PEOPLE FOCUS - CIPD

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HR MANAGEMENT PEOPLE FOCUS Performance Management: Wasteful or Wonderful? by Gerry McMahon Eamonn Dunphy, George Hook, Sue Barker and Pat Spillane make a tidy living from it most weeks. Sky Sports also love to dissect the performance of key players. Goals scored, shots on target, shots saved, successful passes completed and so on are all part of the evaluation. It’s tough stuff either to undertake or be subjected to. It’s especially tough when the assessor’s job is under threat and they’re trying to get more from less in a hostile economic climate. This is exactly the predicament of many workplace managers around the world today. Hence the queries: why do it and why do so many avoid it when they should be doing it? Why Do It? It is an accepted part of management orthodoxy that there ought be some means by which performance can be predetermined, measured, encouraged and rewarded. The reality is that the management of performance is a crucial determinant of the effectiveness and growth of all organisations. A formal system of Performance Management or appraisal is central to the process, involving the regular sharing of information between management and other employees about their work performance and potential. Indeed the wide scale application of formal appraisal systems throughout the world serves to underline its central role in the attainment of both organisational and staff objectives. allowed to become more than a narrow vehicle for the delivery of reward. Beyond their scope for giving and receiving feedback, they allow past performance to be reviewed, future performance targets to be agreed and appropriate training and development plans to be identified. Turning to the ‘bottom line’, American research has found that organisations with strong systems are 51 per cent more likely to outperform their competitors on financial measures and 41 per cent more likely to outperform them on other measures such as customer satisfaction and product\ service quality. Win: Win Experience The value of Performance Management systems was also reflected in a recent survey undertaken by the Chartered Institute of Personnel and Development (CIPD), which concluded that sizeable majorities of managers find the process good for staff motivation, For example, according to both the National Centre for Partnership and Performance and Mercer Consulting about 70% of large firms in Ireland avail of a formal performance review system, whilst in the U.K., Germany, Sweden and Greece more than 4 out of 5 of organisations assess their managers via such a system. Performance review or appraisal systems aren’t all about pay rises. In fact the British evidence reveals that they only begin to have real effects on organisational effectiveness when 26
PEOPLE FOCUS HR MANAGEMENT training and development, reviewing and improving performance, setting objectives and determining bonuses. And somewhat surprisingly the same source found that most employees had a positive attitude to the process, due to its inherent capacity to give them ‘quality time’. That is, it’s good for reflecting on important matters such as: Where have I come from? Where am I now? and Where Do I Want To Go? When the latter query enables employees and managers to dovetail their aspirations the process can serve as a win: win experience for all. This approach will have contributed to Henley Management College and Hay Consultants’ U.K. survey of employees in 2005 which found that: ‘it’s a key force for staff motivation … over 90% were motivated in some way by their last review’. Furthermore a large body of concrete evidence confirms that these joint target-setting meetings are a powerful way of increasing motivation and productivity. When properly conducted – in a participative manner - they give staff a much greater say in what they do and how they do it, thus facilitating commitment and a more positive attitude on their part. Indeed so valuable is the practice adjudged to be that the overwhelming majority of the Fortune Top 500 companies in the United States use 360 degree feedback. That is, the review of staff performance incorporates the views of peers, subordinates and even internal and external customers - in addition to those of their managers! adjudge their systems to be effective place a major emphasis on training. The conduct of a professional training programme is recognised as central to the attainment of successful performance management systems. By providing managers with skills in giving both the good and the bad news their value has been enhanced. The reviewers’ preparedness to use (or if required, develop) their interpersonal skills is the real key to successful performance reviews. The failure to develop these skills has – and will continue to - contribute to numerous management-staff disagreements. For example, from an Irish perspective, one can only speculate as to their absence from the now infamous Cork hurlers dispute or the Keane-McCarthy fracas (i.e. the ‘Saipan affair)’ at the 2002 World Cup. When properly applied, huge benefits can be reaped from techniques designed to manage performance effectively. However it’s scary that even Keane himself should conclude that: ‘most managers don’t really manage at all’. Is he in that category now? ■ Dr. Gerard McMahon is a lecturer and consultant in H.R.M. at the Faculty of Business, D.I.T. and author of the forthcoming text ‘Successful Performance Management’, Liffey Press. E-Mail: ppl1@eircom.net Why Avoid It? The absence or faulty application of Performance Management systems has been central to many team failures and corporate downturns. For example, according to ‘Rogue Trader’ Nick Leeson’s assessment of his single handed destruction of Barings Bank, had his manager done ‘some simple checking he’d have seen some figures which would have given him a heart attack’! Thus prompting the Bank of England’s conclusion that Barings sudden demise was attributable to ‘a serious failure of controls and managerial confusion’, including ‘hazy’ reporting lines. However the start reality for many is that the process is painful and should be avoided at all costs. As researchers at Bath University discovered in 2003, it may be the least favourite Human Resources type activity of all. Undoubtedly from the manager’s perspective it’s very time consuming. It’s also hard to tell someone they’re not getting the bonus they’re convinced they deserve! It’s particularly hard if in the manager’s ‘heart of hearts’ they’re also convinced that the employee deserves it, but due to market or corporate turmoil the hierarchy have determined otherwise. Whilst from the employee’s perspective the fear of being told you’re not up to speed - when they’re already at wits end meeting job requirements – may do more than just keep them awake at night. Effective Systems Of course like any organisational practice, the preparedness of top management to support performance management is a key determinant of its success. Those organisations that
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PEOPLE FOCUS - CIPD

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