Thinking outside the performance management box

May 26 2009 by Nic Paton Print This Article

Managing a team's performance needs to be about much more than just ensuring they are hitting financial or sales targets and meeting yearly goals. Bonuses should be as much about how good or bad a manager is at holding "difficult" conversations with workers about performance or their ability to helping employees to set and achieve their own objectives.

According to a research by consultancy Watson Wyatt many organisations are being let down by their approach to employee performance management at just the point when they most need it to work for them.

At the heart of the problem is often an overly rigid approach to reward and performance, with too little appreciation of the "intangibles" of performance management, which can often be as important long-term as simply cracking the whip to top the sales leader board every month.

But, with reward budgets still under intense pressure, the ability to differentiate between employee performance and therefore funnel rewards towards genuine high performers was becoming even more important than ever, it argued. Justin Grice, a senior reward consultant at Watson Wyatt: "It is the intangible aspects of performance management that make a tangible difference.

"Are line managers actually capable of managing poor performance? Do employees know how to set objectives, and provide and receive feedback? Are objectives set in the context of business objectives that balance financial performance with risk?" he questioned.

Grice's view chimes with the new regulatory regime being mooted by the likes of the Financial Services Authority in the UK, in which regulated companies are being urged to take a more balanced assessment of performance in reaching bonus decisions, and not just measure the achievement of financial targets.

"Determining bonuses in this way relies on assessing performance 'in the round'; You need to intelligently determine financial and non-financial delivery and balance this with behaviour in line with organisational values," said Grice.

"This places renewed emphasis on performance management and ensuring organisations can assess the complexities of performance in a consistent way," he added.

This need to move beyond "self-interest" when it came drawing up targets for managers and deciding on measures of excellence, was highlighted by M-I thought leader and management thinker Robert Heller in March.

He argued that teamwork and delegation were as equally important as self-interest as a driver of economic as well as personal performance.

Yet, according to the Watson Wyatt research, organisations often fall down on performance management by overlooking four key aspects:

  • The capability of line managers to manage poor performance and have "difficult" conversations, which can be addressed through coaching and training.
  • Employees' capability to set objectives, and provide and receive feedback, which can also be addressed through training.
  • Ongoing communication to ensure undue emphasis is not inappropriately placed on objective setting and end-of-year reviews to ensure that performance management is seen as the "way we do things".
  • Ensuring that performance management is placed in the context of overall business performance to provide employees with a "line of sight" and help them to understand how achieving their objectives help to deliver organisational success.

"Addressing these less tangible aspects of performance management as well as the tangible ones is key to delivering an approach to performance management that is sophisticated enough to assess performance 'in the round'," said Grice.

And in April, M-I thought leader Myra White argued that the whole notion that huge salaries and bonuses are essential to attracting and retain talent needed to be rethought.

People, she added, were not driven primarily by money. In fact the lure of more and more money could be counter-productive.