Setting Individual Objectives for Continuous Improvement
White paper, 1992
Observations About Traditional Performance Appraisal
Nearly every company we know is dissatisfied with its performance appraisal program. Repeated efforts to re-design these programs have been disappointing. The assumptions about appraisal are fundamentally flawed. In most companies, performance appraisals suffer from these basic problems:
- they are annual rituals rather than continuous, helpful tools
- at best they focus on short-term results
- they often lack substance; activities are confused with outcomes
- developmental coaching is an after-thought
- objectives are poorly set, usually in top down, mechanical fashion and they are not used as real work plans or control mechanisms
- therefore, they contribute little to greater self-management
- they are overly rigid and don’t reflect the dynamic nature of the environment
- rarely do individual’s objectives clearly tie to the direction of the business or to others with whom they must jointly work to satisfy customers
Linkage between individual performance plans needs to improve both horizontally – across functions, departments, etc. – and vertically among the levels of organization. Sharing a single vision means allowing all contributors to directly relate their contribution to a single set of organizational outcomes.
The linkage between the business plan and individual performance management is an obvious need; many talk about it, but few do it. The traditional performance appraisal is tied to the compensation administration cycle. Enthusiasm for pay-or-performance, still mostly an elusive concept in a majority of companies, causes management to make performance appraisal the role of the human resources department or, worse yet, personnel administrators.
It has become apparent to a number of companies that performance management is a great deal more than compensation administration. It is becoming clear that in building competitive organizations, committed to continuous improvement, individual performance management must become a more effective process for guiding and energizing self-management, tied to the vision and strategies of the business.
Continuous Improvement and Performance
The quality movement has contributed a great deal to competitive tactics, but with the exception of Xerox and a handful of other companies, it has not had a great deal of practical impact on individual performance management. Deming has criticized traditionally applied MBO approaches as contrary to sustained process improvement. He and others have made a persuasive case for focusing on process rather than today’s business results.
Most business people we work with relate to the idea of process improvement. Capable business process, like capable manufacturing process, creates predictability and repeatability of results. It’s clear, but few are ready to make the leap of faith to focus all energies on process, while ignoring the expectations of stakeholders for the shorter term. Balance and sustained focus on both are critical; there is no satisfactory option.