finding the keys to performance management

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Finding the Keys to Performance Management Mark Vickers, Claude Balthazard, and Aileen MacMillan © 2007 Wiley Periodicals, Inc. Published online in Wiley InterScience (www.interscience.wiley.com). DOI 10.1002/ert.20147 T here is no single performance-manage- ment (PM) practice that can transform an ineffective system into a good one, suggest the findings of the Institute for Corporate Productivity’s (i4cp—formerly the Human Resource Institute) 2006 Performance Manage- ment Survey, carried out in partnership with HR.com. In order to create an effective PM process, organizations must take a multi- dimensional approach to the problem. In total, 1,031 usable survey responses were collected. Respondents were primarily located in North America, though some resided in other regions. Responding organi- zations ranged widely in size, with a quarter employing 100 or fewer employees, another quarter employing 101 to 499 employees, and 40 percent employing 1,000 or more employees. The survey clearly shows that most orga- nizations believe their PM systems need improvement. Respondents were asked whether their performance-management process is seen as contributing to indivi- dual performance. Only 8 percent said that their process is viewed as contributing in a significant way and that few improvements are required in the future. Another 45 per- cent said that their PM process contributes but that more improvements are required, whereas nearly half (47 percent) are not sure whether their PM process makes any contri- bution at all. Part of the problem seems to be inconsis- tency. Only about two-fifths of survey respondents indicated that a large majority of their employees receive quality perfor- mance appraisals, whereas nearly a third think that the proportion is half or less in their organizations. Just 13 percent of respondents said that their employees think the PM process provides great value organizationwide. This ambivalence and even skepticism about performance management is also widely reflected in the business literature examined in this study. Existing PM programs are often rife with problems including, but not limited to, a lack of under- standing of the importance of the PM pro- cess, a scarcity of the skills necessary to carry out the process, and disagreements about the most appropriate steps to imple- ment in order to create a well-functioning process. It’s no wonder, then, that both the survey and the broader PM literature review show that performance management tends to be a work in progress. The survey indicates that about two-thirds of respondents said their companies have plans for more closely aligning employee goals with business goals, increasing the number of worker/manager interactions focused on performance-related feedback, and improving clarity in regard to performance expectations. 1

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Finding the Keys to Performance Management

Mark Vickers, Claude Balthazard, and Aileen MacMillan

© 2007 Wiley Periodicals, Inc.Published online in Wiley InterScience (www.interscience.wiley.com). DOI 10.1002/ert.20147

There is no single performance-manage-ment (PM) practice that can transform an

ineffective system into a good one, suggestthe findings of the Institute for CorporateProductivity’s (i4cp—formerly the HumanResource Institute) 2006 Performance Manage-ment Survey, carried out in partnership withHR.com. In order to create an effective PMprocess, organizations must take a multi-dimensional approach to the problem.

In total, 1,031 usable survey responseswere collected. Respondents were primarilylocated in North America, though someresided in other regions. Responding organi-zations ranged widely in size, with a quarteremploying 100 or fewer employees, anotherquarter employing 101 to 499 employees, and40 percent employing 1,000 or moreemployees.

The survey clearly shows that most orga-nizations believe their PM systems needimprovement. Respondents were askedwhether their performance-managementprocess is seen as contributing to indivi-dual performance. Only 8 percent said thattheir process is viewed as contributing in asignificant way and that few improvementsare required in the future. Another 45 per-cent said that their PM process contributesbut that more improvements are required,whereas nearly half (47 percent) are not surewhether their PM process makes any contri-bution at all.

Part of the problem seems to be inconsis-tency. Only about two-fifths of surveyrespondents indicated that a large majority of their employees receive quality perfor-mance appraisals, whereas nearly a thirdthink that the proportion is half or less intheir organizations. Just 13 percent ofrespondents said that their employees thinkthe PM process provides great valueorganizationwide.

This ambivalence and even skepticismabout performance management is alsowidely reflected in the business literatureexamined in this study. Existing PMprograms are often rife with problemsincluding, but not limited to, a lack of under-standing of the importance of the PM pro-cess, a scarcity of the skills necessary tocarry out the process, and disagreementsabout the most appropriate steps to imple-ment in order to create a well-functioningprocess.

It’s no wonder, then, that both the surveyand the broader PM literature review showthat performance management tends to be awork in progress. The survey indicates thatabout two-thirds of respondents said theircompanies have plans for more closelyaligning employee goals with business goals,increasing the number of worker/managerinteractions focused on performance-relatedfeedback, and improving clarity in regard toperformance expectations.

1

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Bottom line: PM systems are just that—systems. They require the coordination ofmultiple key practices. The more of thesepractices that are in place, the more likelya PM system is to be viewed as effective.An analysis of the survey indicates that there are nine key practices overall.

OPTIMIZING PERFORMANCE MANAGEMENT

When trying to optimize employee perfor-mance management, a good place to start iswith the function of the system—that is, ifthe PM system were working well, whatwould be accomplished? Perhaps above allelse, individual performance would be maxi-mized. Employees would exert maximumeffort (including discretionary effort) towardthe achievement of their objectives. Employ-ees would be focused on the right objectives,which are aligned to the organization’s strate-gies. Employees would also be increasingtheir ability to perform in the future. This issometimes called the “focus, will, capability”performance model.

As the i4cp survey results point out, PMsystems often fall short of expectations.Indeed, PM systems are sometimes seen tomake matters worse. For instance, in somecases, feedback has been demonstrated to leadto dips in performance. Pay-for-performanceschemes have also had their share of failures.Even the process of management by objectives(MBO) has seen some challenges, such aswhen employees negotiate low objectives

Mark Vickers, Claude Balthazard, and Aileen MacMillanEmployment Relations Today DOI 10.1002/ert

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instead of upping their performance. All in all,the devil seems to be in the details.

Nine Key Performance Factors

Our survey asked respondents about detailsassociated with their PM systems. The surveyalso included a question whereby respon-dents rated the extent to which their PM sys-tem is seen as contributing to individualperformance improvement. We then lookedat a range of PM practices from the perspec-tive of whether they were correlated withthis effectiveness rating.

The i4cp team found that there were nomake-or-break practices. That is, there wereno practices whose presence would guaranteehigh effectiveness ratings. On the other hand,there were no practices whose absence wouldguarantee low effectiveness ratings. The situ-ation is that many practices make a contribu-tion to the effectiveness of the PM process.Part of the reason that the relationshipbetween individual PM practices and per-ceived effectiveness is not that strong is thateach practice exists in the context of otherpractices.

Although there are no make-or-breakpractices, there may well be a set of prac-tices that, acting together, make for a moreeffective PM system. Would it be possible,then, to identify a core set of practices that,taken together, would maximize the effec-tiveness of the PM system? To tackle thischallenge, we used multiple regression andother allied statistical techniques. We founda core set of nine key practices that met thiscriterion. The presence of each of thesepractices was associated with an increase inthe perceived effectiveness of the PM pro-cess. In addition, once these nine practiceswere included, it was not possible to find a

When trying to optimize employee performance manage-ment, a good place to start is with the function of thesystem—that is, if the PM system were working well, whatwould be accomplished?

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tenth that made any appreciable improve-ment in effectiveness.

The nine key PM practices are as follows:

1. The PM process includes developmentalplans for the next work period.

2. Training is provided to managers on con-ducting a performance appraisal meeting.

3. The quality of performance appraisals ismeasured.

4. There is a system in place to address andresolve poor performance.

5. The appraisal includes information otherthan that based on the judgment ofmanagers.

6. The PM process is consistent across theorganization.

7. Employees can expect feedback on theirperformance more often than once a year.

8. 360-degree or multirater feedback is usedto support the PM process.

9. The PM process includes ongoing goalreview and feedback from managers.

Exhibit 1 illustrates the distribution oforganizations according to the number of keypractices that they have implemented. Given

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that there are nine key practices, this numbergoes from 0, meaning that none of the ninekey PM practices are implemented in theorganization, all the way to nine, meaningthat all nine of the key performance-management practices are implemented inthe organization. The average respondingorganization has implemented four of thenine key PM practices. In our sample, only1.2 percent of organizations have imple-mented all nine key PM practices.

Exhibit 2 looks at the number of key PMpractices companies are using and how this isrelated to the perceived effectiveness of thePM system.

We can clearly see that the perceivedeffectiveness of the PM system increaseswith the number of key practices that havebeen implemented—from a low of 17.2 per-cent, when none of the nine key PM prac-tices have been implemented, all the way to100 percent, when all nine key PM practicesare implemented.

Which of the nine key practices are imple-mented does not matter as much as the num-ber of key PM practices implemented. Themore of these practices an organization has in

Exhibit 1. Percentage of Respondents by the Number of Key Practices They Have in Place

3.5%

10.3%

15.1%

17.2%

14.2%15.4%

12.3%

6.9%

4.0%

1.2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

0 1 2 3 4 5 6 7 8 9

Per

cent

ofR

espo

nden

ts

Number of Key Practices in Place

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place, the more likely it is to say that itscurrent PM process is viewed as effective.That’s not to say that any of these practices is absolutely essential to having a systemthat’s seen as effective. But less than a fifth of organizations that have none of thesepractices in place say their PM process is viewed as contributing to individualperformance.

Moreover, on the other side of the spec-trum, where organizations have all of thesepractices in place, 100 percent indicate that their PM process is seen as effective. It should be noted that 100 percent does not mean that there is no room forimprovement. The 100 percent mark refers to the percentage of respondents that feelthat their current PM process is making acontribution to the improvement of individ-ual performance. This definition does notdifferentiate between levels of improvement.Even at 100 percent, there is often perceivedroom for improvement. That is, a significantportion of respondents thought that futureimprovements were needed, with someimplying that even a good system needs be

Mark Vickers, Claude Balthazard, and Aileen MacMillanEmployment Relations Today DOI 10.1002/ert

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to continually modified and enhanced overtime.

Despite these caveats, the survey analysisindicates that organizations that adopt thesenine key PM practices are more likely thanothers to have effective PM processes. Thefollowing sections examine the nine PM prac-tices in greater detail, but the order ofappearance of these items does not implythat some are more important than others. Asnoted before, it’s the aggregation and conflu-ence of multiple key practices that’s associ-ated with an effective process.

Forming Development Plans

Creating and including plans for helpingemployees develop their work skills in thesubsequent work period after the appraisal isimportant. These developmental plans operateat many levels. Not only does this procedureincrease workers’ capacity for betterperformance, but it also demonstrates to allorganizational members a willingness to investin employees. This presumably has a positiveimpact on motivation as well as skills.

Exhibit 2. Percentage of Respondents That Say Their Current PM Process Is Seen as Making aContribution to the Improvement of Individual Performance, by the Number of Key Practices Used

0 1 2 3 4 5 6 7 8 9

Number of Key Practices in Place

17.2% 18.0%

30.7%

44.1%51.0%

69.2%

78.0%

90.2% 90.2%

100%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Per

cent

ofR

espo

nden

ts

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Training on Conducting Appraisal Meetings

Managers typically do not like conductingperformance-appraisal meetings. There aregood reasons for this—if not handled withsome skill, these meetings can have a deflat-ing effect on performance. Training under-lines the importance that the organizationplaces on the PM process. Training alsoenables greater levels of consistency acrossthe organization.

Measuring the Quality of Appraisals

If an organization believes that a process is important and influential, there will be a genuine desire to ensure that theprocess is carried out well. There may well be increased consistency, clearer ex-pectations, training, and monitoring. A num-ber of the identified key practices supportthis increased focus on quality. As often happens in business, managers measurewhat they view as most important. Orga-nizations that perceive their PM process tobe more effective often monitor the qualityof performance appraisals. This, of course,implies that there is a defined standard ofperformance for the performance appraisal.The idea is to have a consistently high-quality performance-appraisal delivery across the organization and to support and monitor this facet of managerialperformance.

Resolving Poor Performance

One of the more challenging aspects of per-formance management, at least for managers,is dealing with poor performance. Organiza-tions that perceive their PM process to bemore effective have a system in place toaddress and resolve poor performance.

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Although there is no system that will make dealing with poor performance “easy,” a good system will provide a framework tohelp managers, making it less likely thatmanagers simply avoid performancemanagement.

Using Information in Addition to the Judgmentof Managers

Among the most common criticisms of the performance-appraisal process is that it’s subject to the bias of supervisors.Even if supervisors can appraise theperformance accurately, some of theiremployees may walk away from an evalua-tion meeting believing the appraisal is biased and/or inaccurate. One way toenhance the evaluation process is by usinginformation other than that based on thejudgment of managers. This may be “objec-tive” information, such as productivity orsales data, or it may be information thatcomes from other sources, such as colleaguesor customers.

Ensuring Consistency

A PM process that is inconsistent—that is, itvaries according to individual managers,departments, divisions, or other factors—islikely to be seen as being unfair, especially ifappraisals are linked to compensation ordevelopment opportunities. Inconsistency also hinders organizational alignment. If per-formance management is inconsistent amongdepartments or even managers, then itbecomes difficult to compare performance

One way to enhance the evaluation process is by using infor-mation other than that based on the judgment of managers.

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across the organization and, therefore, tolocate the problems that need to be addressed.

Providing Feedback with Enough Frequency

Two of the nine practices point to the needfor ongoing feedback. Not only was “ongoinggoal review and feedback from managers”associated with a more effective PM process,but so were employee expectations that theywould receive feedback more frequently thanjust annually. In short, performance manage-ment needs to be an ongoing process, one thatrequires regular follow-up and follow-through.

Receiving Multirater Feedback

360-degree feedback is a process that thelarger literature has shown to have mixedresults in organizations, so the i4cp team wassomewhat surprised to find that the use of“360-degree” or “multirater” feedback wasrelated to the perceived effectiveness of PMsystems. Our survey did not go into thedetails of the process, but we postulate thatusing a 360-degree or multirater performancefeedback process requires that there be someframework that defines performance expecta-tions. Perhaps this framework, along with thefact that multirater feedback necessitatesfeedback in addition to managerial judgment,creates greater consistency and trust in theevaluation process.

THE ROLE OF TECHNOLOGY

Some experts believe that technology is key toestablishing a sound performance-managementsystem. Our analysis did not support this. Weidentified four levels of technology:

1. A paper-based process2. E-mail and attachments

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3. A homegrown PM technology system4. A commercially available PM technology

system

The survey analysis found no simple rela-tionship between technology and the per-ceived effectiveness of the PM system. How-ever, e-mail and attachments seem to be moreeffective than paper-based processes. Also,commercially available PM systems seem moreeffective than homegrown systems. On theother hand, e-mail-based systems can be just aseffective as commercially available PM systems.

In part, this is a reflection of the criterionused. If the criterion had been one of effi-ciency, the use of technology might wellhave been identified as a key factor. But ourcriterion was one of effectiveness—that is,whether the system made a contribution tothe improvement of individual performance.This study shows that organizations canmake low-tech PM systems work, and high-

tech PM systems can turn out to beineffective.

Clearly, technology can be seen to supportsome of the key practices we identified ear-lier. Technology can help with improving theconsistency of the process across the organi-zation, with the cascading of targets, with theintegration of information from differentsources, and with ongoing follow-up andfollow-through. Technology can facilitate aPM process, but it can’t make an inadequateprocess work well. It is the system as awhole, rather than any form of automation,that ultimately determines success.

Technology can help with improving the consistency of theprocess across the organization, with the cascading oftargets, with the integration of information from differentsources, and with ongoing follow-up and follow-through.

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THE FUTURE OF PERFORMANCEMANAGEMENT

Findings from the i4cp/HR.com survey—aswell as from a broad review of the literatureon performance management—show thatPM is not yet living up to its promise inmany companies. The findings also indicatethat taking a systems approach to PM canbe an effective course of action and thattechnology, although potentially playing an important supportive role, is not apanacea for solving all the problems as-sociated with PM.

In this section, we’ve created threescenarios that, inspired by the survey find-ings, show how performance managementmight evolve over the next ten years. Thesescenarios are presented from the perspectiveof people living a decade from today and soare written in the “present tense” eventhough they’re placed in the future.

The differences among these scenarios areintended to help readers challenge their ownhidden assumptions about what the future ofperformance management will be. None ofthese scenarios is likely to predict the futureof this management process. Rather, thefuture is likely to be some amalgam of theseplus events and trends that we cannotforesee.

Scenario One: Wiring in Performance

As of the year 2017, most aspects of perfor-mance management are wired into compa-nies via commercially available integratedtechnology systems. Although these systemsare sometimes modified or even customizedfor specific organizations, they also representthe commodification of the PM process.That is, the PM components of softwarepackages have become just another com-

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modity in the marketplace. A decade ago, in2007, only a minority of organizations usedthese software solutions, but today it strikesmost managers as a no-brainer to implementthese packages rather than try to create asystem in-house.

“Look,” says one VP of HR for a Global500 company, “performance management isjust part of a larger talent-management sys-tem, which is, in turn, one of the modules inour enterprise resource planning system.These days, you’ve got to use plug-and-playtalent-management systems because nobody

in the organization has the time, skills, orpatience to create homegrown systems.That’d be silly, like trying to write your ownin-house word-processing software.”

The question is, how well do these sys-tems work? The VP of HR sees them as aboon. “The PM system is state-of-the-art effi-cient,” he notes, “particularly the appraisalsystem. Everything’s online. Managers learnhow to fill out appraisals and provide feed-back mostly via e-learning guidance systems.Then, when it’s time to fill out the actualappraisals, the system puts up a set of stan-dard fields, input boxes, and metrics so thatall our managers are forced into a consistentformat. In addition, the system automaticallyinputs more objective data as well, dependingon the position being appraised. There are allkinds of objective metrics linked to produc-tivity, quality, customer ratings, absenteeism,and so on. Once all the data is in, the systemcalculates a score for each employee andautomatically red flags cases in which theobjective data and the manager appraisalsseem to be in conflict.

The future is likely to be some amalgam of these plusevents and trends that we cannot foresee.

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“Our system even reminds managers whenfeedback should be given. If appraisals are notdone on time or if the system’s quality checksindicate that the appraisals are done poorly,then incentive dollars are automaticallysubtracted from manager’s compensationpending a review by his or her supervisor. Onthe other hand, if the system detects that allappraisals are done correctly, incentive dollarsare automatically added.

“When the system sees that employees arelacking in certain areas, it sends them train-ing recommendations, invitations to onlineworkshops, and tuition reimbursementvouchers for specific courses at specificeducational institutions, both local andonline. Employees who seem to excel in cer-tain areas are automatically flagged as peoplefor the attention of managers so they can beconsidered for the succession-managementprograms. In short, the system does a lot ofthe management and facilitation for us, and iteven helps manage the managers. Overall,the system works well.”

Most systems are also integrated withrecruitment, onboarding, and retention pro-grams. The technology has truly broughtabout the functional convergence manyexperts had long sought. But not everyone isenthralled by such integrated systems. “Theso-called talent-management system in ourorganization is a mechanized, bureaucratictyrant,” complains one worker at a midsizedorganization. “If the system gets it in its headthat your productivity was low on a day

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when your work machine was broken andyou couldn’t get anything done, then you’vesuddenly got a black mark on your record.Then you’ve got to spend time trying to con-vince the system you’re not at fault, whichmeans enlisting the help of your boss andthen sometimes his boss. Then the systemwants you to do some training course that youdon’t have time for, and then it shows up onyour record that you wouldn’t take the course.You know how much performance is wastedtrying to deal with the system that is supposedto be boosting performance? It’s crazy!”

The bottom line seems to be that theautomated talent systems have created moreconsistency in the area of performancemanagement, but their ultimate effectivenessat boosting performance still seems to bestrongly linked to the specifics of how they’reimplemented and the human element.

Scenario Two: Focusing on People MoreThan Technology

As of the year 2017, most companies haverealized that that there is no silver bullet whenit comes to managing performance. Creatingan effective and efficient performancemanagement is recognized as a multidimen-sional process, with components supportingone another like structures in a well-builtbuilding. Commercially built technology-based systems often serve to give the PMsystem greater structure and consistency inlarger organizations, but many smallercompanies still gladly do without them.

“Less is more. It’s not all about technology,”says a manager at a 150-person organization.“We have a basic online system that we justdon’t need to integrate with everything else inthe organization. The secret to performancemanagement is to pay attention to the process

Creating an effective and efficient performance managementis recognized as a multidimensional process, with compo-nents supporting one another like structures in a well-builtbuilding.

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as a whole, training managers and employeeshow to give and receive feedback well, tying itto the development system so the feedbackactually means something, reviewing andrevisiting goals, making the process consistentthroughout the company, and making sureevaluations are fair and based on good infor-mation. It’s all about balance, making sure theyin of technology and hard data complementsthe yang of excellent people skills and strongpersonal relationships.”

Where technology has proven most usefulso far is in the auditing of PM systems.Today, there are online tools that make iteasier for companies of all sizes to gauge thequality, effectiveness, and efficiency of theirPM systems. These tools help alert compa-nies to where their systems may be weakest.

There are also more courses—both onlineand at local educational institutions—thatmanagers can take to help them stay up tospeed on the latest motivational techniques.The emphasis on motivation and engagementhas become exceptionally important due totoday’s skills shortages. Companies can’tafford to chase away employees via poor PMsystems, but they also can’t afford to ignorethe fact that many of their employees lack theskills they need in today’s workforce.

“As we’ve learned more through rapidadvances on cognitive research, we’ve gottenbetter at determining how to give feedbackproperly and incorporate it into developmentgoals,” says one chief of human capital (CHC)at a major global corporation. “Yes, the datais also better than ever, but I doubt that’smade a big difference. The real difference isthat our people have better soft skills thanthey used to.”

Another evolutionary change is that per-formance management is increasingly aboutteam rather than individual performance.

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The CHC points to the fact that virtually allthe work in her corporation is team-based.“Take innovation, for example,” she says.“Innovation is nearly always based on teamsof engineers and researchers in our organiza-tion, often working with outsiders. Althoughwe track individual performance, we put asmuch emphasis on team performance. Ourcompensation and rewards systems tend tobe based on achieving team goals rather thanindividual ones, although there continues tobe multirater appraisals within teams.”

More compensation and rewards are alsobased on performance at the organizationallevel. This is, in fact, where organizationalperformance management intersects withteam and individual performance manage-ment. “These two types of performance man-agement used to be separate, but the linesbetween them are increasingly blurred,”notes the CHC. “When overall performanceincreases in measurable ways—especiallythrough higher profits—we tend to share itwith all employees.”

Scenario Three: The PM MachineFlies Apart

As of 2017, the world of work has becomemuch too diverse and chaotic for conven-tional performance management to be per-fected. As has long been the case, satisfactionwith performance management tends to below, from the C-suite on down, and a lot ofemployers have given up on the idea of anorganizationwide system. Part of the reason is that few companies have been able to

As of 2017, the world of work has become much too diverseand chaotic for conventional performance management tobe perfected.

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effectively integrate all the components of theperformance process.

Another reason is that more and moreemployees have become cynical about pay-for-performance campaigns. Even as prof-its rose and organizations expanded over thelast decade, median compensation levels stag-nated. “The rhetorical connection betweencompensation and performance was neveranything more than a way to keep labor costsdown while paying just a few high-level pro-fessionals exorbitantly for performance thatwas the sum result of everyone’s efforts,”opines one worker in a manufacturing firm.

While not everyone is so cynical aboutcompensation, many agree that performanceis inconsistently or inaccurately evaluated atmany organizations. “You’d think all oftoday’s metrics would make it easier,” notesone HR consultant. “They haven’t. That’sbecause the world has become so complex.Let’s say customer satisfaction goes up. Whoshould get the credit? It’s surprisingly hard totease that out, especially with team memberscoming from all over the world and doingvery different jobs while trying to attain com-mon goals. In a global environment, howexactly do you reward all these people fairly,and how do you get them to provide construc-tive performance feedback to one another,especially given their very different culturalperspectives about appraising one another?It’s no wonder that more and more compa-nies are just forgetting about the whole exer-cise, looking at fully integrated systems as atwentieth-century bureaucratic ideal, a simple-minded dream of social engineering. It’s eas-ier to just let local bosses make compensationand motivation decisions using whatever cri-teria are deemed fair, legal, and effective.”

As for training and development decisions,these are usually made on a just-in-time basis.

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A supervisor will decide a staff memberneeds to brush up on a skill and require himor her to sign up for specific e-learning mod-ule. Or, in a growing number of companies,employees sign up on their own becausemore organizations are paying for skillsrather than for performance. “It’s a lot easierto figure out if someone has certain skillsthan it is to decide how much they’recontributing to performance in a complexorganization,” notes one manager. Somerecent research indicates that companies thatwish to retain knowledge workers are muchmore willing to invest in training and devel-opment than other companies, regardless ofhow well workers perform.

Another problem with the conventionalPM paradigm is that a fast-growing propor-tion of the labor force is made up of

“free agents” such as independent contractors,temporary workers, “pivot workers” (thosewho essentially work for multiple firmsinvolved in a business partnership), andothers. Few companies wish to try to managethe performance of these people, thoughsome use metrics to decide whether or notthey wish to retain the services of the freeagents in the future.

“We mostly track performance for legalreasons,” says one HR professional. “If wehave to take punitive action against anemployee, we need some documentation incase we’re accused of some sort of discrimina-tion. But we don’t tie this stuff to compensa-tion or development or succession planning orrecruitment. Employees tend to be skeptical of

Although there seems to be much room for improvement inmost organizations today, there is no standard recipe forsuccess.

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it, and the management team is skeptical oflinking it to anything else. We’d prefer tomanage things piecemeal rather than try tobase an integrated performance machine on aflawed linchpin. It’s a lot wiser to let thething fall apart.”

CONCLUSION

The full survey report identified a number of factors that contribute to the effectivenessof the PM process. Although there seems to bemuch room for improvement in most organiza-tions today, there is no standard recipe for suc-cess. Rather, there are a number of steps that,if put in place, contribute to a well-functioning

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PM process. That is, the organizational foun-dation of employee performance is built brickby brick. High performance results from thecreation of a “milieu” that supports desiredbusiness outcomes.

The future of employee PM systems willdepend on both the desire and the capabilityof managers. Good systems will require theright balance of technology, hard metrics, andsoft skills. After all, being able to provideemployees with the feedback they need whilemaking sure they stay motivated and engagedis a difficult challenge. It’s a critical challengeto meet, however, in an intensely competi-tive global marketplace where high perfor-mance is the only long-term key to success.

Mark Vickers is a futurist and vice president of research at i4cp, formerly the Human ResourceInstitute. He has authored many institute reports and white papers, is a former managing editor,and is currently the editor of i4cp’s TrendWatcher publication. He may be contacted via e-mail [email protected]. Claude Balthazard, PhD, is an organizational psychologist with a backgroundin organizational measurement, executive and management assessment, and leadership and organi-zational development. A proponent of data-driven approaches to organizational development andHR management, he has worked in academia, government, consulting, and business. Formerly withHR.com, he is now director of HR excellence at the Human Resources Professionals Association(HRPAO) of Ontario. He may be contacted via e-mail at [email protected]. AileenMacMillan has worked as a research analyst since 2004, focusing on how performance manage-ment affects organizational success. She has authored a number of white papers and articles on thistopic and has presented at various venues on the subject. She may be contacted via e-mail [email protected].

Also contributing to the ideas in this report was Donna J. Dennis, PhD, a leadership develop-ment professional with over 30 years of experience helping leaders and teams increase leadershipand team effectiveness through coaching, strategic planning, and team building. She is certified in personality assessment and executive coaching. She may be contacted via e-mail at [email protected].

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