Managing Individual Performance
Many organizations claim that “employees are our greatest asset” but give little thought to how to get the most from those assets. Furthermore, although an enterprise will want to design and implement an approach to managing people that will help to ensure that they are a source of sustainable competitive advantage collectively, it must also be flexible enough to get the most out of every single individual. In practice, this means that to be effective, a performance management system must both motivate the high-performing individual to want to stay with the enterprise and continue to give of their best and deal quickly and appropriately with the low-performing individual, who needs to do better or move on. Of course, it must also deal with all the employees in-between these two extremes (the so-called “mediocre middle”) and this usually creates its own set of challenges.
A well-designed performance management system should ideally reflect the interests and concerns of multiple stakeholders, should be linked to the organization’s particular business strategy at any one time, be consistent in its application, and be continuously reviewed, evaluated and revised. In addition, the system will ideally provide mechanisms to set clear goals and expectations of every individual, help to shape people’s behavior to support overall team and organizational goals, describe valuable organizational competencies and provide a specific means of motivation and reward. Let’s look at these four parts of the process in more detail.
Clear goals and expectations
When the enterprise plans a strategy or develops a set of overall objectives it is employees that execute the plan. This means that overall strategies have to be split into parts, which functions, departments or other groups can be responsible for undertaking, and these then need to be further broken down into tasks which individuals can tackle—either alone or as part of a team effort. This “cascading” process, with a simple example is illustrated in the diagram below:
In addition to making sure that individual goals are well-linked to organizational goals, they must also be expressed in clear ways. This apparently easy step is often missed or not done well, with managers falling back on vague statements which are often more about inputs than outputs. For example, the goal statement “To analyze recent lateness figures and summarize them for management” is both vague and input-focused when compared to “Analyze lateness data to recommend ways in which it can be potentially reduced by at least 25% this year versus last year.” Simply put, the clearer the expectation the clearer it is to the employee what is required of them to perform (and both below, at or above the target).
Shaping people’s behavior
Many organizations invest considerable effort into trying to “shape” individual behaviors. This is typically done by either offering a “positive reinforcer” when so-called “good behavior” is exhibited (hoping that the individual will be likely to repeat the act) or offering what psychologists call an “aversive stimulus” when so-called bad-behavior occurs. This effectively amounts to a punishment of some kind.
The shaping process typically has a number of steps as follows:
- Identify a desired behavior for the particular individual in pursuing the chosen goal.
- Identify the present level of performance in displaying the desired behavior.
- List the steps that will eventually take the individual from his/her present level of performance to the final desired behavior. These levels of skill should be progressively more demanding.
- Tell the individual that s/he must accomplish step 1 to receive any reward (or avoid punishment).
- Once the individual has mastered a specified behavior, require that s/he demonstrate the next stage of behavior in order to receive a reward (or again avoid punishment).
Although an organization sometimes takes a very open and direct approach to shaping behavior by asking its managers to apply the above steps, it is most often much more covertly handled in the performance management system. This may be to publish core desired competencies or values for the organization as a whole or to vary at least part of any pay increases according to whether or not an individual is behaving in the “right way” or not.
At the highest level, a competency is the ability of an individual to do a job properly but at a more detailed level it is the attributes, knowledge, skills, abilities and other characteristics possessed by an individual to get a task done. Examples of competencies are things like: “Making decisions and weighing risk,” “Thinking clearly and analytically” and “Identifying and Solving Problems.”
Many organizations like to develop overall or general “target competencies” to suit their size or type of enterprise or even to create and sustain the culture they desire. These may be aimed at all leaders of people, all employees or in some cases apply only to individual teams or groups. For example, if an organization sees “attention to detail” as an important goal or desirable cultural habit, it may describe a particular competency in this area, which explains what is required and then uses the performance appraisal process to invite managers to measure how well an employee is using this competency in their particular role or tasks. This may then be directly linked to the pay review or even the future promotion system.
Motivation and Reward
The whole idea of finding new and creative ways in which to motivate and reward employees is always at the heart of any performance management system. However, in practice, most organizations fall back on two very tried and trusted methods to do this. The first of these is to offer praise for work that is well done. This may be verbal praise (offered individually or in team situations), expressed in awards and performance celebration events or even be linked to prizes and benefits. The second approach is to use the compensation review process and have a “performance related pay” component. In a conservative enterprise, this component may be quite small (and represent only 5% or 10% of a pay increase). However in most organizations it is likely to make up 25%, 50% or even 100% of the pay increase and therefore the additional money that an individual receives will be wholly dependent upon his or her performance. This excludes additional rewards that can be offered in some instances such as bonuses, commissions, gain-sharing awards and benefits which have direct monetary value (vouchers to purchase goods, additional vacation time etc).
Managing employee performance is rarely a task that should be left to an individual manager. Instead, a well-designed system should be available which not only fits the culture, style and strategic goals of the particular enterprise but provides mechanisms to set clear goals and expectations of every individual, helps to shape people’s behavior, describes valuable organizational competencies and finally provides a specific means of motivation and reward.