Performance management is still a puzzle waiting to be solved in many companies. Three types of choices need to be made when designing a performance management system. We find too much attention paid to the second and third set, and not enough to the first:
1. Philosophical direction
A shared belief across the company’s leadership regarding what the performance management process is expected to measure and what behaviors it is intended to incent
2. Focus of measurement
The nature of what what mix and balance of results and behavior are measured and how these are linked to individual, team, unit, and company performance
3. Practices, processes, and tools
Tactical practices such as rating scales, forms, self-assessments and stake-holder input, frequency, and feedback.
Performance management is often used as the “backbone” for many HR systems. For example, compensation decisions are linked to performance review data. The challenge is that because performance management data is often perceived as invalid because of flaws with what is measured or the process for collecting and calibrating the data, it undermines the confidence of all subsequent decisions based upon it – rewards, development and coaching, and placement and promotion.
Therefore, the search for solutions should not be limited to so-called best practices and tools, but instead should start with a deep debate within the executive team about their philosophy and strategic people objectives regarding performance differentiation. Then the focus can shift to how best to achieve those outcomes.
Solutions must start with a core point of view (and resultant policy position) with regard to performance. Often we hear the assumption that the core purpose of performance management is to enhance employee motivation. That is a point of view, and perhaps a valid one in some contexts, but generically it is worthless. A company must find its own point of view on the core purpose of performance management and then design a system to achieve it.
For example, the notion of separating pay from developmental feedback is a core design philosophy that preceeds all discussion about training our leaders to do a better job of giving feedback, which is often jumped to as a solution.
This is why we continue to swirl on the performance management issue – as we have done for at least 30 years. The swirl will not end until a deeper understanding of the problem is unearthed.