-end to facilitate using the data in compensation decisions. As a result, this may be rushed through. In some instances, managers draw on the most recent employee performance, which may be limiting, especially if performance management reviews are only conducted annually. Further, employees who recognise this may perform better closer to reviews. They bank on this behaviour as being top of mind in their review. Task Questions 1. How is the data from your organisation's performance management system used? In your opinion, do perceptions about how the data is going to be used shape the attitudes and responses of managers and their employees? Justify your response. 2. Reflect on your organisation's performance management system and the level of employee engagement. What are some of the challenges in the system? Could there be a correlation between the approach taken in the performance management system and employee engagement as defined by Hewitt (2013)? 3. Discuss the complexities that might exist in performance management systems in large MNEs, especially those relating to different cultural contexts and in the case of multiple managers. 4. How important is the timing of appraisal meetings in view of Collins and Bell's (2013) research? Regenesys Business School 17

22 7.1.4 Advantages and disadvantages of performance management systems The advantages of a well-run performance management system versus a poorly conceptualised and managed performance management system are summarised in the table below (Aguinis, 2013). TABLE 2: EFFECTIVE VS INEFFECTIVE PERFORMANCE MANAGEMENT SYSTEMS Advantages of an effective performance management system Managers gain insights into their employees; Increased clarity around job descriptions and task criteria; Motivation to perform is increased especially when linked to development planning; Opportunities to increase self-esteem are created; Employee self-insight and own development opportunities are increased; Opportunities for fairer and more appropriate administrative actions are increased; Organisational goals and divisional objectives are made clear; Increased likelihood of improvements in range and depth of employee competences; Employee misconduct is minimised (shared understanding of expectations); Better protection from lawsuits; More accurate distinctions between good and poor performers; Organisational change is facilitated; Employee retention is increased as a result of increased motivation and commitment; Employees are encourage to voice their suggestions which creates improved knowledge sharing and innovation; and Employee engagement is enhanced (empowerment and passion). Implications of a poorly run performance management system Process is perceived as unfair and discriminatory leading to increased employee turnover; Inaccurate information leading to misleading evaluations; Poor feedback leading to lowering of self-esteem; Poor design and inefficiencies leading to wasted time and money; Deficient systems leading to damaged relationships; between management and employees (often permanently); Perceived mismatch between increased performance and reward/recognition leading to decreased motivation to perform; Unrealistic demands leading to employee burnout and job dissatisfaction; Unfair appraisals increasing the risk of litigation; Unjustified demands on managers' and employees' time or resources; Unfair standards and ratings in general leading to loss of confidence in management's ability to implement the system; The replacement of organisational standards with personal values, biases and favouritism; and Poor communication especially in terms what the ratings are used for. (Aguinis, 2013:4-10) Regenesys Business School 18

23 The most significant differences between effective performance management systems and poorly conceived performance management systems centre around the concepts of: Congruency (compatibility) and integrity (reliability) of the whole; Clarity and transparency; The focus on engagement (commitment) of the employees; and It could also be argued that performance and engagement are inseparable when employees are engaged they are performing and vice versa? Read the next journal article, in which the authors research practical ways to overcome specific performance measurement challenges. Jääskeläinen, A., and Laihonen, H. 2012, 'Overcoming the specific performance management challenges of knowledge intensive organisations', International Journal of Productivity and Performance Management, 62 (4), Task Questions 1. Based on Davenport's (2008) definition of a knowledge worker given in the opening paragraph of the journal article, identify examples of knowledge workers in your organisation. 2. Discuss why the performance of knowledge workers is a key challenge particularly in relation to measurement. In this opening section we have attempted to point out some of the competing views on performance management. We have also highlighted some of the dangers of ill-conceived performance management systems. However, significant advantages may be achieved through a strategically effective and efficient system. Sustained competitive advantage is possibly derived from above-average performance and at the heart of this are the employees. Regenesys Business School 19

24 7.1.5 Thinking Systemically about Performance Management To understand the performance management system you cannot look at each part in detail because some properties only emerge when they are combined together. For example, if we want to understand performance appraisal (eg the effect of this activity) we can only understand this by considering all the constituent parts. We need to look at the job description, the coaching and feedback that have taken place, in other words the whole employee tenure (across all his or her responsibilities) for the period under review. Also consider that every employee in the system brings to the system their understanding of its purpose and their view of the world. This view consists of several elements rational, emotional and cultural perspectives. To understand these views requires an understanding of organisational behaviour. We encourage you to draw, and reflect, on learning from your other modules, specifically from organisational behaviour and leadership. The components of the system continually interact and create a reciprocal flow of influence. We could say that if an employee receives poor or inappropriate feedback (eg not consistent with the culture of the organisation), his or her motivation to perform may be impaired. This, in turn, will induce poorer performance and detachment from the purpose of the organisation. A performance management system is a complex and dynamic combination of several factors, which should not be seen in isolation; Systems nest within systems and these interrelationships should be understood (eg the performance management system is nested within the cultural system of the organisation and those of its employees); and To be effective, the purpose of the system (whole) must be evident (even though the system is dynamic). Given the importance of systems thinking it is useful to identify common parts of performance management systems in terms of their purpose. It is important to reflect on the interplay of these parts. This is shown in Figure 1 below. Each of the parts (seven in this particular framework) has a purpose or plays a role in the system: Strategic Onboarding Administrative Information Development Organisational maintenance Documentation Regenesys Business School 20

25 FIGURE 1: PERFORMANCE MANAGEMENT SYSTEM PURPOSES Organisational objectives purposes Documentation purposes Onboarding purposes (new employees) Organisational maintenance purposes Performance Management System (Values/culture) Administrative purposes Developmental purposes Information purposes (Adapted from Aguinis, 2013) At the centre of the system are the values and culture of the organisation, which transcend into each component of the performance management system. For example, an organisation that values an innovative culture will reflect these values in the processes that make up the performance management system (eg onboarding will have an innovation requirement, etc). From a strategic perspective, the performance management system must be aligned to the strategic choices made by the organisation. This means that employees must know the overarching objectives of the organisation. They must also know how these objectives cascade to their division (team), and how each team member, is expected to individually and corporately contribute toward these. Similarly, they must also know how they will be measured. Onboarding means the transitioning of new employees from outsiders to participants in the sustained performance of the organisation. The performance management system must provide the catalyst for change, ie to behaviours and results that are valued and rewarded in the organisation. This, in turn, would lead employees to understand the organisation's culture and what it values. Regenesys Business School 21

26 Administrative purposes include all those processes that relate to remuneration, rewards, promotion, retention, or termination. The link to administrative processes is to ensure fairness (eg avoid favouritism) and evade unethical practices such as corruption and bribery. It is fuelled by legislative demands and ethical considerations. At the heart of a performance management system is communication it tells employees how they are doing and how they can improve. The expectations are set by the job description and prioritised in terms of the strategic objectives. Aguinis' (2013) term "developmental purpose" refers to the combination of feedback and coaching by using a culture of support (non-threatening) that is focused on helping employees to interpret the feedback both in the context of their jobs (ie organisational performance) and in terms of their career paths (ie short- and long-term). Organisational maintenance refers to the planning efforts required to ensure that the organisation has the right people, in the right place, doing the right things, at the right time. This includes the knowledge and skills required in terms of the strategic objectives and the processes to nurture these (ie sustained competitive advantage derives from internal resources and capabilities). An effective performance management system will alert management to training initiatives. Organisational behaviour will, where necessary, change requirements. Documentation purpose refers to data collection that informs other systems. For example, performance data can facilitate decisions around the selection of new production systems, or new employment selection criteria. The performance management system proposed by Aguinis (2013) demonstrates the need to step back and critically reflect on the reasons why a performance management system is required and how each element contributes to the whole. Regenesys Business School 22

27 Task Questions 1. Think systemically about the framework (adapted from Aguinis, 2013) in Figure 1. What would happen if there were competing values or and an ill-defined culture at the centre of the framework? 2. What would happen if the performance information was not passed through to administration (eg not reflected in remuneration, rewards, promotion opportunities, etc)? 3. Read Chapter 1, Section 1.6, "Characteristics of an ideal performance management system", in Aguinis, H. 2013, Performance Management, 3 rd ed., Cape Town: Pearson Education, and then use these fifteen points to evaluate the performance management system in your organisation. Aguinis's 15 elements include: 1. Strategic congruence 2. Context congruence 3. Thoroughness 4. Practicality 5. Meaningfulness 6. Specificity 7. Identification of effective and ineffective performance 8. Reliability 9. Validity 10. Acceptability and fairness 11. Inclusiveness 12. Openness 13. Correctability 14. Standardisation 15. Ethicality Regenesys Business School 23

28 7.1.6 The Link to Reward Systems A reward system is defined by Aguinis (2013) as: "A set of mechanisms for distributing of both tangible and intangible returns as part of an employment relationship." (Aguinis, 2013:10) Returns include both: Tangible returns (base pay, annual increases based on the cost of living, merit increases/bonuses, tuition reimbursements, allowances, etc); and Relational returns (recognition, employment security, learning opportunities, new and challenging work, work/life focus such as flexible working hours). The very nature of rewards means different things to different people (this is evident in Maslow's hierarchy of needs). For example, rewarding a single mother with flexible working hours may be valued more than a long-term incentive such as stock options. The following texts originate from an article published by PWC (2013), which demonstrate the complexities to be analysed and evaluated. How to manage the millennials? Understand generational differences (tensions): Understand what Millennials and prior generations (Generation X) want and how these desires might be different. Customising benefits: As PWC states, it is imperative to "Get the deal right". It is argued that millennials are attracted to the prospect of customising their benefits. There are also significant gaps between perceptions and reality when it comes to promises of work life balance. PWC emphasise, "If employers want to continue to attract millennials, this has to be addressed companies should review the messages they are sending out and test them against the reality of the employee experience." Help them grow: Mix teams generationally to help millennials grow. Put millennials on special rotational assignments more frequently and challenge them to come up with new ways to exercise creativity and improve processes. Let them know how they are doing: Millennials want and value feedback and they want to know now in real time. They also want to know how they are contributing. Set them free: Millennials want flexibility if you as a manager know what you want done, why does it matter where and how they complete the task? Set deadlines and set them free. Let them learn: Millennials do not think about seniority and time of service. They value results over tenure they will become frustrated with the amount of time it takes to work up the career ladder. Expect them to go: The rate of churn among millennials will be higher than among other generations. Prepare for this churn. (PWC, 2013) Regenesys Business School 24

29 It has been suggested that there are generational considerations in terms of performance management. This has implications for rewards and performance management design. Task Questions 1. Critically evaluate your organisation's performance management system in terms of reward tangible and intangible. 2. What drives your organisation's reward system? 3. Does the reward system pay attention to generational needs? Why/why not? Legal Considerations Employees may challenge performance management systems and this may have legal repercussions. Undoubtedly, the principles of equity and fairness must be upheld. Consider the following advice (Author unknown, 2013a): Performance management systems (eg appraisals) should not be used for punitive or retaliatory reasons; Discrimination must be avoided (eg race, religion, age, gender, disability, marital status, pregnancy, or sexual preference); Accuracy and fairness should be ensured through evidence, examples and, where there is any doubt, from multiples sources; Employees must be able to comment on and express agreement/disagreement with their performance review, feedback, coaching, etc, without fear of retribution (where there is discrepancy the employee should be able to request review clarification or additional comments from an alternative manager); As far as possible, appraisals must be balanced (both good and poor aspects of employee performance should be given); Appraisal results must not be used as the sole basis for decisions (eg promotion, remuneration or termination decisions); Employees must be given reasonable opportunities to improve; Feedback must be timely (if feedback is only given at the end of every year the employee could not be expected to have made improvements during that year of assessment; more frequent feedback must be given if the situation warrants it); Appraisal records, including feedback and coaching opportunities, should be documented and retained according to HRM legislative requirements; Where a very poor appraisal must be given ask for an objective third party view and be prepared to modify your data if this opinion is not supportive of your result; Avoid inflammatory and emotive language in documents (use constructive and factual language that points to the actual job requirements); and Employee information is confidential (only people with an approved need should have access to employee performance appraisal data). Regenesys Business School 25

30 Managers (leaders) must be trained on how to conduct employee appraisals since it can be a sensitive and controversial task. If mismanaged, this can cause serious damage to employee relations and the organisation's reputation as an employer of choice, notwithstanding the potential for legal recourse. Legislation in China How Labour Law is Changing It is useful to point out how legislation is changing in various countries. We have selected China as an example: The Chinese government used to give businesses a great deal of discretion over their employment practices. This practice helped Chinese businesses maintain low labour costs. This policy changed in 2008 with the enforcement of the Chinese Labour Contract Law. This law emphasises greater employee rights (more participative labour relations that emulate the German labour law model). To avoid lawsuits, businesses must build consistent HRM systems such as linking performance and compensation based on quantifiable and measurable standards (Liang, Marler, and Cui, 2012). Liang, et al (2012) explains: "The new law suggests that the government is interested in encouraging more European-style HRM policies, which focus more on employees as long-term stakeholders." Task Questions Read the following excerpt from the journal article by Liang, Marler, and Cui (2012) and then complete the reflective tasks that follow: Performance Appraisals: "In the iron rice bowl era, SOEs [State-owned-enterprises] evaluated employees' work performance according to individual trait characteristics that included virtue (de), ability (neng), and diligence (qing). Actual performance (ji) (ie results) came last in the assessment. This emphasis reflects traditional Chinese culture, which values taking a long-term orientation and holds in high esteem individual effort and positive attitudes. Given this cultural influence, one would expect that Chinese employees would prefer attitude or behaviour-based appraisals over resultbased appraisals. Ironically, however, not only does a result-based approach dominate performance evaluations among Chinese firms, but many SHRM [Strategic Human Resource Management] studies empirically indicate a positive relationship between the use of result-based appraisals and firm performance. In fact, in a survey of employees, Xiao and Bjorkman (2006) found that employees do not consider behavioural appraisal to be a good HRM practice." 1. What does the excerpt above tell you (in your management role) about culture and performance management? 2. Why do you think there might be a difference between national culture and organisational culture and if this is so, what is the significance for performance management systems? 3. Could the arguments that PWC (2013) propose about millennials answer some of the questions that surround the dissonance between Chinese culture and the current results-based focus? 4. Liang, et al's (2012) article also reveals that Chinese employees prefer differential reward allocations rather than equal allocations again this is inconsistent with their collectivistic values and socialist ideologies. Reflect critically on the potential for management to make faulty assumptions about what motivates their employees. Regenesys Business School 26

31 7.1.8 Trends in Performance Management To conclude this section we look at trends in performance management, including trends that occur in different countries. Performance Management in a New World of Work Adachi, Gretczko, and Pelster (2013) argue that conventional processes to performance management are becoming increasingly obsolete. Their research shows a shift from the traditional approach shown in the table below to the corresponding list of emerging trends. TABLE 3: PERFORMANCE MANAGEMENT IN THE NEW WORLD Traditional approach Emerging trends Hierarchical è Networked Direct è Coach Top-Down è Bottom-up Process-focused è Outcome-focused Autocratic è Democratic Measures è Improvements External rewards è Intrinsic reward Fixed organisation è Matrix organisation Annual cycle feedback è Just-in-time feedback Weakness-based è Strength-based (Adachi, Gretczko, and Pelster, 2013) Adachi, et al (2013) argue that much has changed in the business world, eg individuals migrating from one cross-functional team to another (each with a different leader). What has not changed is what leaders and employees want from performance management systems: Leaders want a broad view of the organisation's human resource performance; and Employees want a fair and valid assessment process. To achieve this, the top-down annual performance evaluations (often based on aged feedback or vulnerable to the recency effect) are becoming obsolete. Some organisations are even considering social media tools to access in-the-moment feedback from peers, customers, and other stakeholders to rapidly improve their performance (based on the 360 degree appraisal approach). Regenesys Business School 27

32 A Workforce of One Customisation is increasingly being adopted across organisational systems, including performance management systems. The driver for the customisation of the performance management system (Cantrell and Smith, 2013) is the rise of more complex knowledge work and the increasingly difficult task of standardising these jobs. Some authors argue that this makes today's generic onesize-fits-all performance management systems obsolete, if not detrimental to an organisation's bottom line. In their recent work, Cantrell and Smith (2013) reveal that pioneering companies are "now using customisation to transform how they manage their people" developing systems for personalisation rather than sameness. "Leading companies are applying the same business logic to their employees that made customisation so successful with customers. Just as organisations now gain an edge by understanding their customers and give them tailored experiences, companies that customise work experiences and HR policies for employees can achieve a sustainable market advantage." (Cantrell and Smith, 2013) Actually, this does make sense employees can be measured and rewarded in ways they personally value, which leads to increased motivation to excel (to engage fully). This in turn leads to reduced attrition rates and the lowering of turnover costs. Consider the following typical survey respondent's comment: Aspect of work: How work is evaluated One-size-fits-all: Generic assessment criteria and appraisal method Survey respondent comment: "Performance appraisals are merely a bureaucratic exercise to set merit increases. They don't help me improve my performance, because the criteria I'm rated on don't align with what I actually do in my job." (Cantrell and Smith, 2013) Cantrell and Smith (2013) propose that a wider range of criteria be used to segment employees and that these should allow employees to custom-configure their own work experience. For example, Best Buy lets its employees determine how they want to accomplish tasks as long as they get the job done. As employees have more diverse and personalised experiences in the workplace, the performance management systems of the future will have to find new ways to unite employees behind the organisation. Regenesys Business School 28

33 Task Questions 1. Critically evaluate the following statements (Adapted from Cantrell and Smith, 2013): 1.1 "Performance management systems will need to view employees as individuals with unique needs and preferences who are capable of making work-related decisions for themselves and their subordinates within a structured framework." 1.2 "By applying the principles of customisation gleaned from their marketing counterparts, performance management system professionals can create an environment where individuals can flourish even as organisations maintain some measure of control." 1.3 "Organisations that make it possible for employees to excel through personalised work experiences and the respective performance management system set the stage for new heights in performance." 2. Chapter 1, Section 1.8 "Performance Management Around the World", in Aguinis, H. 2013, Performance Management, 3 rd ed., Cape Town: Pearson Education, highlights some of the differences between systems adopted in, for example, the United Kingdom and India. Read and reflect on this section and then carry out your own research into performance management systems in your country (or countries in which your organisation does business). What are the distinguishing features you should be aware of? Evaluate these features in terms of the performance management system in your organisation. 3. Complete the case study 1-3, "Distinguishing Performance Management Systems from Performance Appraisal Systems", pp in the recommended textbook, Aguinis, H. 2013, Performance Management, 3 rd ed., Cape Town: Pearson Education. Regenesys Business School 29

34 7.2 PERFORMANCE MANAGEMENT PROCESSES Timeframe: Learning Outcome: Recommended Book: Recommended Articles: Section Overview: Minimum of 40 hours Critically explain performance management terminology, concepts, definitions, models and techniques. Chapters 2, 4 5, 6, and 7 in Aguinis, H. 2013, Performance Management, 3 rd ed., Cape Town: Pearson Education. Maley, J., and Kramer, R. 2014, 'The influence of global uncertainty on the cross-border performance appraisal', Personnel Review, 43 (1) This section deals with the performance management process, including competing perspectives on what to measure and how best to measure performance. The performance management process is located within several challenging viewpoints, for example those of results versus behaviour approaches and comparative and absolute measures Performance Management Concepts Before we consider the performance management process it is useful to reflect on the following concepts: Self-efficacy; Self-regulating models; Creating purpose-driven practices; Segmentation; Declarative knowledge, procedural knowledge and motivation; and Re-defining performance management at the top. Self-efficacy Self-efficacy is the belief in one's capabilities to succeed at something. In short, our belief about our capabilities impacts on our success. When managers believe they cannot influence behaviour, (eg increased performance), they give up on any efforts to do so. By contrast, managers who believe it is possible to change the course of employee performance, tend to set increasingly challenging goals, and in turn the employees perform well. In short, when people are focused on the fact that effort itself generates results (not talent) they achieve better than expected results (Rock, Davis and Jones, 2013). Belief in employee capabilities depends on the phrasing of the feedback. In other words, if the feedback is phrased in terms of effort and not ability, and if the feedback provides suggestions on what to focus, such effort will provide positive results (Rock et al, 2013). Regenesys Business School 30

35 Research has shown that praise for effort helps to drive improved performance as compared to praise for talent. (Rock et al, 2013) Self-regulating Models Many of the related with performance management are associated with the notion that, "If I don't manage you, there will be no performance" (Bogsnes, 2013). Bogsnes (2013) argues for a new approach to performance management one that is less about managing performance and more about creating conditions for great performance. His argument is: "We need self-regulating models, requiring less management, but more leadership from everyone." Consider the following analogy: A traffic robot can manage traffic, but those managing the process (programmers) are not in the situation; information used is not fresh (real-time) which is clear when the traffic is snarled up in front of a red light. The roundabout is a very different alternative. Those managing the situation are the drivers themselves. The information being processed by the drivers themselves is real-time coming from their own immediate observations. The traffic continues to flow with cars seamlessly integrating into a flow. While that information is also available in front of the traffic light, drivers do not have the authority to act on it going through the red robot would be breaking the law (rules). (Bogsnes, 2013) In the analogy above, the robot system is rules-based whereas the roundabout is values-based. However, consider that the drivers adopt the following values on a roundabout "Me first, I don't care about the rest"? This would create a serious problem in a roundabout. In the roundabout system, drivers must be considerate, open about own intentions while trying to understand the intentions of other drivers. Think of the traffic authorities as management. When management creates conditions for self-managed performance to occur, it requires values. Management has to allow for values (inculcate values) if performance systems are to foster intelligent behaviour (realtime and adaptive). Traditional management practices may hinder practices that could make us the agile organisation we need to be. Do we want robots or roundabouts? Do we have the value system in place to support roundabouts? Regenesys Business School 31

36 Creating Purpose-driven Practices Wright (2013) argues that one of the most important aspects of an organisation's performance management process is that it is integrated into the ways in which the organisation does business. The process requires an anchor. Without this there will be no ownership and little sense of purpose. Wright (2013) describes: "It will feel like a stand-alone exercise that induces more frustration and cynicism than admiration and will be treated accordingly with all the suspicion and disdain that many are subject to today". Managers must begin by interpreting strategy and establishing objectives for themselves and the employees for whom they are responsible. Wright (2013) maintains that in the absence of a strategy, two poor alternatives normally emerge: (1) High-level financial targets. Employees will argue that these have been manipulated when bonuses are not paid) and (2) Targets being set at local levels without due consideration for high-level objectives. This will create a disconnect with the big picture strategy since managers put down the things they are already working on as their pet objectives. Wright (2013) also argues that individual training plans, training and development interventions, and the long-term approach to human resource management do not have to be pigeon-holed into the organisation's financial timeframes. The outcome of Wright's research is that "separating career and compensation discussions is an essential prerequisite for ensuring that important human resource decisions are not corrupted by a sense of individuals simply wanting to negotiate their bonus". Equally important to the process is simplicity. Trying to fit all the requirements listed below into the process (12-month cycle) is a major feat of logistics: Goal setting; Competency management review; Data collection methods (eg 360 degree feedback); Basis of deciding all annual payments and long-term incentive decisions; Forced distribution curves to ensure fairness; IT systems capable of allowing for matrix organisations to capture manager inputs; Individual development plans (the most important and often the most time consuming); Fostering the necessary conversations (communication) between employees and managers; Providing feedback to employees (including coaching programmes); Appeals processes; Creation of a paper trail that will serve as a defence against any legal action to be taken; The closing off of one year and the next one started. The younger generation is particularly interested in seeing the organisation's commitment to invest in their future. When selecting an organisation to work for, that organisation's level of commitment is crucial for them. The process in itself is time consuming. Regenesys Business School 32

37 The combined effect of the above should create a purpose-driven set of practices to create a meaningful engagement with performance improvement. Wright (2013) states, "no two systems will be the same, and doing it badly is worse than not doing it at all." The key message appears to be keep it focused (purposeful) and simple. Segmentation Jesuthasan (2013) proposes that to achieve strategic priorities, an organisation must understand how its different employee groups drive value (strategically or operationally). Best practice organisations use workforce segmentation to accomplish this. Consider the following example: In a global airline, having 100% of pilots operate at the expected level of performance is essential to the integrity of the business model, while having flight attendants strive to exceed customer expectations is critical to differentiating the airline on the basis of its primary strategy: customer service. It is useful to distinguish between the pivotal role (such as that of the flight attendant which is essential to implementing a given strategy) and a proficiency role (such as that of the pilot, which may be essential to operating the business at a particular level of quality but not pivotal to strategic differentiation). (Jesuthasan, 2013) Workforce segmentation helps organisations to understand where variation in performance among employee groups really matters. In the example of the airline, pilots must perform at a certain level, but to be a high-performing airline, the differentiation lies in the performance of the airhostesses. Think about your own organisation what is operationally important (eg an industry standard) and what is strategically important (will set the organisation apart from all others)? How does knowing what is operationally important and strategically important change the way you think about performance management? Regenesys Business School 33

38 Business Model Risk Tolerance Jesuthasan (2013) also points out the importance of linking risk tolerance to performance management. In industries with low business model risk tolerance (eg healthcare, financial services, construction) a mistake can be detrimental to the organisation's reputation and may even lead to insolvency. Conversely, for industries with a high business model risk tolerance (eg retail industry), the negative effects of a mistake can be overcome more easily, and the consequences will be more limited. Therefore, organisations with high business model risk will focus on meeting specific objectives within a narrow range of performance standards (little performance calibration and little or no reward differentiation) consistency and compliance are the basis for measurement. On the other hand, organisations with low business model risk will focus on leverage and differentiation (reward discretionary effort and differentiation) (Jesuthasan, 2013). What type of industry is your organisation in high business model risk or low business model risk? How does your current performance calibration and reward system fit with your organisation's risk profile? Select one job role in your organisation and determine role tolerance (narrow performance tolerance is associated with high safety or regulatory requirements). What are the implications of performance management for this role? Declarative Knowledge, Procedural Knowledge, and Motivation Aguinis (2013:89) poses two important questions: "What factors cause an employee to perform at a certain level?" And, "Why do certain individuals perform better than others?" To answer these questions, Aguinis points to three important elements as shown in the table below. TABLE 4: DETERMINANTS OF PERFORMANCE Declarative knowledge per task Procedural knowledge per task Motivation per task Facts Principles Goals Cognitive skill Psychomotor skill Physical skill Interpersonal skill Choice to perform Level of effort Persistence of effort PERFORMANCE = Declarative Knowledge x Procedural Knowledge x Motivation (Aguinis, 2013:89) Regenesys Business School 34

39 THE THREE DETERMINANTS HAVE A MULTIPLICATIVE RELATIONSHIP IF ANYONE OF THEM IS ZERO THEN PERFORMANCE ALSO HAS A VALUE OF ZERO. Samuel is a mechanic at a large Mercedes garage. He has extensive knowledge of the different models and how to use sophisticated equipment to test and repair faults in below average time his declarative knowledge is high. Samuel is also highly intelligent he can respond quickly to new product specifications and adapt to complex work schedules that require mechanics to work on several cars simultaneously. He is also physically strong. His manager also considers his procedural knowledge to be high. However, currently, Samuel does not show any motivation to perform; instead he sits in the mechanics' coffee corner at every opportunity and takes long lunches (10 x 10 x 0 = 0). What the example shows us is that in determining performance all three factors must be assessed together they are interdependent. Depending on the context, declarative knowledge may be the simplest to rectify, followed by procedural knowledge. What might be more difficult to rectify through a development plan is motivation. This may require a different strategy (eg job rotation, new job description, or more challenging tasks). It is useful to keep the above in mind for two reasons: To performance-manage employees; managers must borrow from organisational behaviour concepts; and Performance management is not limited to isolated measurements but it is rather a systemic view of several combined concepts. Redefining Performance Management at the Top Most performance management systems adopt a one-size-fits-all approach to performance management. According to Lee, Rose, and O'Neill (2013), this is around 77%. Very few organisations have been seen to tailor the process for the top tier (Lee et al, 2013). The myth suggests that executives are competent and that the same accountability standards do not apply. When considering the complexity of the responsibilities surrounding executive roles, an organisation would produce better results "by building a distinct performance process that recognizes the unique challenges and feedback needs of executives" (Lee et al, 2013). If the purpose of our performance management system were to, for example, drive results and build organisational capabilities, why then would we overlook top tiers? Lee, et al (2013) raise the following issues that often disqualify senior executives from the performance management system: Myth 1: Senior executives do not need feedback; Myth 2: You cannot teach successful dogs new tricks; Myth 3: The money is all that counts; and Myth 4: At this level goals are self-evident. Regenesys Business School 35

40 Task Questions The following excerpts are from the research of Lee, et al (2013). Using your own organisation as the basis for reflection, critically evaluate the following statement: 1. "Even when the organisation uses a balanced scorecard that includes non-financial goals (eg financial operational, people, and client), the scorecard can leave executives at a loss regarding their personal accountability for the nonfinancial factors." 2. "Goals are commonly established in silos and are often based on inadequately confirmed assumptions about resources or other dependencies managed by other business leaders. This creates goal ambiguity a lack of understanding about how senior executive goals relate to the goals of their peers." 3. "Executives suffer from an appraisal paradox: the higher one's position in the organisation, the less likely one is to receive rigorous, constructive feedback." 4. "The performance management system for executives needs to reflect the 'Facts of Executive Life': the executive's public persona (representation of the company to all stakeholders); how comfortably top executives engage with all levels in the organisation; and the caretaking responsibilities including fostering community and a positive culture." Lee, et al (2013) recommend three performance management process design factors for senior executives, shown in the table below. TABLE 5: FOCUS AREAS FOR SENIOR EXECUTIVE PERFORMANCE MANAGEMENT CLARITY CAPABILITY CULTURE Individual accountability for balanced scorecard goals Process to identify crossdepartmental goal dependencies Senior executive success profile or competency model Internal supervisor as primary feedback source Supplemental feedback such as financial results, 360 degree feedback, employee surveys, and customer surveys Radical transparency Belief in potential for executive behaviour change Development orientation Accountability (Lee et al, 2013) In terms of clarity, Lee et al (2013) emphasise accountability for each executive on goals within each quadrant of, for example, the Balanced Scorecard. This requires a goal alignment process typically facilitated in the form of cross-business unit/department meetings. Assumptions need to be vetted and goal interdependencies clarified. Based on this, a senior executive success profile (competency model) can be drawn up against which performance factors can then be measured. Important to the concept of clarity, capability, and culture is qualitative feedback directly from executives, senior management or supervisors received regularly and with candour (qualities of openness and honesty). External coaches have become a popular choice but should not replace the first-hand feedback from own employees (ie other managers/supervisors). In support of the discussion above on self-efficacy, executives are responsible for creating an environment where people believe in the power of effort supported by feedback. Regenesys Business School 36

41 Task Questions 1. Evaluate the following statement in terms of your own and other organisations: The lack of appropriate tools, compounded by fear of confrontation, time pressures, misguided beliefs about the potential for behaviour change by seasoned executives and abdication of supervisory responsibilities by executives have created a situation where expectations for complying with performance management are low. 2. Carry out your own research on the term radical transparency and critically evaluate the implications for performance management The Performance Management Process A process infers interrelated parts that follow a structured development (albeit iterative where necessary) toward an end goal. In Figure 1 we considered an example of the interrelated parts in terms of purpose. Here we look more closely at an example of the interrelated parts in terms of process (Figure 2). FIGURE 2: PERFORMANCE MANAGEMENT SYSTEM PROCESS 1. Prerequisites 6. Performance renewal and recontracting 2. Performance planning 5. Performance review 3. Performance execution 4. Performance assessment (Aguinis, 2013:39) Regenesys Business School 37

42 Each of the above recommended elements are interdependent. The poor implementation of one has an effect on the remaining processes. Aguinis (2013:38) recommends that this process is ongoing and does not take place once a year. Aguinis (2013:38-53) explains each component in the process: 1. Pre requisites: Two important elements are required before a process can be developed knowledge of the organisation's mission and strategic goals; and knowledge of each individual job (through an in depth job analysis that produces a job description). The organisational goals must be cascaded down to each department and each employee must have a set of goals that are consistent with the goals of the organisation, the department, and his or her job analysis and description. FIGURE 3: PERFORMANCE MANAGEMENT PROCESS PRE-REQUISITES Organisational goals Departmental (or Business Unit) goals Individual (or team) goals Job description (KSAs) The job description, derived from the job analysis, includes knowledge, skills and abilities (KSAs). These are important for achieving the individual goals. This means that the individual must be equipped with the necessary explicit (information) and tacit (experiential) knowledge, skill sets (eg meeting management) and abilities (physical, emotional, intellectual and psychological aptitude to perform the work). It is important to align the job analysis to the departmental objectives; otherwise improvement efforts will be misdirected. The focus must be on what matters. For example, if the overarching strategic direction of the organisation is toward quality improvement, then each individual's job description must include this objective. Consequently, the KSAs must support this focus (eg knowledge, skills and abilities that will facilitate improved quality). Regenesys Business School 38

43 Task Questions 1. Ensure that you have a comprehensive understanding of the two concepts (your recommended textbook, pp 40-45) explains the various approaches): 1.1 Job analysis 1.2 Job description 2. Compare their descriptions to the processes used in your organisation and motivate, where appropriate, to make improvements. 3. Critically evaluate the extent to which your organisation's strategic goals, departmental (business unit) goals, individual (team) goals and job descriptions are aligned. 2. Performance planning: This component includes planning towards results, behaviours and development plans. In essence this refers to the "what" and the "how": Results (the what): These are the outcomes an employee must produce (specific goals or standards for which he or she is accountable. The results are stated in measurable terms, eg $ target, number of units, less than 10 defects, more than 95% product knowledge, 100% deadlines met, etc). Refer to the full definition of "performance standard" in the glossary of terms. Behaviours (the how): These are criteria relating to how the job to be done should reflect qualitative measures to provide a complete picture of employee performance (eg written/oral communication, negotiation skills, organisational values, team commitment, creative thinking, etc) Development plan: This plan identifies the gaps in the "what" (results) and "how" (behaviours). For example, the current baseline might be 75 units per day but the results require 100 units per day., The root cause of non-performance could be identified by means of meaningful feedback and conversation. A combination of technical skills and teamwork, for which additional coaching and coordination is planned, could be identified. The employee should also be encouraged to set his or her own goals to achieve the "what" and "how". 3. Performance execution: The employee commits to (engages with) his or her tasks and goals including the agreed upon development plan to achieve these. Management assessment, self-assessment, and peer-assessment combine to provide an ongoing evaluation process. Both the employee and manager are responsible for achieving these goals. This is a shared responsibility. Key factors must be present: Commitment to (engagement with) goal achievement; Continuous performance feedback and support (coaching); Two-way communication with manager/supervisor (informal); The collecting and sharing of performance data; and Preparation for next formalised review. Regenesys Business School 39

44 4. Performance assessment: This is a shared evaluation of the gap between the planned and the actual (results and behaviours). Formal appraisal forms are used to record the assessment, as this provides both the employee and supervisor or manager with opportunities to rate performance. 5. Performance review: This meeting provides a space for a one-to-one conversation (and feedback) about the past and the future (eg what is going well and not so well). This meeting may also include a discussion on merit increases (rewards) in line with performance. 6. Performance renewals and re-contracting: This is essentially a repeat of the performance planning stage where results, behaviours, and developmental planning are re-affirmed (or renegotiated). When the performance management process is completed on a six-monthly cycle it might mean that only minor changes are made, since the strategic direction of the organisation is unlikely to change significantly. However, if performance renewal and recontracting falls at the end of the year, or at a point when there is significant organisational change, this step can include substantial changes. The objective is to maintain alignment (integrity of the whole). Task Questions 1. The strategic direction of organisations may remain constant for a period of time (eg two years), however, at some point the direction is likely to shift. What impact does this have on job analysis and specifications that were agreed when an employee was appointed to his or her position? 2. Aguinis' (2013:43) performance management process suggests that job analysis and job descriptions should be part of the performance review form. Critically evaluate the benefits and costs of making job descriptions a part of the performance review form as opposed to maintaining separate but integrated documents (eg KRAs only). 3. Carry out your own research into two other performance management processes. Critically evaluate these in terms of the process provided by Aguinis (2013). 4. Reflect critically on the differences that would be required, if any, in different contexts, eg manufacturing industry versus retail industry; high business model risk vs low business model risk; and executive performance management. Regenesys Business School 40

45 7.2.3 Measurement Approaches Now that we have considered the process, our attention turns to the measurements, which are more specific determinants of performance. Regular Practice versus Deliberate Practice It is useful to begin by distinguishing between two concepts: Regular practice (repetition without a goal); Deliberate practice (repetition with a goal practicing with a purpose). Regular practice suggests repeating a task, at regular intervals, without consciously aiming to improve with each repetition. Deliberate practice means repeating the task with a specific goal in mind and making adjustments after each attempt (based on quantifiable measurements) to improve on the previous attempt. Successful people are known to use deliberate practice (also called reflective practice). Aguinis (2013:90) emphasises the following five steps: 1. Approach the performance with the aim of increasing it with each repetition. 2. Determine what is happening during execution and why you are executing the task in a particular way. 3. Seek performance feedback at regular intervals from a range of sources. 4. Establish mental models (muscle memory) of tasks performed well, in different contexts, and against specific goals. 5. Repeat steps 1-4 on an ongoing basis. What is the significance of the five-step approach to performance management? Use an employee that you manage and a particular task of theirs to understand the significance; How does this make you think differently about individual development plans, coaching, and feedback? Regenesys Business School 41

46 Measuring Task Performance and Contextual Performance When considering measurement two important factors emerge: Task performance. This refers to the fundamental activities that transform raw materials into the goods and services that the organisation produces. This also includes the activities that assist in the transformation processes, for example planning, co-ordinating, and supervising activities that enable the organisation to function effectively. Contextual performance. This refers to behaviours that contribute to organisational effectiveness. Examples include to persist with enthusiasm, exert extra effort, be punctual, volunteer to carry out tasks outside of one's job description, make constructive suggestions, co-operate with others, follow policies and procedures, act with loyalty, etc) An employee can be highly proficient at a task, but underperform in contextual performance. This suggests that a performance management system must measure both factors. Task performance will vary across jobs, but contextual performance is fairly similar across tasks and hierarchical levels; Task performance is likely to be role prescribed whereas contextual performance may not be explicitly stated; and Task performance is mainly influenced by abilities and skills (cognitive) whereas contextual performance is mainly influenced by personality (eg perseverance). Aguinis (2013) provides several persuasive reasons why both task and contextual performance dimensions (measurements) should be included in performance management systems: It is difficult for an organisation to compete successfully if its employees do not engage in positive contextual behaviours, specifically those required by certain industries; Contextual behaviours can have a profound effect on customer satisfaction (eg extra effort to satisfy customer needs); Teams are here to stay and contextual performance is essential to team work; and Employees who are measured (rated) are more satisfied with a performance management system that includes contextual performance (believe it is a fairer reflection on performance). When managers or supervisors measure performance they incorporate contextual dimensions (consciously and even subconsciously) although these are not made explicit. This leads to subjectivity. The preferred approach is to make the contextual factors explicit. Research has demonstrated that organisations that include both measurements (task and context) are more successful. (Aguinis, 2013:94) Regenesys Business School 42

47 Measuring Voice Behaviour Aguinis (2013:93) defines "voice behaviour" as: "A type of behaviour that emphasises expressions of constructive challenge with the goal to improve rather than merely criticise, it challenges the status quo in a positive way, and is about making innovative suggestions for change and recommending modifications to standard procedures even when others, including an employee's supervisor, disagree." (Aguinis, 2013:93) The behaviour of challenging the status quo is non-conformist and can be seen as a threat to some supervisors or managers. However, in a healthy organisation that is receptive and adaptive to change, "voice behaviour" is included as a measurement and reward.. Perspective on What to Measure The founder of the Chinese company Haidilao does not believe in formal performance evaluation based on quantifiable financial measures (Liang, Marler, and Cui, 2012). Senior management believes that store managers are not responsible for financial outcomes like sales revenue or profitability. Rather, the company pays close attention to employee initiatives, customer satisfaction, and employee development at each store. They argue that managing these three key aspects well will result in outstanding financial performance (Liang, et al, 2012). This example provides a useful reflection point: Care should be taken in terms of what really drives performance as this has implications for performance management system design. Behaviour, Results, and Trait Approaches The following diagram (Grote in Aguinis, 2013) shows the interrelationship between the three approaches to measurement: Behaviours, results, and traits. FIGURE 4: JOB PERFORMANCE IN CONTEXT An individual (or team) with certain traits In a given work situation Engages in certain behaviours That produce various results (Grote in Aguinis, 2013:95) We consider each of the elements. Regenesys Business School 43

48 Behaviour approach The behaviour approach records what people do on the job and excludes other factors. For example, a sales person may not be able to close a deal because of a downturn in the economy in spite of applying all the right behaviours. This suggests, that in some instances, the link between behaviours and results may be unrelated and it is therefore better to measure the behaviours. Additionally, when the outcomes occur in the distant future (months or years), behaviour measurement is preferred. Also consider that if the results are beyond the employee's control, it makes more sense to emphasise the measurement of behaviours as shown in the next example: Consider two assembly line workers one on a day shift and the other on a night shift. Measuring their performance in terms of results may be unrealistic, since breakdowns might be fixed more timeously during the day than at night. This places the night shift worker at a disadvantage: Both employees may be equally competent and responsible, but the given work situation precludes the night shift worker from performing equally well. (Aguinis, 2013:96) Results approach This approach focuses on the results (outcomes) produced by the employee. As such, it ignores the traits and behaviours used to achieve those results (eg it measures number of errors, sales, etc). This measurement approach lends itself to quantitative measures that are easily understood. When this approach is used, less time is spent on defining behaviours. The results approach is suitable in scenarios: where: The outcome requires experienced employees who are skilled in the needed behaviours: A qualified technician can only implement certain tasks based on his or her qualification. Therefore the behaviours are a prerequisite of the task and do not need to be measured. Only the outcome is important, eg the number of calls completed in a day. Behaviours and results are obviously related (some tasks are highly structured and the task could not be completed at all without following the necessary procedures, eg a delivery person must have a delivery list, a route plan, and the requisite documentation and goods. Therefore, measurement might only be concerned with accuracy and timeliness in completing the schedule. Results indicate consistent improvement over time. When a consistent improvement in results is demonstrated then it is evident that the employee knows what behaviours and traits are required. This is only a matter of reaching the target results. When there are multiple ways to do the job. In creative or innovative environments employees may be required to be resourceful in the ways in which they are able to complete the tasks. Management has little concern for the means. They are rather concerned with the end result, eg a chef could use multiple ways to compile a menu but it is the end result that counts. By attempting to control and measure the behaviours the restaurant could impede the chef's tacit or experiential knowledge. Regenesys Business School 44

49 Task Questions 1. Identify examples in your job description where performance should be measured using a: 1.1 Behaviour approach 1.2 Results approach 2. Discuss why this makes a difference in terms of performance management. Trait approach This approach ignores specific situations, behaviours and results but focuses on the individual performer, for example, using: Cognitive abilities (eg intelligence); and Personality traits (eg conscientiousness). Professional human resource practitioners with knowledge of applied psychology typically use this approach. Implementing a performance management system that includes the traits approach is complex since traits are under the control of individuals. In some cases this is not likely to change over time. In some cases, employees may also view this approach as unfair because they feel some traits are beyond their control (eg concentration spans). Aguinis (2013:99) points out that certain traits (eg intelligence) do not necessarily lead to desired behaviours and results as we pointed out in the disparity between effort and talent. Further, if the work situation is undesirable, even an intelligent and conscientious employee is not likely to engage in behaviours conducive to achieving the desired results. There are, however, instances were the trait approach to measuring performance might be desirable. Aguinis (2013) explains this in the example below: As part of an organisation's business strategy it may be anticipating drastic structural changes (eg into international markets) that will lead to the reorganisation of most functions and the resulting reallocation of employees. In such circumstances, it may be useful to assess the traits possessed by the various individuals so that fair and appropriate decisions can be made regarding the future allocation of human resources across the newly created organisational units. (Aguinis, 2013:100) While the above example might only occur in selected instances, it highlights that traits should not be excluded from performance management measurement approaches. However, Aguinis (2013:100) argues that the more popular approaches to measuring performance are based on behaviours and results. The thinking might be that traits should be appropriately assessed during the recruitment stage. Regenesys Business School 45

50 Task Questions Complete the following four case studies and answer the respective questions in your textbook pp (Aguinis, H. 2013, Performance Management, 3 rd ed., Cape Town: Pearson Education): 1. Diagnosing the cause of poor performance (4-1) 2. Differentiating task from contextual performance (4-2) 3. Choosing a performance measurement approach at Paychex, Inc. (4-3) 4. Deliberate practice makes perfect (4-4) Measuring Performance Given our previous discussions on the importance of measuring both results and behaviours, it is useful to explore the processes to carry out measurement. Measuring Results Theoretically, to measure results you must determine the objectives against which the results will be measured and the standards that will be applied. This is necessary to determine the level of performance against these results. Consider the following diagram: FIGURE 5: MEASURING RESULTS PROCESS Key accountabili.es (from job descrip.on and strategic priori.es) Expected objec.ves (SMART) Performance standards (Yards.cks) (Adapted from Aguinis, 2013: ) Regenesys Business School 46

51 The key accountabilities derive from the job descriptions, with some flexibility depending on the strategic direction of the organisation. Clearly, if the strategic direction of the organisation has changed significantly then job descriptions (core responsibilities) may need to be renegotiated. It is important to allocate a weighting (percent) to each accountability. For example, if quality improvement is a strategic priority, this should carry a greater weighting than other accountabilities (eg 30% of the weighting, whereas other accountabilities might range between 10% and 20%). Key accountabilities must be grouped appropriately, for example issues relating to the broad areas of quality management, time management, and cost management. The expected objectives must be made specific (eg quality targets stated in specific, measurable, achievable, relevant and time-based terms). While the objectives should be challenging, they must be realistic and agreed upon. Aguinis (2013:110) argues in favour of limiting the number of objectives (five to ten). Yet, consider that too few objectives may not contribute sufficiently toward strategic priorities and job descriptions and too many may not be achievable. Performance standards are the criteria (yardsticks) against which the objectives are measured. These standards can be internal to the organisation (eg 40 units per hour) or they can relate to industry or professional standards (eg according to local or international legislation; ISO standards, etc). Effective standards: Are observable or verifiable; Include appropriate flexibility provide a range within which the employee is expected to perform (eg within one or two days, etc), especially if the standard depends on external factors (eg the performance standard depends on inputs from another source); Reliable in that the observed performance of the standard is accurate; Valid in that the standard measures what it is intended to measure; Are without any form of bias or dispute; and Are reviewable on a regular basis. Efficient standards provide performance results using the least amount of resources (time and costs). Task Questions 1. Critically evaluate your performance management agreement using the above results based approach. In your analysis, select only those criteria that are results-based and evaluate these against the three criteria given in Figure 5 above. 2. What recommendations would you make based on our discussions? Justify why this would lead to a more effective and efficient measurement process. Regenesys Business School 47

52 Measuring Behaviour The behaviour approach relates to how the results are achieved (eg through communication; adaptive and resourceful or creative thinking; dependability, etc). Aguinis (2013: ) distinguishes between two measurement types: Differentiating competencies: These proficiencies allow the distinction between average and superior performers; and Threshold competencies: These are the proficiencies that everyone needs to display to perform the job to a minimum adequate standard. Consider the example provided by Aguinis (2013): The IT project manager must have: Differentiating competence: Process management (the ability to manage project activities); Threshold competence: Change management (knowledge of operational and relational skills and sensitivity to motivators that he/she will require). Therefore, in order for the IT project manager to meet performance expectations he or she must possess process management and change management competencies. (Aguinis, 2013:113) To measure behaviours we need to measure competency indicators. A competency can have several indicators. If these indicators are displayed, it suggests that the competency is present. However, as Aguinis (2013:114) states, "the measurement of competencies is intrinsically judgemental". Two types of systems are used to evaluate competencies: Comparative systems (comparing employee A to B) and Absolute systems (comparing employees with prescribed performance standards). Table 6 provides a synopsis of the various comparative and absolute behavioural measurement systems (Aguinis, 2013). Aguinis (2013: ) emphasises that forced distribution (comparative methods) assumes that performance scores are normally distributed. Some employees perform highly, some poorly and the majority perform somewhere in between (the Bell Curve). However, consider that a unit is comprised of all high performing employees or conversely all low performing employees. The very nature of the unit is such that job performance is rarely normally distributed (eg the team members each contribute in different areas of responsibility, which cannot be compared). Regenesys Business School 48

53 TABLE 6: COMPARATIVE VS ABSOLUTE MEASUREMENT SYSTEMS Comparative Absolute Simple rank order Relative percentile method Forced distribution 'Essay' Behaviour checklist Critical incidents Graphic rating scale (also known as Behaviourally Anchored Rating Scales, BARS) Employees are simply ranked from best to worst performer. Explicit comparisons are made between each employee against the performance of all other employees using a 100-point scale (50-point marks the average employee). For example, employee A is rated at 95 in terms of communication (well above average) and employee B is rated at 45 (slightly below average; 55% of employees are better communicators than employee B). Employees are apportioned according to an approximately normal distribution. For example, 20% of employees must be classified as exceeding expectations, 70% must be classified as meeting expectations and 10% must be classified as not meeting expectations. Made popular by GE (Jack Welch) through their 'vitality curve'. Individualised account of each employee without reference to other employees; strengths and weaknesses are identified and suggestions for improvement made. Consists of behavioural statements with behavioural indicators (eg "always", "very often", "fairly often", "occasionally", and "never"). The rater ticks the response category that best describes the employee's behaviour. The responses are weighted and the "anchors" can range depending on complexity: 3-point scale; 5-point scale; and 7-point scale. Gathering of reports of situations that reflect effective or ineffective behaviours in accomplishing jobs Clearly defined statement of what is required with a rating option provided (often linked to critical incidents), eg "The project management initiation phase consists of inputs, processes and outputs. Rate Peter Smith's performance knowledge of the inputs required to initiate a new project. The scale (eg 5-point scale) speaks directly to the measurement, eg: Unaware or not interested; Needs additional training; Aware of inputs in initiation phase; Excellent knowledge of project initiation inputs; and Superior knowledge; ability to train others. Advantages: Easy to explain; Decisions resulting from these methods are fairly straightforward; Easy to see which employees are where in the distributions; and Bias is reduced as compared to absolute systems (you cannot give high, low, and central tendency scores to most employees). Disadvantages: Employees compared only in terms of a single overall category which does not include 'rich' information about behavioural contributions; Based on rankings (not scores) therefore no information about the relative distance between employees; and Might be subject to legal challenge. Advantages: The 'essay' provides detailed feedback (rich and personalised); Scales used in the behaviour checklist can motivate performance (get from "fairly often" to "very often"); Behaviour checklist is relatively easy to use and understand; Critical incident approach gets right to the heart of the problems (achievements); and BARS combine ratings with critical incidents as anchors. Disadvantages: The 'essay' is likely to be unstructured which does not lend itself to the allocation of rewards; Some supervisors or managers may not be good at writing 'essays'; Critical incident data collection is time consuming and difficult to score in terms of rewards. (Aguinis, 2013: ) Regenesys Business School 49

54 It is also important to reflect on the behavioural responses to comparative approaches. For example, some employees who understand the Bell Curve, might think, "The better my colleague does, the smaller the chance that I will be rated at the top of the distribution, so why should I help her do her job?" (Aguinis, 2013:118). Based on this type of response, Aguinis (2013:118) points out that comparative approaches can be counter productive to team work and that it is important to relate the performance management approach to the culture of the organisation. If the culture of the organisation is highly competitive then a forced distribution approach may produce an effect opposite to what is intended. This may create performance problems. Aguinis (2013:123) states that the most popular tool used to measure performance is the "graphic rating scale" (an absolute measure). Response categories are clearly defined and together with the scales these emerge as a consequence of critical incidences, which makes them highly relevant (targeted). Further, this approach appears to meet the needs of all stakeholders including organisational needs, administration needs, rater/user needs, and employee needs. The purpose of your study guide is to guide the direction of learning. To obtain an in depth understanding of the complexities that surround the individual topics, students must carry out their own supplementary research (eg prescribed, recommended reading, and other sources). Task Questions 1. Supplement your understanding of comparative methods by reading widely on the topic. Evaluate the strengths and weaknesses of comparing employees with each other (simple rank order, relative percentile methods, forced distribution). 2. Critically evaluate the following statement by Lisa Brummel (senior vice president in charge of human resources at Microsoft) when asked about comparative methods in use, "people were beginning to feel like their placement in one of the buckets was a larger part of the evaluation than the work the person actually did". Similarly an employee at Microsoft (on their blog) said, "I LOVE this company, but I hate the Curve". 3. Several types of methods are available for assessing performance each of which has advantages and disadvantages and which will appeal more to the organisation, HR administrators, the rater/user, or the employee. Practicality, efficiency, and effectiveness are key determinants in selecting performance measures. Critically evaluate your own performance management system and make recommendations based on your research on the topic. 4. You are encouraged to test the depth of your understanding on the topic by completing the case studies (5-1 to 5-3) in the recommended textbook (Chapter 5, pp in Aguinis, H. 2013, Performance Management, 3 rd ed., Cape Town: Pearson Education). Regenesys Business School 50

55 7.2.5 Collecting Measurement Data on Results and Behaviours Once an approach(s) to performance management has been identified, then consideration must be given to: The data collection tools; Who should collect/provide the data; What training should be given in the collection of data (raters); and Appraisal timeframe. Data Collection Tools The most common tool used for data collection is the appraisal form (hard copy or in electronic format). Core elements include: Employee information: This information contextualises the period for the data collection (name, job title, division, period of evaluation; the number of months the employee has been supervised by the rater; any changes in responsibilities that have taken place by the employee during the period under assessment, etc); Responsibilities, objectives and standards: In a results-based approach, this would include job specific responsibilities, targets based on the objectives, and respective standards. These can also include an opportunity for the rater or employee to explain why or why not these were achieved. For example, the employee may have been seconded temporarily to another department, or the reason may be the tough economy; etc; Competencies and indicators: When adopting a behavioural approach, this section includes a definition of each competency to be assessed with the behavioural indicators and scales, eg a graphic rating scale/bars; Major achievements and ratings: These may be either results or behaviour-based and provide an opportunity for the employee to showcase particular strengths that can be utilised more fully by the organisation in the future, eg innovativeness, interest in social responsibility initiatives, etc; Developmental achievements: These include past performance; the extent to which the developmental goals have been achieved during the past review period, including workshops attended. Evidence of improvement is key here, eg professional certification, or significant improvements in results; Developmental needs, plans and goals: These refer to future focus; information about specific goals, and how these can be achieved including the resources that might be required; Stakeholder input: From those persons who are affected by the performance of the employee, eg customers, other supervisors or managers, team members, etc; Employee comments: This section gives the employee a voice and ensures the legality of the review, ie that the employee has had an opportunity to participate in the evaluation process; and Signatures: This formalises the tool, ie signatures of employee, rater, and HR department. Regenesys Business School 51

56 Task Questions 1. Obtain a copy of an appraisal form from your organisation and critically evaluate the value that this tool brings to the process of performance management using the core elements discussed above. If you do not have access to appraisal review forms go to pp , Chapter 6, in Aguinis, H. 2013, Performance Management, 3 rd ed., Cape Town: Pearson Education, where you will find two examples of forms purposely included for critical reflection. 2. Based on your evaluation, make recommendations to improve the tool. While your evaluation might be based on the listed core elements, it must show that you are thinking systemically about the context of these recommendations. For example, the organisation might be experiencing low levels of change or it could be in the middle of a merger/restructuring process. 3. In terms of your own performance appraisal, is a results-based or behavioural-based approach appropriate? Explain why. 4. It is argued by some organisations that neither approach is valuable and that a developmental approach is preferred. In what context is this likely to be the case? Beyond the recommended core elements, appraisal forms should demonstrate (Aguinis, 2013: ): Simplicity and relevancy: The objective is to pinpoint critical areas for performance improvement; focus on what matters, or what will make the most difference with the least amount of effort; avoid long complicated assessments; Descriptiveness and clarity: Select words that describe precisely what is required; each stakeholder must be able to understand the requirements in the same way. This is to ensure that the form can be used reliably across employees and across time; and Adaptability: The format must be adaptable across the organisation; only the content specific to the job function needs to change. Who Should Collect or Provide the Data Apart from the employee's direct report (supervisor or manager) the appraisal process may need to be supported by other data collection tools to be valid. These could include: 360 degree feedback forms (data is collected and computed from a range of stakeholders); Customer survey forms (data from customers is incorporated into the appraisal result, eg used at FedEx to ensure a strong focus on meeting customer expectations). According to Aguinis (2013: ), data is generally collected from: Direct reports from above (supervisor/manager); Peers horizontally (team members); Reportees from below (subordinates); and Self personal reflection (internally). Regenesys Business School 52

57 Clearly, each of the above has implications, for example, peer evaluations may suffer from: Friendship bias; Lack of training in objective evaluation; Context effects (the peer will relate evaluations to the contexts in which he or she remembers; and Behaviour effects, rather than an objective understanding of the employee's job descriptions. Subordinates are in a good position to evaluate leadership competencies, including delegation, organisation, and communication. They are also good sources of information as they relate to their supervisor's or manager's abilities to remove the barriers that prevent employees from performing at their best (eg shielding employees from politics, providing developmental opportunities). As Aguinis (2013:147) emphasises, many organisations take upward feedback very seriously as in the case at Dell, the computer giant (the "Tell Dell" surveys). Confidentiality is key if subordinates are to be used as a source of performance information. Interestingly, Aguinis (2013:148) states that the vast majority of Fortune 500 companies do not include self-appraisals as part of their performance management systems. This is due to leniency and bias. However, in highly developmental environments, this could be a valuable tool to understand and increase employee engagement. Task Questions 1. When multiple sources of data are used to measure the same objectives there are bound to be disagreements across the sources. Discuss why different sources should be used to measure different aspects of performance (ie performance dimensions that are similar and unique to each source). 2. Consider that an employee is able to communicate very well with his or her peers but is unable to communicate well with the supervisor, hence a conflict in performance assessment on the basis of communication by both raters. In this instance, is it appropriate to use multiple raters across one performance criterion? 3. Discuss why (why not) raters, who are most acquainted with the performance criteria should be used. 4. "When feedback is broken down by source, the employee can place particular attention and effort on the interactions involving the source that has detected performance deficiencies" (Aguinis, 2013:150). Reflect critically on this statement and determine how this can be put to use in your performance review (if not already). Regenesys Business School 53

58 Training Required for Data Collectors (Raters) While accurate ratings can provide meaningful feedback, inaccurate ratings can be very detrimental to organisational performance and the respective employees. Ironically the very system that is selected to improve performance can produce the very opposite. At the two extremes, raters are motivated to either: Provide accurate ratings Distort ratings Both of these are determined by what the rater stands to gain or lose, eg will the relationship with the employee be damaged by such a rating? The following examples demonstrate the wide array of motivations for distorted ratings. Supervisor A is measured on employee retentions and therefore wants to produce the highest possible rewards for his employees and he knows this will happen if he provides the highest possible ratings. Supervisor B believes that employees' moral (and hence motivation) will be increased if they are more highly rated and consequently results will be better. Supervisor C may not want to provide a paper trail that could lead to the dismissal of an employee, especially since this employee wields power in the community in which the supervisor lives. Supervisor D finds it difficult to give negative feedback to older employees (culturally challenging). Supervisor E is currently managing more than one job function and following the path of least resistance is the only way he can cope. Supervisor F believes that if he gives a certain problematic employee high ratings this employee will be promoted out of his team. Supervisor G believes that if he gives everyone high ratings this will reflect well on his ability to manage and lead the department. Supervisor H believes that if he gives a poor enough set of ratings the employee will either be jolted into action or look elsewhere for work. One of the most common (and misguided) uses of a performance rating is to create a paper trail of sub performance, which is then used to get rid of an employee. Raters must be motivated to produce accurate assessments of results and behaviours, eg they must be held accountable for the ratings they give. This means including assessing the performance of the supervisor in how he or she implements performance management within his or her unit. Secondly, the ways in which to manage performance assessment should be trained, especially in highly emotive or political instances. Aguinis (2013: ) provides an extensive list of possible errors. However, he also points out "simple awareness of the errors does not mean that errors will not be made": Similar-to-me-error (rater favours those who are similar to him or her); Contrast error (rater compares individuals with one another, instead of against predetermined standards); Regenesys Business School 54

59 Leniency error (rater applies artificial rating inflation for various reasons some of which are purposeful eg raise all the ratings to increase own popularity); Severity error (opposite to the above, eg rater drops all the ratings as a punitive measure) Central tendency error (rater avoids using extremes, eg the rater may lack confidence in being able to deal with low and high performers); Halo error (an employee receives a high rating on one element of performance and therefore receives the same across the board); Primacy error (data collected early in the process supersedes that collected throughout the process); Recency error (opposite of primacy, rater is more heavily influenced by behaviours taking place toward the end of the review period); Negativity error (rater places more emphasis on identifying negative incidents rather than seeking an objective view); First impression error (rater makes an initial judgement and then ignores all subsequent evidence); Spill over error (scores from prior review periods spill over onto current review period assessments); Stereotypical error (rater has an oversimplified view of individuals based on group membership); and Attribution error (the rater attributes poor performance to an employee's dispositional tendencies such as the ability to communicate instead of the features of each situation). As a rater, I must continually question my motivations, which are not always self-evident they require reflection. If two raters carry out a rating the result should be the same (ie reliable). Spot-check a sample of ratings by asking another rater to correlate his or her ratings of the same employee. If the ratings are different and there is a good case for the difference question the validity of the measurement. Appraisal Timeframe Appraisal can take place annually or more frequently, depending on the context of the organisation. Where there is a high level of new and or inexperienced employees, more frequent appraisals are likely to be beneficial. In this regard, the shorter turnaround time for feedback and coaching is important. As discussed previously, the timeframes of the performance management system should be aligned to financial timeframes (eg the fiscal year) to enable the drawing together of performance and reward. However, some organisations prefer to carry out performance reviews on the anniversary of the employee (ie in the month the employee joined the organisation). This means that the supervisor or manager does not need to contend with all the appraisals simultaneously. Bear in mind, however, that this precludes the supervisor or manager from using comparative management systems, which means that he or she may be unable to compare employee performance simultaneously with others in the same job. Additionally, objectives may change, which would make it more difficult to synchronise across employees with different appraisal timeframes. Regenesys Business School 55

60 Task Questions 1. Provide arguments for and against including appraisals in a performance management system. 2. Evaluate the strengths and weaknesses of aligning the performance process to the fiscal year. Conclude this section by reading the following journal article and complete the tasks that follow. Maley, J., and Kramer, R. 2014, 'The influence of global uncertainty on the cross-border performance appraisal', Personnel Review, 43 (1) Task Questions 1. Discuss the complexities of cross-border performance appraisal. 2. Explain the concept of "real options" as used in the journal article. In you explanation relate this concept to examples of multinational corporations operating under global uncertainty (eg BHP Billiton). 3. Discuss why different processes to manage performance management across multiple cultures should be considered. 4. Discuss why the strategic drive for profit during global uncertainty may squeeze out the other two key purposes of performance management employee development and compensation management. 5. Critically evaluate the following statement, "The selection of real options theory enables the building of a practical performance management framework that permits flexibility in three key areas: behaviour, skill, and HRM practices." (Maley and Kramer, 2014:30). Regenesys Business School 56

61 7.3 PERFORMANCE MANAGEMENT SKILLS Timeframe: Learning Outcomes: Recommended Book: Recommended Articles: Prescribed Multimedia: Section Overview: Minimum of 20 hours Examine the role of the manager or leader in implementing a performance management system Manage change within the context of introducing a performance management system Chapters 8 and 9 in Aguinis, H. 2013, Performance Management, 3 rd ed., Cape Town: Pearson Education. Anitha, J. 2014, 'Determinants of employee engagement and their impact on employee performance', International Journal of Productivity and Performance Management, 63 (3), Farry, M. 2014, 'PhotoBox focuses on employees' strengths', Human Resource Management International Digest, 22 (1), Anthony, D. nd 'Developing an effective performance management appraisal system', [video clip] (accessed 2 December 2013). Author unknown, 2012, 'Be Nice to Penny: Performance Review', [video clip] (accessed 8 April 2014). RandomButDeadly, 2009, 'The Performance Appraisal', [video clip] (accessed 2 December 2013). Because the list of skills required to performance manage employees is extensive, a. selection is provided here. These mainly include engaging employees in meaningful work; formulating goals using insight (specifically an understanding of one's own motivations); skills to observe, record and evaluate performance; the art of one-to-one communication; and the important tasks of feedback and coaching The Role of Supervisors or Managers The performance management system is only as good as its purpose, design, principles and those who implement it. The types of knowledge and competence that the system requires include: 1. Understanding the systemic connections between organisational goals, departmental or business unit objectives, job analyses, job descriptions, measurement and standards; 2. Knowing the purpose of the performance management system, and more specifically, the key drivers for success (what will make it effective, efficient, and economical) 3. Understanding how to observe, record, and measure performance (results and behaviours) and how to minimise rating errors (awareness of rating distortion and the consequences for the employee, the team, and the organisation); 4. Knowing how conduct one-to-one performance management meetings with employees; 5. Knowing how to provide feedback and how coach employees to the desired performance levels. Regenesys Business School 57

62 Employee Engagement the Heart of a Performance Management System Before reviewing each of the five points made above it is important to explore the concept of employee engagement further. Some managers have been known to say that if employees are engaged then performance management is redundant. The counter to this argument is that, for an employee to be engaged, there has to be a performance management system in place to create the platform from which the connections between the organisation, the teams, and the individual can be made. Consider the next excerpt: Employee engagement: "the emotional commitment the employee has to the organisation and its goals. This emotional commitment means engaged employees actually care about their work and their company. They don't work just for a paycheck, or just for the next promotion, but work on behalf of the organisation's goals. When employees care when they are engaged they use discretionary effort." (Kruse, 2012) Clearly, Kruse (2012) emphasises the concluding two words: "discretionary effort". Discretionary effort is, for example, the engaged computer programmer who works overtime when needed without being asked (even if the boss is not watching). Engaged employees lead to: Higher service, quality, and productivity, which leads to Higher customer satisfaction, which leads to Increased sales (repeat business and referrals), which leads to Higher levels of profit, which leads to Increased profits, which leads to Sustainable organisations, which leads to Economic growth (for the individual, the organisation, the industry, the community, and the broader economies) (Adapted from Kruse, 2012) It is through the strategic goals of the organisations and how these translate to departmental objectives, job analyses, and job descriptions that employees understand how they fit in. This is their purpose, and most importantly, the reason to engage. Do not confuse employee happiness with employee engagement: Employee engagement does not mean employee happiness. Making people happy and making them engaged are not the same thing it makes me happy to go to the gym provided by the organisation, but this does not make me more engaged in my work. A happy employee might show up to work from 08h00 to 17h00 but this does not mean they are engaged or disengaged. Reflect on the distinction between employee happiness and employee engagement and the role of performance management in engaging employees. Regenesys Business School 58

63 We have captured the five points made at the beginning of this section diagrammatically to emphasise the interdependence of the parts, keeping in mind that the motive is to engage employees. FIGURE 6: EMPLOYEE ENGAGEMENT - THE HEART OF THE PERFORMANCE MANAGEMENT SYSTEM 2. Know what drives PM success (what makes it effec.ve, efficient, and economical) 3. Know how to observe, record, and measure performance 4. Know how to conduct 1- to- 1 PM mee.ngs 1. Connect goals, objec.ves, job analyses and job descrip.ons Employee 'engagement' - the heart of the PM system 5. Know how to provide feedback and coach (Adapted from Aguinis, 2013 and Kruse, 2012) Employee engagement is the heart of the performance management system. What are the consequences of disengaged employees? Read the following journal article and complete the questions that follow: A number of studies show that an important way to enhance employee performance is to "focus on fostering employee engagement" (Anitha, 2014). Anitha, J. 2014, 'Determinants of employee engagement and their impact on employee performance', International Journal of Productivity and Performance Management, 63 (3), Regenesys Business School 59

64 Task Questions Anitha's (2014) research considers the following seven critical factors that lead to employee engagement each of which effect performance: 1. Work environment 2. Leadership 3. Team relationship 4. Training and career 5. Compensation 6. Policies and procedures 7. Wellbeing 1. After reading the journal article, reflect critically on the key findings with respect to your team's and your levels of engagement. Is your experience of reality consistent with Anitha's research findings? 2. Two factors are highlighted as significant working environment and worker relationship. This finding points to the social significance of the workplace. In your opinion, is this finding generalisable (could it be applicable to all work places)? 3. What further research would you conduct to understand the connection between performance management and employee engagement? As an MBA student you will be required to carry out business research. Existing research provides a useful starting point for further research Goal Setting Skills Throughout this study guide we have referred to "systemic thinking" and its importance. The role of the supervisor or manager is to translate the concept of systemic thinking to his or her employees. This means connecting organisational goals; departmental or business unit objectives; the employees' job analyses; job descriptions. Such skills also include knowing how these will be measured and against what standards. Further, the supervisor or manager must direct each individual employee to his or her priorities using meaningful examples. Consider that a high-level goal is quality improvement. The organisation has lost market share through poor quality and this has been identified as a strategic goal (aim) for the next 12 months. What is the employee required to do to engage with this requirement? What specific aspects of his or her departments or business unit's objectives and job description relate to this high-level strategic goal? And, how will the employee know that he or she has attained this requirement? Clearly, quality is far reaching and if the employee is focussing on the wrong quality issues then it is unlikely that he or she will achieve high-level goals. Regenesys Business School 60

65 Task Questions Read the following excerpt from Saravanja (2010:69), and complete the questions that follow: "Goal theory was developed by Locke and Latham, who contend that difficult, specific goals lead to higher performance than easy goals, vague goals or no goals (Armstrong, 2004:58). They claim that the level of production in the companies they studied was increased by an average of 19% as a result of goal setting processes with the following characteristics: The goals should be specific They should be challenging but reachable The goals are seen as fair and reasonable Individuals participate fully in goal-setting (Armstrong, 2004:58)." 1. A fundamental skill for managers is the ability to translate high-level goals into departmental or business unit objectives and then translate these into team and individual goals (targets or objectives depending on the terminology in use in the organisation). Given this seemingly straightforward process, critically evaluate the extent to which this happens (use your own experiences and confer with your work colleagues). 2. Ordonez, Schweitzer, Galinsky, and Baserman (2009) provide examples of the "hazards of indiscriminate goal setting", ie Sears Roebuck and Co set sales goals for its auto repair staff; this specific and challenging goal prompted staff to overcharge for work and to complete unnecessary repairs on a companywide basis (the goal motivated employees to deceive customers). By focusing on revenue rather than profit, Enron executives drove the company into the ground. Discuss these and other similar cases and analyse the potential harmful effects of goal setting. Ordonez, et al (2009) point to several important considerations in setting goals: Narrow goals Too many goals Inappropriate time horizon Goals that are too challenging Goals, learning, and cooperation When goals harm motivation itself Calibrating goals Regenesys Business School 61

66 Narrow goals Ordonez, et al (2009) caution that goals can focus attention so narrowly that people may overlook the other important features of a task. Consider the analogy given below: "As research has shown, goals focus attention. Unfortunately, goals can focus attention so narrowly that people overlook other important features of a task. Consider Simons and Chabris' (1999; Neisser, 1979) well-known study of inattentional blindness. The researchers asked participants to watch a video in which two groups of players pass basketballs. One group wears white shirts; the other group wears dark shirts. Given the task of counting basketball passes among people wearing only white shirts, people unconsciously block out the black shirted individuals. As a result of this narrow focus, most participants fail to notice when a man wearing a black gorilla suit saunters into the middle of the screen, pounds his chest, and walks off screen. Intense concentration on the counting task causes people to overlook a striking element of their visual world. This focusing problem has broad application (Bazerman and Chugh, 2006) and direct relevance to goal setting." (Ordonez, et al, 2009:6) As Ordonez, et al (2009) point out, intense focus on specific goals can blind employees to important issues. Learning or recognising how to set appropriate goals is a management skill that is essential to performance management. Failing to anticipate the broader effects of these directives can be counterproductive (or cause myopia). Too many goals The next concern is too many goals. A likely consequence is that employees focus on some and not all of the goals (eg quantity goals instead of quality goals and vice versa). Ordonez, et al (2009) point out employees will instinctively gravitate to the easier and more accurately measurable goals first, leaving the more challenging goals for last. Inappropriate time horizon A common pitfall occurs when goals emphasise immediate performance (eg this month's repairs and maintenance budget) at the expense of long-term objectives. Avoiding, for example, important repairs and maintenance to equipment that is constrained by the monthly budget could lead to long-term more expensive repairs, even the scrapping of such equipment. Some companies, such as Coca-Cola ceased issuing quarterly earnings guidance and rather provide more information about progress on meeting long-term objectives (Ordonez, et al, 2009:8). As Ordonez, et al (2009:8) emphasise, goals should be floors rather than ceilings. Time horizons create pause problems. A salesperson may meet her monthly sales quota within three weeks and spend the rest of the time socialising with friends. Regenesys Business School 62

67 The problem of goals as ceilings Why is it so hard to get a cab on a rainy day? Most people blame demand when it is raining more people hail cabs than when the weather is clear. However, it has nothing to do with demand, but rather with supply. Why? Because of the specific, daily goals that most cab drivers set: a goal to earn double the amount it costs them to rent out their cabs for a 12-hour shift. On rainy days, cabbies make money more quickly than on sunny days, hit their daily goal sooner, and then they go home (the problem of goals as ceilings). This finding is contra to the economic tenet of wage elasticity, which predicts that people should work more hours on days when they can earn more money and less on days when they earn less. If New York city taxi drivers used a longer time horizon (weekly or monthly), kept track of indicators of increased demand (eg rain or special events), and ignored their typical daily goal, they could increase their overall wages, decrease overall time spent working, and improve the welfare of drenched New Yorkers. (Ordonez, et al, 2009:9) Goals that are too challenging It is argued that goals should be set at the most challenging level possible to inspire effort, commitment and performance. However, these goals must not be so challenging that employees see no point in trying. Ordonez, et al (2009:9) offer an alternative view. This approach can cause serious side effects: Shift risk attitudes: Such attitudes may lead to employees choosing riskier alternatives to accomplish the more challenging goal. In so doing they would put the organisation at risk and lead to destroying value and excessive growth. This could, for example, lead to the collapse of organisations. This attitude is also referred to as destructive goal pursuit; Promote unethical behaviour: Senior managers give lawyers and consultants specific, challenging goals for billable hours. Subsequently, the consultants bill clients for the hours they never worked; Trigger the psychological costs of goal failure. This refers to the way people view their achievements. It can have important consequences for their future behaviour, eg reduced self-efficacy) The interplay between organisational culture and goal setting is particularly important. An ethical organisational culture can reign in the harmful effects of goal setting, but at the same time, the use of goals can influence organisational culture. Goals that are too challenging and impede ethical decision make it harder for employees to recognise ethical issues and easier for them to rationalise unethical behaviour these small actions can have broad implications for organisational culture. Regenesys Business School 63

68 Task Question Critically evaluate the following statement: "Aggressive goal setting within an organisation will foster an organisational climate ripe for unethical behaviour it can subtly alter an organisation's culture." (Ordonez et al, 2009) Goals, learning and co-operation The pressure of stretch goals can literally squeeze out learning and cooperation. The pressure of time, for example, is counterproductive to learning: Employees go at the goal without taking the time to explore new learning components. This means that they literally do their best based on prior experience. Further, they are less likely to explore alternatives methods that could lead to improved performance (double-loop learning is squeezed out). A stretch goal can inspire performance but prevent learning. Lock and Latham (in Ordonez, et al 2009:13) recommend that "learning goals" should accompany complex situations. Many performance areas require collaboration and cooperation. Again, these can be squeezed out by the sheer pressures of performance (eg groupthink is the faster alternative to a more thorough investigation of the issues). When goals harm motivation itself Goals and motivation are intrinsically linked. Since goal setting increases extrinsic motivation (tangible rewards) it can harm intrinsic motivation, ie it will lead to engaging in a task for its own sake. The danger of overusing goals can destroy intrinsic motivation and consequently employees will disengage from the organisation (Ordonez, et al 2009:14-15). What is the impact of my workplace goals on my extrinsic and intrinsic motivations? Am I likely to engage with the organisation more or less if I am motivated by external means (goals, rewards)? And, if I am motivated by the intrinsic value of the job itself? Regenesys Business School 64

69 Calibrating goals The skills required to set goals may at first appear simple, however, as we have already seen various complexities exist. These are further increased by unique settings. Can the same goal, for example, be set for a number of people whose knowledge and competencies vary (too easy for some and too difficult for others)? Tailoring the goal to each employee will echo unfairness. Employee perceptions are key motivators. When rewards are not fairly matched to effort and performance commitment (engagement), motivation becomes impaired. Some employees may even lower the bar in order to create space for lesser goals and procure the resulting rewards and accolades. Consider too that some employees may strive to meet goals in the first quarter to secure a large commission, but relax in the second quarter after all they do not have to return the commission in the second quarter (Ordonez, et al 2009:16). Task Questions 1. Goal setting is a significant factor in performance management it can either inspire employees to improve performance or it can have unintended consequences for the individual, teams, and the organisation. Create a diagrammatic representation of the issues raised in this section (including your own desk research) and discuss this with your management team. Critically evaluate the potential challenges and formulate a half-day training session for supervisors or managers on the potential pitfalls of goal setting and how to minimise negative effects. 2. GE's Steve Kerr (in Ordonez, et al 2009:16) states that, "most organisations don't have a clue how to manage 'stretch goals'. He encourages managers to avoid setting goals that increase employee stress, to refrain from punishing failure, and to provide the tools employees need to meet ambitious goals." Critically evaluate this statement. 3. Refer to your other modules and carry out further desk research into the theories listed below. In each case, make the link to goal setting, motivation, and organisational culture. In your concluding comments, argue why managers must be equipped with the knowledge and skills that extend beyond mere goal setting in order to manage performance effectively. 3.1 Maslow's theory (hierarchy of needs) 3.2 McClelland's theory (achievement, power, and affiliation) 3.3 Hertzberg's theory (job satisfaction and hygiene factors) 3.4 Alderfer's ERG theory (existence, relatedness, and growth) 3.5 McGregor's theory (X and Y) 3.6 Equity theory (compared contributions and rewards) 3.7 Reinforcement theory (goals and rewards act as positive reinforcement) Regenesys Business School 65

70 7.3.3 Ensuring the System is Effective, Efficient and Economical From your other modules you will remember the distinctions between the following terms: Effective do the right thing; Efficient do the right thing right; and Economical do the right thing right with the least amount of resources. As with any other management task the same 3Es apply to performance management. Task Questions Refer to the case study in Appendix 1 "Dealing with Poor Performance" and then answer the questions that follow. 1. Identify examples of being effective or ineffective, being efficient or inefficient and being economical or uneconomical in the case study by Elaine the HR Manager and David the claims team manager. 2. What are the consequences of the HR department not implementing an effective and efficient performance management system? Specifically, in the case of Carol? 3. Critically evaluate if the process followed by David was economical (did the right thing right with the least amount of resources)? The Roles of Observation, Recording and Measurement It is one thing to sit behind a closed door and analyse pages of printed results (activity reports, spreadsheet and work-flow charts), but there is no substitute for observing employees actually carrying out the range of jobs that have contributed to those results. An observation strategy requires a planned and systematic approach to watch employees carry out their jobs. It is important to know what they do to achieve the desired performance (match the behaviours to the results). Remember, we distinguished between differentiating competencies (those that allow the distinction between average and superior performers) and threshold competencies (those that everyone needs to display to do the job to a minimally adequate standard). We used the example of the project manager who should posses differentiating competencies (eg project initiation management) and threshold competence (change management). When analysing a competency, Ravikant and Deshmukh (nd) recommend defining the competency in terms of positive and negative indicators (criteria) as shown in the next table: Regenesys Business School 66

71 TABLE 7: SAMPLE THRESHOLD COMPETENCE - NEGATIVE AND POSITIVE INDICATORS Threshold competence: Solves problems based on perceived relationships, patterns, and cause and effect. Negative indicators (criteria) Positive indicators (criteria) Needs help when faced with problems; Makes ineffective responses to problem issues; Is unable to identify gaps in the plans and foresee areas of concern; Is unable to differentiate the key elements from the trivial; Is unable to get to the root of the problem; and Addresses the symptoms rather than the cause of the problem. Grasps problems quickly in their totality; Uses sound judgement to arrive at appropriate solutions solve the problems; Is able to identify gaps in the plans and foresee areas of concern in planning and execution; Is able to differentiate the key elements from the trivial; Produces workable solutions that meet the demands of the situation; and Gets to the root of the issue does not take things at face value. (Ravikant and Deshmukh, nd) Defining the competence from both perspectives (negative and positive) gives the supervisor or manager (the rater) observable criteria against which to evaluate performance and more importantly to guide feedback and subsequent coaching. Overall evaluation should be founded on more than one observation, and where appropriate across a range of settings. For purposes of feedback, specific examples relating to the positive and negative indicators should be cited, beginning with positive indicators of competence. Ravikant and Deshmukh (nd) propose the following process (ORCE) beginning with observation: Observe (observing what each employee does); Record (recording factual evidence); Classify (classifying under the competence and against the respective positive or indicators); and Evaluate (determining the level of competence based on the presence or absence of the criteria or indicators, for example, using a five-point scale). Regenesys Business School 67

72 Task Questions 1. Draw on your own experiences of (and research about) observing, recording, classifying and evaluating performance. Compare these to Ravikant and Deshmukh's (nd) approach. 2. How effective is the process described above across a range of job functions and at different levels of seniority? Use the following examples to justify your position: 2.1 Production worker 2.2 Buying clerk 2.3 Project manager 2.4 Accountant 2.5 HR Director 2.6 Sales representative 3. What are the challenges to implementing this type of strategy (ORCE) in your organisation? 4. Reflect on why evidenced-based observation is a critical element to the process. 5. Argue why it is important to train supervisors or managers in this process (ORCE or other) One-to-One Meetings The relationships between employees and their managers are key (Oberoi and Rajgarhia, 2013). The managers drive the performance management system by communicating expectations, encouraging employee engagement and giving and receiving feedback. Oberoi and Rajgarhia's (2013) research indicates that whilst processes are deemed world class they might overlook (or underestimate) the importance of the people element. Because managers have significant control, and consequently impact on their employees, it is important to explore these elements in greater depth. Oberoi and Rajgarhia (2013) report that great managers: "Clearly communicate performance standards and what good performance in a role looks like Focus on employee strengths rather than weaknesses Help employees understand that the purpose of the performance system was to aid in their development; it was not just an activity required for pay or promotions Communicated regularly with their team members on performance expectations (rather than once a year)." (Oberoi and Rajgarhia, 2013) To achieve a meaningful relationship between manager and employee requires one-to-one communication, preferably in the form of meetings. It is at these meetings that managers require the following skills: Active listening; Action planning; and Following up. Regenesys Business School 68

73 Much has been written about the above (including in your other modules). The object here is to highlight some of the skills required to ensure performance improvement. Active listening We know that active listening goes beyond the words that we hear it extends to body language, including tone. As much as 70% of what we say is communicated through our body language and how we say what we say. This is further complicated in multicultural settings which are becoming more commonplace in globalised economies. Communication takes place not between two people, but between four participants (Ivey in Saravanja, 2010:94) as shown in Figure 7 below. FIGURE 7: NOT TWO PEOPLE, BUT FOUR PARTICIPANTS Manager's role Employee's cultural and historical background Employee's role Manager's cultural and historical background (Adapted from Ivey in Saravanja, 2010:94) The manager not only brings his or her authority in terms of job role to the communication process but the entire process is also infused with his or her cultural and historical background. Likewise, the employee does the same. In attempting to create a relationship with the employee, and nurture engagement, the manager must understand multiculturalism. Multiculturalism is the understanding and preservation of the different cultures (or cultural identities) within a unified organisation (department or business unit). Care must be taken, not to stereotype a person based on other employees who derive from the same cultural background. Remember that the historical background also plays a role (by historical background we mean prior experiences). Historical background could, for example, include schooling, the type of economy in which the employee was raised, etc. The combined effect makes each individual unique. Regenesys Business School 69

74 To assist in understanding this complex view of each individual, various authors propose reading people using their meta-programmes (or frames-of-mind). Meta-programmes are the frames-ofmind that colour the ways in which each individual sees and experiences the world (Hall and Bodenhamer, 2005:30). Meta-programmes come from: "Repeated thoughts and emotions, from the mental and emotional states that we habituate. We create our meta-program or perceptual filters as we layer one idea upon another." (Hall and Bodenhamer, 2005:42) Consider the following example of pessimism versus optimism: We create the most basic meta-programmes of optimism-pessimism by bringing the idea of optimism (or pessimism) to our information process. When we set optimism over our thinking in general, it becomes a filter a perceptual filter. A meta-program governs how we think, what we attend to, and what we value. (Hall and Bodenhamer, 2005:42-43) Some of these meta-programmes become primary perceptual filters they supersede all others. But, as Hall and Bodenhamer (2005:45) emphasise that we are not stuck with our metaprogrammes; we are not destined to think in the same ways in the future as now. Metaprogrammes are dynamic, an ongoing process of patterning and structuring our thoughts and emotions. To create a relationship with employees requires a process of figuring out the employee's primary meta-programmes especially those relating to performance. There are 60 or more metaprogrammes. We have selected one, by way of example: "Completion". Meta-programme ''Completion'' This meta-programme deals with closure and non-closure. Read the following excerpt and then complete the task that follows. Completion (closure or non-closure) "Whenever we listen to, read, or present information, we sometimes complete the story or process and sometimes we do not. Sometimes we run out of time; sometimes we don't have enough information; sometimes the information itself is incomplete and sometimes we forget or become distracted. Whatever the reason, this meta-program relates to how we handle closure or the lack of closure. Do we have a high drive for closure or a low drive? Do our frames allow our mind-andemotions to live comfortably with an unfinished gestalt?" (Hall and Bodenhamer, 2005: ) Regenesys Business School 70

75 Task Questions 1. Based on the example of the Completion (closure or non-closure) given above, answer the following questions to determine your meta-programme: 1.1 If, in the process of studying something, you have to break off your study and leave it, would you feel okay about this or would you find it disconcerting? 1.2 When you are watching a television programme and you are interrupted or you cannot complete it, how do you feel? 1.3 When you get involved in a project, do you find yourself more interested in the beginning, middle, or end of the project? 2. How would it settle with you if someone mentions five points and then only lists four? 3. Now read the following two excerpts and identify an employee that demonstrates each of the following: 3.1 Non-closure: People who enjoy and perform better in the beginning or middle of a task, project, relationship, etc, do not need closure as much as those who enjoy and feel more completion in bringing a project to completion. Listen for how a person talks about completing or not completing something. Listen for levels of anxiety in both experiences. How well is the person able to embrace ambiguity, confusion, and something left in suspense? 3.2 Closure: Those who enjoy and perform better in sequencing and closing a project are energised by the need to close things. They do not want to leave things open. Uncertainty and ambiguity are not desired experiences for them. The closure meta-programme describes a filter of wanting to compartmentalise things so that things are neatly wrapped up at the end of the day (high closure feelings). They will often think in more definitive, blackand-white categories. 4. What is the connection between active listening and "figuring out" employees? Through actively understanding employee meta-programmes, managers can become better equipped to set performance goals and assist employees to attain these. For example, it would be inappropriate to set a stretch goal that relies heavily on deadlines for a person whose pre-dominant meta-programme is non-closure. Instead the manager should set more realistic goals and gradually increase these as the employee becomes more comfortable with moving along the continuum toward a closure frame-of-mind, which the job might require. Task Questions 1. Carry out your own desk research into other meta-programmes, some of which are listed below: 1.1 Information kind: Preference for quantitative vs qualitative analysis 1.2 Scale: Tendency toward global or specific information 1.3 Conventional: Conformist versus non-conformist 1.4 Philosophical: Why (origins) versus How (solutions) 1.5 Self confidence: Low versus high levels of confidence 2. Determine how these will assist you to listen to (read) employees better. Also, establish how these will assist in setting performance objectives. Regenesys Business School 71

76 The following video may appear over-simplistic, but there are some deadly truths in the content. Before you continue with the next section, watch the video and reflect on these truisms. RandomButDeadly, 2009, 'The Performance Appraisal', [video clip] (accessed 2 December 2013). Anthony, D. nd 'Developing an effective performance management appraisal system', [video clip] (accessed 2 December 2013). Author unknown, 2012, 'Be Nice to Penny: Performance Review', [video clip] (accessed 8 April 2014) Feedback and Coaching Skills The Feedback Role Research reveals that effective communication in the performance appraisal interview is one of the greatest challenges of the entire process (Saravanja, 2010:246). Specifically, this may refer to: Inappropriate communication of feedback; Late feedback; Lack of feedback and; Lack of specific feedback. The skill to draw together pertinent issues, both positive and negative, underpins the challenges mentioned above. Specific feedback Fundamental to solving these challenges is the ability to provide factually correct information and relate this to specific performance issues, objectives and standards. Consider the next example: Providing factually correct information and relating this to the performance issue Supervisor A: "You are always late!" Supervisor B: "You were late twice last week and again today. When you arrived late for the staff meeting, you missed an important discussion about the launch of our new products." The second statement is factual and specifically addresses the performance issue including the impact of being late. Similarly, in one-to-one meetings the feedback must be directed at the performance (nonperformance) and the implications for the employee, the team or department or business unit, and the organisation. Regenesys Business School 72

77 Dahl (2013) points out that some employees test the waters with their behaviour to see where the boundaries lie "they might not even be aware of what they're doing, or even the impact, until it's brought to their attention" through constructive feedback. Consider the advice offered by Dahl (2013): We try to instil the concept that we're a learning organisation and that it's better to ask than to make a mistake (open a feedback session by stating company culture); It is better to address poor behaviour early on point it out and set clear and measurable expectations within specific time periods (delaying negative feedback is condoning the behaviour); Use training, coaching, and even shadowing of more seasoned employees (feedback can take many forms); If the position doesn't fully utilise their talents consider giving them a special project that does (give feedback, both positive and negative where appropriate on additional contributions made); and Use the employee assistance programmes when you sense life issues are becoming a distraction (avoid providing negative feedback if it cannot constructively lead to change; employees may be experiencing noise such as high stress levels which precludes them from absorbing negative feedback). Language usage The ways in which supervisors or managers say things has enormous impact on performance. Steinman (in Dahl, 2013) says, "We spend most of the time asking questions and listening at every employee meeting I ask what I can do for them or what they need from me you'd be surprised at how open they are, but if you don't ask, they won't tell you." Goals are one thing but the road map to get there is another. Dahl (2013) calls this "overempowerment". What is suggested here is to break performance objectives down into milestones and then openly discuss the steps that need to be achieved to reach each milestone. Steinman (in Dahl 2013) explains: "If you only tell the employee to "get started", a big project [with multiple deliverables and performance measures] can seem overwhelming". Busser (2012) points out: "The process of giving and receiving feedback has the potential to be a win-win experience for employers and employees alike. In a productive performance discussion, organisations have the opportunity to reinforce company values, strengthen workplace culture, and achieve strategic objectives. Ideally, employees feel respected, invested in the company's success, and committed to their own learning and development." In those organisations that consistently rank in the best places to work, feedback is integral to communication (Busser, 2013) part of everyday work life. Regenesys Business School 73

78 An organisation's culture provides an important backdrop for creating an environment conducive to productive performance feedback conversations; When I value, trust, and empower employees they are likely to welcome feedback as a tool for growth and development; and If my employees fear the repercussions of honest dialogue, their receptivity is likely to be low. (Busser, 2013) Interestingly, Busser (2013) argues that in a meaningful and productive performance feedback discussion, both parties don't necessarily need to agree. However, they must feel heard, understood, and above all respected. Aguinis (2013:237) points out the dangers of using adjectives and adverbs liberally. Evaluative adjectives such as "good" and "well" and adverbs such as "quickly" and "sometimes" will lead to different interpretations. Further, avoid statements that imply subjective judgement or prejudice. The following are quotes taken from actual employee performance evaluations (Aguinis, 2013:238): "Since my last report this employee has reached rock bottom and has started to dig. Works well when under constant supervision and cornered like a rat in a trap. He would be out of his depth in a parking lot puddle. He sets low standards and then continuously fails to achieve them. The employee is depriving a village somewhere of an idiot. Gates are down, the lights are flashing, but the train isn't coming. If you gave him a penny for his thoughts, you'd get change. Some drink from the fountain of knowledge he only gargled. This employee should go far and the sooner he gets started the better." (Aguinis, 2013:238) Reflect on each of the above statements in terms of what it says about the evaluator rather than the employee. Regenesys Business School 74

79 Task Questions 1. Analyse the points made by Busser (2013) below, citing examples from your workplace: 1.1 Share thoughtful and informed feedback on a regular basis (avoid ambushing employees at official performance reviews). 1.2 Ask open-ended questions before you deliver information based merely on your impressions or assumptions about situations pertaining to poor performance (set the stage for a joint problem-solving discussion in which you are both invested in arriving at a solution). 1.3 Encourage employee-generated solutions (partner with employees; avoid dictating an approach; focus on the outcome what do we want to achieve; show the employee that you believe in their resourcefulness). 1.4 Become an ally rather than a critic (tie your feedback to the achievement of employee goals personal and organisational). 1.5 Show employees how other stakeholders (customers, investors, suppliers, other employees) value their performance. 1.6 Model the behaviour you would like to see (seek feedback from your employees, share your own career aspirations; promote professional growth). 2. Critically evaluate the importance of thoughtful feedback in performance management. The Coaching (vs Training) Role It is useful to begin by reflecting on the differences between coaching and training. TABLE 8: DIFFERENCE BETWEEN TRAINING AND COACHING Training Coaching Directive; The trainer is the expert in the area of learning; Typically takes place in groups (eg training course in meeting management); and Typically runs according to a pre-planned schedule. Facilitative; The coach creates awareness in the individual of his or her own knowledge, skills, and behaviours and the possibilities for performance improvements; Flexible arrangement between coach and employee; and The coach continues to motivate the individual to accomplish agreed objectives through regular feedback. Dahl (2013) stresses that poor performance often results from supervisors' lack of coaching. Coaching should be documented on an action plan with bite-size coaching points. Fear of failure can impede performance so the action plan should be aimed at timeframes to enable the employee to achieve competence and receive positive feedback before moving to the next bitesized performance challenge. Regenesys Business School 75

80 Supervisors or managers should actively seek out coaching opportunities and begin by rooting out the cause(s) for underperformance. Keep in mind that some of these root causes may not even be the fault of the employee (within their control). Addressing the performance problem begins with problem identification and this is best carried out through observation, recording and measurement together with feedback discussions. Once a problem has been recognised, the root cause of the problem must also be identified. Sometimes problems hide other more important problems. Addressing the wrong problem could frustrate performance further. Problems seldom exist in isolation and require the identification of all stakeholders (eg co-workers in a team, employees from other teams, external stakeholders such as suppliers, etc). Viewpoints from these stakeholders may be required in order to better understand the performance issues. Once a thorough understanding of the performance problem is achieved the problem needs to be defined in terms of its boundaries and components (eg >10% durable goods returned due to incorrect packing procedures during first quarter 2014). If we use the example of packing procedures consider that the procedures themselves could be poorly written for the range of packing tasks required or the employee might be insufficiently skilled in the different packing techniques required. Before coaching can take place a clear understanding of the root causes (from all stakeholders) is required. Consider the following example (Ries, 2012) of getting to the root cause and then finding a way to correct performance. Once you have read through the example complete the tasks that follow. The Five Whys When we run into a problem there is a server crash or a product that doesn't work we want to get to the root cause. What caused it to fail? And, fix that root cause. Behind every seemingly technical problem is actually a human problem waiting to be found. If a server, for example, crashed we would ask the questions: 1. Why did the server crash? It was because a new API was pushed to that server. 2. Well, why was that? It's because we just launched a new feature that used that API in the wrong way. 3. So why was that? It's because we had an engineer who was new and didn't know how to use that API properly. 4. Well, why is that? Well, that engineer was never trained. 5. And why is that? It's because their manager doesn't believe in training. So what appeared to be a technical problem is in fact a managerial problem with that engineer's manager. Regenesys Business School 76

81 The purpose of the five whys is to make a proportional investment in each of the five levels of the hierarchy so: 1. Fix the server. 2. Prove that API. 3. Teach the engineer the proper way to use it. 4. Have a conversation with the engineer's manager. The conversation with the manager might go like this, "Sure I believe in training and if you can find someone to do all the work that I have planned in the next eight weeks I will be happy to invest in a state of the art training programme for my engineers." This is "manager's speak" for there is no way I'm going to do this training programme so leave me alone. So how can we get out of that situation which is, "It's all or nothing"? Eight weeks invested in training or leave the problem as is. The 5 Whys provides a solution. Let's make a small proportional investment each time the problem happens. Let's do the first hour of that 8-week training, then if we have additional problems we will do the second, third and fourth hours. In that way the 5 Whys operates as an automatic speed regulator. It forces us to invest proportionally in prevention. As those prevention investments pay off, the team can naturally speed up again and find its optimal pace of work. To recap, every time you have an unexpected surprise, a fire that you have to fight, ask why at least five times. Find the human problem behind every seemingly technical fault. And, make a proportional investment in each of the five layers. This is a very powerful technique to build an adaptive culture that automatically invests in process only when it's needed. (Ries, 2012) Regenesys Business School 77

82 Task Questions 1. Critically evaluate the technique proposed by Ries (2012). Use a set of criteria to facilitate your evaluation, for examples: time, cost, and quality; effective, efficient, economical; etc. 2. Review your knowledge of the following problem-solving techniques and evaluate how they can facilitate the role of coaching employees to improved performance: 2.1 Root cause analysis 2.2 Fishbone analysis (cause and effect analysis) W's and 1H (What, Why, When, Where, Who, and How) 2.4 Six Serving Men (uses the 5W's and 1H but from a positive and negative perspective in each case) 3. Select a performance problem in your workplace and compare the approach of Ries (2012) to those you have investigated (above). What have you learned from your evaluations? How does this make you think differently about solving performance management issues? 4. Complete Aguinis' (2013:232) "Good Coach Questionnaire" and reflect critically on your responses: 4.1 Do you listen (actively) to your employees? 4.2 Do you understand the individual needs of your employees (bearing in mind that these may change from time to time)? 4.3 Do you encourage employees to express their feelings openly (build trust)? 4.4 Do you provide your employees with tangible and intangible support for development (the physical and emotional means)? 4.5 Do your employees know your expectations about their performance (is it documented and have you discussed each indicator)? 4.6 Do you encourage open and honest discussions and problem solving (do you have evidence of situations where you have empowered employees to solve problems and then discussed the outcomes)? 4.7 Do you help your employee create action plans that will solve problems and create changes when needed (is there a format to facilitate this process)? 4.8 Do you help your employees explore potential areas for growth and development consistent with theirs and organisational needs? Conclude this section by reading the following short article and answering the questions that follow. Farry, M. 2014, 'PhotoBox focuses on employees' strengths', Human Resource Management International Digest, 22 (1), Task Questions 1. Discuss the concept of "unique strengths" in the workplace. 2. Explain the potential of harnessing "unique strengths" in terms of employee engagement and increased performance. 3. Reflect critically on your own role in your organisation: If you were played to your unique strengths, how would this contribute to your levels of enjoyment and levels of performance? Regenesys Business School 78

83 7.4 IMPLEMENTING A PERFORMANCE MANAGEMENT SYSTEM Timeframe: Learning Outcome: Recommended Reading: Recommended Multimedia: Section Overview: Minimum of 20 hours Set performance goals and indicators and conduct performance appraisals and reviews isixsigma.com, 2013, 'What is Lean Six Sigma?' (accessed 10 April 2014). MindTools, 2012, 'The McKinsey 7S Framework: Learn How to Align all Parts of Your Organisation', [video clip] (accessed 10 April 2014). Our aim here is to draw learning together and locate this within a wider corporate performance management system. While there are many such systems, we have selected and summarised five for discussion. This section also considers the need for a pilot run. We conclude by drawing attention to the need to monitor and control the system Corporate Performance Management The performance management system may be a system in its own right, or it could be a part of a wider corporate performance management system. Some of the more popular approaches include: Scorecards Dashboards 7-S Model (McKinsey) Performance Prism Lean Six Sigma While the focus of this module is on performance management (a human resource perspective) it is important to locate performance management within the wider scope of managing organisational performance, as this has implications for implementation and monitoring and control. The next table provides a high-level view of each of the above, including some of their strengths and weaknesses and implications for employee performance. Regenesys Business School 79

84 TABLE 9: HIGH-LEVEL VIEW OF CORPORATE PERFORMANCE MANAGEMENT SYSTEMS Type Description Strengths and weaknesses Scorecards A performance tool that compares strategic goals with results. It measures periodic results (weekly, monthly, quarterly, annually) against predetermined goals, which allow departments or business units to asses performance regularly across the organisation. Can be fully customised to the organisation. Only sometimes linked directly to systems, which prevents it from being fully real-time. Implications for performance management Specifically designed to manage performance although the data is periodic rather than real-time. Provides senior management with a balanced view of performance against strategic goals. Dashboards A display of various data that provides up-to-date information on current status of the business, eg an Inventory Dashboard that provides part numbers, actual, planned, variances and status (eg red is danger level). Can be customised to an organisation and provide real-time data. The dashboard (like the dashboard in your car) tells managers the "what" about performance but little about the "why". Effective for managing hourly and daily performance and can be used by mid-level operations and customer support managers. Almost always linked to systems. Performance at a glance but the data requires interpretation. Current (often real time) so provides opportunities for immediate feedback. Used by lower level managers who can have hands-on control of their performance areas. 7-S Model (McKinsey) The model combines seven forces with superordinate goals at the centre: Superordinate goals (shared values) Strategy Structure Systems Style (culture/behaviours) Staff Skills The real energy required to redirect an organisation comes when all the variables in the model are aligned. Recognised (useful) as a strategy implementation and change model, three out of the seven are "hard Ss" (Strategy, Structure, and Systems), whereas the rest are "soft Ss". The integration of the seven- Ss provides a systemic focus on key areas (internally consistent). You can use the framework to pinpoint a weak link in performance. To achieve optimal performance all seven forces must be aligned. The focus is on interactions and fit. Regenesys Business School 80

85 Performance Prism (Adams and Neely) Lean Six Sigma Five interrelated facets: Stakeholder satisfaction Stakeholder contribution Strategies Processes Capabilities (Stakeholder mapping is key; stakeholders are becoming more demanding) Broadly it is a measure of quality that strives for near perfection (disciplined, data-driven approach and methodology for eliminating defects). Uses quantitative measures to determine how a process is performing. To achieve Six Sigma, a process must not produce more than 3.4 defects per million opportunities (ie anything outside of customer specifications). Focus on stakeholders quid pro quo stakeholders expect something from the organisation but the organisation also wants something in return. Focus is on what changes must be made to the organisation's strategies, processes and capabilities in order to meet stakeholder needs. The methodologies are broken down into: DMAIC (define, measure, analyse, improve, control) an improvement system for existing processes DMADV (define, measure, analyse, design, verify) an improvement system to develop new processes or products Used by large organisations such as DHL (UK) performance measures are aligned to strategies, processes and capabilities, which derive from stakeholder analysis. Customised performance management approach that includes a methodology (tools and techniques) to systematically improve processes with the objective of delivering accelerated business results. GE, for example, has estimated benefits of $10b during the first five years of implementation. Emphasises customer-driven performance management. Not just restricted to manufacturing can be used in any process that provides something that is supposed to add value to the customer. (Peters, 2011; isixsigma.com, 2013; Ryan, 2012) Organisations continue to invest in business intelligence and analytical tools such as dashboards are becoming more commonplace. While performance reports (financial and non-financial) have provided useful data, management consider that these are no longer sufficient for effective performance management. BlumShapiro (2013) for example argues, "The numbers need to be accompanied by how and why so that managers know what to do next." Business intelligence derives from computer-based techniques used to spot, dig out, and analyse "hard" business data such as sales revenue by product type and the associated costs. The objective is to understand internal strengths and weaknesses; understand the relationships between different data for better decision-making; and detect opportunities for improved performance. (Business Dictionary, 2014) Dashboards and scorecards are not mutually exclusive. Some organisations use both as a hybrid tool (BlumShapiro, 2013) with dashboard metrics providing a link to department or business unit objectives and scorecards including dashboard graphics to improve readability. Whichever approach is adopted, the information must allow you to drill down to get to the performance issue (the What, When, Where, Who, Why and How that is driving or not driving the desired performance). Regenesys Business School 81

86 Our high-level view includes two other well-known performance management approaches, namely the McKinsey 7-S Model and Lean Six Sigma. Both of these view strategy and performance from different perspectives. Watch the following video to understand the purposes behind the McKinsey 7-S Model: MindTools, 2012, 'The McKinsey 7S Framework: Learn How to Align all Parts of Your Organisation', [video clip] (accessed 10 April 2014). Read the following transcript of the interview between Michael Cyger (founder and publisher of isixsigma.com) and Rick Murrow (from AirAcad.com): isixsigma.com, 2013, 'What is Lean Six Sigma?' (accessed 10 April 2014). Despite the Performance Prism by Adams and Neely being perhaps less well known, it does draw attention to the significance of stakeholders. This is something that is not always present in performance management systems. Task Questions 1. After carrying out your own desk research into the four approaches provided in the high-level view of corporate performance management systems critically evaluate the strengths and weakness of each. In your analysis, determine if the approaches are industry specific or not. 2. Given that variation in the way a service is performed impacts on the customer, argue for the implementation of a Lean Six Sigma performance management approach over other approaches. 3. In the Lean Six Sigma interview, Rick refers to the "value stream" the connection of processes that eventually add value to the customer (support functions like HR, IT, Finance). Discuss why this "value stream" is so important to the understanding of performance management. 4. In Lean Six Sigma the objective is to enhance the intellectual power of the working force, as they are the process owners. What does Rick mean by this and what are the implications for performance management? 5. Lean Six Sigma aims to enhance the culture of exchange of ideas so that processes upstream and downstream talk to each other. What are the implications of this for performance management (specifically around silos and culture)? Regenesys Business School 82

87 A performance management system helps to reduce information asymmetry between the corporate centre and its subsidiaries, departments or business units, teams and individuals. As we saw in the previous table, organisations implement a wide range of tools to ensure information symmetry (ie from scorecards to Lean Six Sigma). Corporate Subsidiaries and Performance Management Systems The motives for decentralisation are to increase flexibility for subsidiaries to react to market demands and create the freedom for subsidiary managers to respond to these demands. Contrary to this is the argument that a performance management system is a key instrument for subsidiary control and that it can help to overcome the problematic characteristics of the principal (eg a holding company) and an agent (eg a subsidiary) relationship (Schlegel and Britzelmaier, 2011). Contingency theory argues that there is no best way of structuring an organisation and its management systems. Optimal design depends on situational factors (contingent factors or contextual factors) and these impose constraints on the organisation (Schlegel and Britzelmaier, 2011). As Schlegel and Britzelmaier (2011) point out, management should be concerned with aligning contingent variables and the management system to achieve good fits: Reflect on standardisation versus differentiation in performance management systems across a holding company and its subsidiaries. Characteristics of subsidiary performance management should not be universal across the company groups but designed individually for each subsidiary depending on the respective situational factors. Do you agree with this statement? Can subsidiaries in two different economic zones have the same performance management system when these subsidiaries may be controlled by different economic factors and consequently have different strategies to deal with these? (Refer to Porter's generic strategies). One subsidiary, for example, might have a "build strategy" to increase market share at the expense of short-term financial performance (may even be cross-subsidised by another subsidiary). (Adapted from Schlegel and Britzelmaier, 2011) From the reflection points above it becomes clear that subsidiaries might be independent in their strategic aims. This has consequences for organisation-wide performance management design. Subsidiaries with high-uncertainty strategies are likely to have KPIs, such as high level of innovation, creativity and staff involvement (Schlegel and Britzelmaier, 2011). Conversely, subsidiaries with low-uncertainty might focus on financial performance (eg cost reduction). Regenesys Business School 83

88 Task Question Read the following excerpt and then critically evaluate the argument proposed: "For subsidiaries with high-uncertainty strategies, there is a limited possibility to plan in advance and predict targets accurately so budgets are more of a short-term planning tool rather than a tool for control. The system in general is more informal and there is a participative decision-making environment instead of a top-down determination of targets. In contrast, controls of subsidiaries with low-risk strategies are tighter with an emphasis on budget achievement. Furthermore, procedures are more formal, standardised and centralised." (Schlegel and Britzelmaier, 2011) Identify companies with subsidiaries in different markets reflect critically on the implications for performance management Communication and Appeals Process The communication process includes two important elements communicating the implementation of the performance management system and formalising the appeals process. Having more and better knowledge of the performance management system leads to greater employee acceptance and satisfaction. (Aguinis, 2013:170) Aguinis (2013:170) provides the following in terms of a good communication plan. It must: Communicate the purpose of the performance management system (ie how teams and employees will benefit; how it will benefit the organisation; and the relationship to other initiatives such as training, promotion, and succession planning); Explain why a strategy cannot be fulfilled without a corresponding performance management system (ie strategic objectives are measurable and are aligned to standards); Explain what is in it for employees (ie the linkages to development opportunities and to rewards; what it could mean in terms of employee growth in the organisation and in terms of professional growth); Show how it works (ie the process and timelines); and Emphasise responsibilities (ie the organisation, managers, teams, employees, and the raters). Regenesys Business School 84

89 Consider that some employees may be harbouring bad experiences of performance management systems from prior employers and have little faith in the value that such a system can add. The following include strategies to ensure communication drives the process: Involve employees; Revisit employees' needs and expectations (especially around coaching and development to meet the performance standards); Provide factual evidence of employee (and organisational) benefits derived from the process; Use multiple channels of communication (eg open discussion in team settings, one-to-one discussions, the organisation's intranet); and Document improved results and make the link to performance management systems. The inclusion of an appeals process adds credibility to the system. The appeals process must be considered as non-threatening and non-discriminatory. A third party should be appointed to mediate the process (eg representative from HR) Pilot run Aguinis (2013:184) recommends a test version of the entire system to facilitate adjustments and revisions before launching the system organisation-wide. Important to the pilot process, is documentation relating to the challenges and obstacles (eg measurement challenges, problems with the appraisal form, etc). Once the initial snags have been ironed out, the pilot group can then champion the full launch providing support where necessary. The completion of the pilot run should create credibility in terms of the full launch since the initial sample has had a say in the process. The pilot group should be sufficiently large and representative of the organisation. No new challenges and problems should arise during the full launch. Regenesys Business School 85

90 7.4.4 Monitoring and Evaluation The performance management system requires monitoring (measurement) and evaluation (reflective and critical) to determine: The validity (the right approaches) and reliability (consistency) of the performance assessment processes; The extent to which the system is being implemented as intended; Whether it is producing the intended results (ie performance improvement, employee retention, employee learning and development, etc); and Confidentiality. Aguinis (2013: ) proposes several additional measures to regularly monitor and evaluate the system: Distribution of performance ratings (eg too high, too low, or clumped around the centre of distribution; departments/business units and raters should be compared to identify possible trends in rating distortion); Quality of the information in open-ended questions and information; Quality of follow-up actions (eg coaching and development); Quality of performance management meetings (eg via a survey to find out how supervisors or managers are conducting meetings); Overall cost or benefit ratio or return on investment. This may be difficult to quantify accurately. The costs of the system should be weighed up against the desired benefits. A targeted performance management system (such as Six Sigma) is more likely to provide a bottom line figure. Customer satisfaction data and other specific data can be used to determine benefits, but care must be taken not to confuse the cause and effects. Task Questions Make time to complete the following case studies in your recommended textbook, 7-1, 7-2, 7-3 and 7-4 (in Aguinis, H. 2013, Performance Management, 3 rd ed., Cape Town: Pearson Education). Regenesys Business School 86

91 7.4.5 Setting Performance Goals and Indicators and Conducting Performance Appraisals and Reviews The purpose of this final section is to reflect on your own organisation and draw together the learning from this module. Task Questions Using your own organisation as a case study: 1. Reflect critically on the purpose of a performance management system. 2. Determine how your current performance management system interrelates with your organisation's strategy, culture, structure, and systems. 3. Examine your role in implementing an effective performance management system. 4. Determine the critical success factors of the system. 5. Recommend improvements to the system. Your recommend textbook (Aguinis, H. 2013, Performance Management, 3 rd ed., Cape Town: Pearson Education) is a valuable resource; especially for those of you whose primary function is not Human Resource Management. We encourage you to read widely especially around current debates on performance management so that you can provide informed discussion on the subject. Regenesys Business School 87

92 8. REFERENCES Adachi, B., Gretczko, M., and Pelster, B. 2013, Human Capital Trends 2013, Deloitte, U.S. Edition. Aguinis, H. 2013, Performance Management, 3 rd ed., Cape Town: Pearson Education. Anitha, J. 2014, 'Determinants of employee engagement and their impact on employee performance', International Journal of Productivity and Performance Management, 63 (3), Author unknown, 2013a, 'Legal Aspects', Archer North, (accessed 18 November 2013). Author unknown, 2012, 'Be Nice to Penny: Performance Review', [video clip] (accessed 8 April 2014). Barr, W. 2012, 'A Definition of What a Performance Measure Really Is', (accessed 29 November 2013). Bogsnes, B. 2013, 'Can Performance Management Foster Intelligent Behaviour?' People & Strategy, 32 (2) 12. Business Dictionary, 2014, 'Definitions', (accessed 10 April 2014). Busser, D 'Delivering Effective Performance Feedback', American Society for Training and Development, April 2012 Edition. Cantrell, S.M., and Smith, D. 2013, Trends Reshaping the Future of HR, Accenture Institute for High Performance. Dahl, J 'Help Employees Rediscover Their Mojo', Credit Union Magazine, April 2013 Edition. Collins, C., and Bell, B. 2013, 'The State of the Art in Performance Management', People & Strategy, 36 (2), Fallaw, S.S., and Kantrowitz, T.M. 2013, The 2013 Global Assessment Trends Report, SHL.com. Farry, M. 2014, 'PhotoBox focuses on employees' strengths', Human Resource Management International Digest, 22 (1), Hall, L.M., and Bodenhamer, B.G Figuring out People, USA: NSP: Neuro-Semantic Publications. Hewitt, A. 2013, The 2013 Trends in Global Employee Engagement: Report Highlights, AON Plc. Investopedia, 2013, 'Definitions', (accessed 29 November 2013). Regenesys Business School 88

93 Isixsigma.com, 2013, 'What is Six Sigma?' (accessed 28 November 2013). Jääskeläinen, A., and Laihonen, H. 2012, 'Overcoming the specific performance management challenges of knowledge intensive organisations', International Journal of Productivity and Performance Management, 62 (4), Jesuthasan, R. 2013, 'Performance Management as a Business Discipline', People and Strategy, 36 (2) Kruse, K. 2012, What is Employee Engagement? (accessed 26 November 2013) Lee, R., Rose, J., and O'Neill, C. 2013, 'Redefining Performance Management at the Top', People & Strategy, 36 (2), Liang, X., Marler, J.H., and Cui, Z. 2012, 'Strategic Human Resource Management in China: East Meets West', Academy of Management Perspectives, May 2012, pp Maley, J., and Kramer, R. 2014, 'The influence of global uncertainty on the cross-border performance appraisal', Personnel Review, 43 (1) Noblet, C. nd 'Dealing with Poor Performance' [case study], m.html (accessed 25 November 2013). Oberoi, M., and Rajgarhia, P. 2013, 'What Your Performance Management System Needs Most', Gallup Business Journal, (accessed 27 November 2013). PWC, 2013, 'How to Manage the Millennials', (accessed 2 December 2013). Ordonez, L.D., Schweitzer, M.E., Galinsky, A.D. and Baserman, M.H. 2009, 'Goals Gone Wild: The Systematic Side Effects of Over-prescribing Goal Setting', Working Paper , Harvard Business School. Peters, T. 2011, 'A Brief History of the 7-S ("McKinsey 7-S") Model, (accessed 28 November 2013). Ravikant, J., and Deshmukh, M. nd 'Competency assessment an art or a science a case for applying the language processing method', Unpublished. Ries, E. 2012, 'The 5 Whys', [video clip] (accessed 28 November 2013). Rock, D., Davis, J., and Jones, E. 2013, 'One Simple Idea That Can Transform Performance Management', People & Strategy, 36 (2), Regenesys Business School 89

94 Ryan, N. 2012, 'The Performance Prism', (accessed 29 November 2013). Saravanja, M Integrated Performance Management Systems and Motivation in the South African Public Sector, in fulfillment of Degree Doctor of Philosophy in the Faculty of Economic and Management Sciences, School of Government, University of the Western Cape. Schlegel, D., and Britzelmaier, B. 2011, 'Business Strategy as a Situational Factor of Subsidiary Performance Management', International Journal of Management Cases, pp Wright, P. 2013, 'Some Practical Thoughts on Annual Performance Management Process', People & Strategy, 36 (2) Ziskin, I. 2013, 'Performance Management: Reconciling Competing Priorities', People & Strategy, 36 (2), Regenesys Business School 90

95 9. APPENDIX 1: CASE STUDY DEALING WITH POOR PERFORMANCE This case study (Noblet, nd) looks at a situation in which a manager initially wants to consider dismissing an employee for her poor performance even though the employer has failed to address the poor performance to date. The purpose of this case study is to gain insight into one of the many challenges facing supervisors or managers how to be effective, efficient and economical. Carol is a claims administrator with Stay Insured plc, a life assurance company. In her mid 60s, she is one of the company's longest-serving employees and has an unblemished disciplinary record. David, the claims team manager, who joined the company recently, arranges a meeting with the HR manager, Elaine, to discuss a problem he is having with Carol. Some of Carol's colleagues have complained to him that she is not pulling her weight and is dealing with her claims allocation very slowly. They have to cover for her to prevent a backlog of claims building up. David explains to Elaine that he has been told that Carol's poor performance has been a problem for some time but the previous claims team manager did nothing about it. There is no documentation showing that the problem was being addressed. The previous manager allowed Carol to coast along, so much so that it appears to Derek that she has become somewhat "set in her ways". Because of the effect that Carol's underperformance is having on the rest of the team, David wants to take decisive action now. Elaine needs to outline to David the steps that he should take to address Carol's underperformance. He should take action promptly before Carol's performance issues escalate further, and follow the company's performance management procedures. He must also take care to comply with the requirements of the industry code, which covers poor performance. However, before he takes formal action against Carol, David must investigate whether or not she is underperforming and, if she is, why. He will need to meet Carol to discuss the possible cause of her below-standard job performance. He should make it clear to her that this meeting is investigatory and is not, at this stage, part of the formal disciplinary process. Prior to the meeting, David should collect relevant and objective evidence, for example customer complaints and other evidence to demonstrate that Carol has not been dealing with claims in a timely manner. If they had been available, he would also have needed to obtain copies of Carol's appraisals and details of discussions that her previous manager had with her concerning her performance. Assuming that the evidence indicates that Carol has been underperforming, based on the evidence that he collects and his subsequent meeting with Carol, David should try to establish whether Carol's underperformance is capability or conduct related, and whether or not there are mitigating reasons for it. Poor performance that is capability related may be attributable to inadequate or insufficient training, poor communication, the employee's lack of understanding of her goals and objectives, lack of feedback, poor quality supervision or support, excessive workloads, unrealistic targets and deadlines, poor working relationships and personal problems. Regenesys Business School 91

96 Alternatively, poor performance may be the result of genuine inability or lack of commitment. If Carol's poor performance is conduct related, Stay Assured should follow its disciplinary procedure rather than a performance management process. If David identifies that Carol's poor performance is capability related, he should agree specific action points and targets with her, together with a realistic timescale in which she should achieve them. He should also arrange training or other remedial steps if these are appropriate and schedule a follow-up meeting to review Carol's performance. It is essential that David keep a record of the meeting (including the agreed targets for improvement) and of the arrangements for the follow-up meeting. He should continue to monitor Carol's ongoing performance. If Carol's performance does not improve after Stay Assured has followed their performance management procedure, he may be left with no alternative but to take this to a formal review panel. To avoid Carol being able to successfully claim any kind of unlawful discrimination against Stay Assured, for example because of her age, David should deal with her performance in the same way as he would for other employees in the team. Prior to this, subject to the (now repealed) statutory retirement procedure, employers could compulsorily retire employees when they reached retirement age. As a result, many employers overlooked performance issues in older members of staff who were approaching retirement age because they would be leaving anyway. David cannot use the fact that Carol may have attained what was previously the company's retirement age as a reason to end her employment. Nor can he assume that she will want to retire at this point. If he treats Carol less favorably than other employees because she is close to, or has reached, a particular age, this might amount to unlawful age discrimination. Conversely, if he treats her more leniently than other members of the team for the same reason, Stay Assured could be vulnerable to claims of age discrimination by them. David gathers his evidence and meets with Carol to discuss his concerns. At first Carol is defensive and claims that her performance is no worse than that of the other members of the claims team. She does not believe that there have been customer complaints about her so she cannot see what the problem is. However, when David shows her evidence that her closure rate of claims files has consistently been the lowest in the team and that some customers have complained about the slow handling of their claims, she breaks down in tears and confesses to David that she has been struggling to cope with the volume of work since a new computer system for handing claims records was installed over a year ago. Although she received training when the new system was introduced, she is not as computer literate as some of the other members of the team and has struggled with it. Having established that Carol's performance issue is capability and not conduct related and that her underperformance appears to be due to a training need, David decides to take an informal approach. He tells her that she needs to improve her performance or she may be moved to the next stage of the performance management process, which could ultimately lead to formal warnings. David arranges for Carol to receive one-to-one refresher training on the new claims records system. Once the training is complete, David agrees with Carol that, over a period of three months, she must ensure that her claim closure rates are at, or above, the claims team's average. Regenesys Business School 92

97 He also agrees with her that he will sit down with her at the end of each month during this period to discuss how she is progressing towards meeting the target and any concerns that she may have. At the end of the three-month period, Carol's performance shows a consistent improvement and the informal approach has served its purpose without need to move to more formal measures. He continues to monitor her performance by way of regular meetings and Stay Assured's appraisal process. David's experience with Carol demonstrates the benefits for employers of having robust and fully documented processes and of dealing with performance issues as and when they arise. Employers that have failed to address poor performance at the outset may have to tolerate a longer period for improvement than they otherwise would, because the employee will have become used to performing at the lower level. It is important to have some documented evidence of a performance issue before starting formal action and by carrying out an investigation into the poor performance; the employer should be able to identify whether it is due to capability or conduct, and follow the correct procedure as a result. Regenesys Business School 93

98 10. GLOSSARY OF TERMS Term Job Analysis Job Specification Key Performance Indicator (KPI) Millennials Performance Measurement Performance Standard 360-degree Feedback Explanation Detailed examination of the (1) tasks (performance elements) that make up a job (employee role), (2) conditions under which they are performed, and (3) what the job requires in terms of aptitudes (potential for achievement), attitudes (behaviour characteristics), knowledge, skills, and the physical condition of the employee (where appropriate). Its objectives include (a) determination of the most efficient methods of doing a job, (b) enhancement of the employee's job satisfaction, (c) improvement in training methods, (d) development of performance measurement systems, and (e) matching of job descriptions with person specifications in employee selection. Comprehensive job analysis begins with a study of the organisation itself: its purpose, design and structure, inputs and outputs, internal and external environments, and resource constraints. It is the first step in a thorough understanding of the job and forms the basis of job description, which leads to job specification. Also called human resource audit, job study, or occupational analysis. A statement of employee characteristics and qualifications required for satisfactory performance of defined duties and tasks (responsibilities) comprising a specific job or function. The job description is derived from the job analysis. A set of quantifiable measures that an organisation (or industry) uses to gauge or compare performance in terms of meeting their strategic and operational goals (also known as key success indicators (KSIs). Born between early 1980s and early 2000s (also referred to as Generation Y). A comparison that provides objective evidence of the degree to which a performance result is occurring over time (past, now, future). A single number can never be a performance measure because it doesn't provide a basis for comparison (eg if the performance measure is 10 is 8 good or bad under the circumstances? Does it have to be acted upon? And, in what direction is it changing?). Ideally the performance measure should indicate degree such as a 5-point scale that best describes the measure as opposed to a yes or no or single unit measures such as 10. Performance standards are attainable, specific, observable, meaningful, and measurable and are stated in terms of quality, quantity, timeliness or cost. Performance appraisal data collected from "all around" an employee (peers, subordinates, supervisors and external parties such as customers and suppliers). It is argued, that the objective is to assess training and development needs and to provide competence-related information for succession planning (not for pay increases or incentives). Also called multirater assessment, multi-source assessment and multi-source feedback. (Investopedia, 2013; Barr, 2012; Business Dictionary, 2013) Regenesys Business School 94