The A Word: Can Performance Management Possibly Drive Business Value Without It?

What could be more powerful and engaging than knowing that the work you do is an important part of what helps your company succeed ... and having your manager reinforce that fact regularly by highlighting the connection between the goals you are striving to accomplish and the organization's most critical priorities?

What is the biggest difference between a performance management system whose return-on-effort is primarily compliance and one that actually drives improvement in corporate performance.

Yes, it's the A word.  Alignment.

How are we doing in that regard? 

A recently released Hewitt study The Current State of Performance Management & Career Development 2010, which features responses from 193 employers, gives us a peek at the answer.

 On the question of alignment, the linkage of employee performance expectations to business strategy, the chart above shows that only 15% of the surveyed organizations reported that employee goals are "very aligned" with organizational priorities.

The large majority (73%) indicate that goals are somewhat aligned, that corporate goals are communicated and then left to local managers to translate.  So, for most employers, it all rests on effective coaching and direction from the local manager.  (All responses are detailed in the chart below.)

 
And how's that working for us? The Hewitt study also provides a revealing answer here.  When asked to name the top performance management process improvements needed by their organization, guess what came out as #1 and #2?

#1: Performance coaching - 65% ranked as one of their top three improvement needs

#2: Managers not held accountable (for performance management) - 35% ranked as one of their top three improvement needs

(Oh, and the #3 process improvement need? Linking performance management to business strategy. Surprise!)

The Hewitt report further notes that the dial is not moving much on the "managers able to coach" thing; in a similar study five years ago, 73% of respondents identified it as the area needing the most improvement.

All this, I'm afraid, only serves as fuel for the anti-performance management fire.  No wonder Samuel Culbert and others are calling for us to kill the performance review.  Do you hear CEOs or CFOs yelling back at them, leaping to defend the process?  Not me. And no wonder. There's little evidence to support the notion that performance management is driving real business value.

Until we fix that, it'll only be HR and reward folks (and possibly a minority of us at that) fighting to save performance management. 

Comments

[Paul Weatherhead]

Thanks, Ann, for yet another great thought-provoking blog.

Maybe there is another A word that needs to be emphasized in the performance management system -- appreciation.

Its perhaps one of the most important feelings to be conveyed to a worker that you are trying to attract, retain, or motivate.

[Laura Schroeder]

Well, you know I think it comes down to the P word - Personal: http://tinyurl.com/32wk2bm

Many thanks for providing the hard data, as well as your own valuable insights.

[Ann Bares]

Paul and Laura:

Excellent additional points - making it personal and expressing appreciation are certainly key parts of the performance management equation. Thanks for weighing in!

[Dan Walter]

Great post. This made me think about two hot points that are not being addressed. Communication and Supervision.

Communication is always in our top 3 concerns, but seldom gets more than 10% of the compensation support budget.
#1: Performance coaching - 65% ranked as one of their top three improvement needs

Supervision. I tread a recent blog posting by Paul Hebert and he tried to differentiate between supervision and management. Perhaps we should be doing less Performance Management and more Performance Supervision. If more people were being supervised and guided thorough their goals, accountability would be an outcome of the process, rather than an add on at the end.
#2: Managers not held accountable (for performance management) - 35% ranked as one of their top three improvement needs

[Ann Bares]

Dan:

Right on, on both counts. I like it ... we DO need less Performance Management and more Performance Supervision. That Hebert, he's a smart guy. :)

[Derek Irvine, Globoforce]

Couldn't agree more, Ann, and something I am quite passionate about. The Corporate Exec Board found: "Simply put, almost two-thirds of all employees are 33% as productive as they can be because they don't understand what they are now asked to do."

Wow. 64% of employees not working to full effectiveness, not because they don't WANT to, but because they don't know HOW to. They don't know or fully understand your strategic objectives (which likely changed due to the recession), don't know how this affects their personal jobs/functions, and don't know what they should be changing. Even more sad, they don't know that they should even be thinking about this.

And you lose out. Tremendously.

If you’re going to improve your business results, then you must get all of your employees aligned with your changing/changed business strategies. One of the most effective and positive methods for creating alignment is through strategic recognition. These highly structured programs communicate clearly through positive reinforcement the desired changes you need your employees to make in their everyday work and focus to achieve your new objectives.

(CEB quote citation here: http://globoforce.blogspot.com/2010/04/get-most-out-of-recognition-with.html)

[LTC Performance Strategies]

Great post Ann. We've been saying for a while now that performance coaching is the most important part of the equation. Planning and evaluation waste everyone's time if there is no substance in between. We think supervisors have to first ask themselves, How much do I really care about the improvement of those I'm leading? Setting goals and then throwing employees out to float by themselves is setting them up for failure and possibly even resentment: http://tiny.cc/c9xnt. There is a reason why we are all inspired and admire great COACHES like John Wooden.

[LTC Performance Strategies]

Great post Ann. We've been saying for a while now that performance coaching is the most important part of the equation. Planning and evaluation waste everyone's time if there is no substance in between. We think supervisors have to first ask themselves, How much do I really care about the improvement of those I'm leading? Setting goals and then throwing employees out to float by themselves is setting them up for failure and possibly even resentment: http://ltcperformance.com/blog/2010/07/19/dont-let-them-sink/. There is a reason why we are all inspired and admire great COACHES like John Wooden.

[Ann Bares]

Derek:

Thanks for the CEB quote and reinforcement. It IS a loss when we have willing and able employees, and we fail to put the information and practices in place that allow them to contribute to business success as fully as possible.

LTC:

Agreed - without performance coaching, the planning and evaluation practices are of minimal benefit. Until we step up there, we will be hard pressed to defend performance management as a true value adder. Thanks for sharing the link.