Why Is Performance Management Broken?

Download Why Is Performance Management Broken?

Post on 29-Sep-2016

224 views

Category:

Documents

2 download

Embed Size (px)

TRANSCRIPT

  • Industrial and Organizational Psychology, 4 (2011), 146164.Copyright 2011 Society for Industrial and Organizational Psychology. 1754-9426/11

    FOCAL ARTICLE

    Why Is Performance ManagementBroken?

    ELAINE D. PULAKOS AND RYAN S. OLEARYPDRI, an SHL Company

    AbstractAlthough extensive research and practice have focused on understanding and improving performancemanagement systems in organizations, the formula for effective performance management remains elusive.We propose that a significant part of the problem is that performance management has been reduced toprescribed steps within formal administrative systems that are disconnected from the day-to-day activitiesthat determine performance management effectiveness (e.g., communicating clear work expectations, settingshort-term objectives and deadlines, and providing continual guidance). We argue that interventions to improveperformance management should cease their exclusive focus on reinventing formal system features. Althoughwell-developed tools and systems can facilitate performance management, these alone do not yield effectiveperformance management. In lieu of making further changes to formal performance management systems,we argue for devoting more attention to improving manageremployee communication and aspects of themanageremployee relationship and propose an approach we believe holds promise for improving performancemanagement processes in organizations.

    For over 30 years, extensive research andpractice have focused on understandingand improving performance managementsystems in organizations. Some researchhas examined the effects of various fac-tors on ratings, including format (Bernardin,1977; Borman, 1979; Landy & Farr, 1980);rater and ratee characteristics, such asgender, race, liking, and so forth (Landy,

    Correspondence concerning this article should beaddressed to Elaine D. Pulakos.E-mail: elaine.pulakos@pdri.com

    Address: PDRI, an SHL Company, 1300 North 17thStreet, Suite 100, Arlington, VA 22209

    This article was based on Elaine Pulakos Distin-guished Professional Practice Award address at the2010 SIOP conference in Atlanta, GA. The authorswould like to thank Thomas K. Coghlan and Edward K.Moe for providing insightful comments on an earlierdraft of this article. These individuals bring valuableperspectives based on their roles leading to large,complex, and challenging performance managementinterventions in major organizations. We also thankRose A. Mueller-Hanson and Anne M. Hansen of PDRIfor their helpful reviews of this article.

    2010; Pulakos & Wexley, 1983); and ratercognitive processes (DeNisi, Cafferty, &Meglino, 1984; Feldman, 1986), amongothers. Yet, other work has examined whatfeatures lead to successful system imple-mentation, such as automation to improveefficiency (Pulakos, 2009) and leadershipsupport and employee buy-in (Rodgers,Hunter, & Rogers, 1993). Finally, severallarge-scale survey studies have examinedwhat performance management features aremost related to employee engagement andperformance outcomes (Corporate Leader-ship Council, 2004; Creative Metrics, 2008;Harter, Schmidt, & Hayes, 2002; Office ofPersonnel Management, 2007).

    Although the cumulative research andpractice have yielded performance man-agement methods, tools, and processes thatshould work well, operational implemen-tations have proven disappointing. This isconsistent with what we have experienced

    146

  • Why is performance management broken? 147

    as we implemented many large-scale per-formance management systems over thepast 15 years. For example, no solutionhas been found to ameliorate the seeminglyintractable problem of leniency in ratings,which at the extreme renders performanceevaluations of little value for decision mak-ing (e.g., pay, promotion, etc.) or vali-dation research. Although implementationof a new performance management sys-tem is usually accompanied by decreasedleniency during the initial rating cycle, rat-ing levels creep up again over time. Asanother example, survey data consistentlyshow poor attitudes toward performancemanagement, with many employees report-ing that their system fails to provide usefulfeedback and establish clear expectations.Thus, after extensive analysis and study, theformula for effective performance manage-ment remains elusive.

    It is perhaps for this reason that perfor-mance management has been character-ized by innumerable attempts to improveit, more so than it seems to be the casewith other human capital systems. In thelast 20 years, recommendations have beenmade to evaluate results, competencies,behaviors, and contributions; to rate per-formance using highly differentiated 5-, 7-,or 9-point scales, much simpler passfailscales, strictly developmental scales, or noscales and instead prepare written narra-tives; to collect ratings from supervisors,peers, customers, or the employees them-selves; to cascade goals from the highestorganizational level to individual employ-ees, to establish individuals objectives thatare rated directly, or not to include goals;and the list goes on. As long as a newapproach holds promise for increasing per-formance management effectiveness, orga-nizational members from top-level leadersto human resource professionals seem toflock to it. What happens so often, how-ever, is that new performance managementpractices are enthusiastically and readilyadopted, without sufficient consideration ofwhat it takes to implement them effectivelyor how they will fit within an organiza-tions culture (Pulakos, 2009). This has led

    to vicious cycles of organizations reinvent-ing their performance management systemsevery few years only to suffer implementa-tion failures that necessitate reinventing thesystem again, and the cycle continues.

    The challenges inherent in performancemanagement are well known. It has rightlyearned its distinction as the Achilles Heelof human capital management, rarely work-ing well irrespective of the time, effort, andresources that are devoted to it. Yet, com-municating what employees are expectedto do, providing feedback, and helpingemployees contribute the most they can areessential behaviors managers must engagein to accomplish work through others. Doneeffectively, performance management com-municates whats important to the organi-zation, drives employees to achieve results,and implements the organizations strategy.Done poorly, performancemanagement notonly fails to achieve these benefits but canalso undermine employee confidence anddamage relationships. The extremely largenumber of unsuccessful attempts to improveperformance management speaks volumesabout its inherent difficulties.

    We believe that a significant part ofthe problem is that performance manage-ment has been reduced to prescribed, oftendiscrete steps within formal administrativesystems, the results of which are highlyscrutinized. Although formal performancemanagement systems are intended to driveand reinforce the day-to-day activities ofcommunicating ongoing expectations, set-ting short-term objectives, and giving con-tinual guidance as work is planned andexecuted, these behaviors seem to havebecome largely disconnected from the for-mal systems. For example, effective man-agers regularly provide informal feedback toemployees on specific tasks, but the samemanagers are often reluctant to formallydocument less-than-stellar performance forfear of damaging relationships with the veryindividuals they count on to get the workdone. Similarly, many employees wantguidance from their managers about howto accomplish work, yet they do not wantdocumented examples of them needing

  • 148 E.D. Pulakos and R.S. OLeary

    guidance for fear that these will underminetheir pay or advancement. These concernson the part of managers and employeesprevent formal performance managementsystems from working well and have turnedthem into largely administrative drills thatadd little value. Contributing to this is thefact that performance management imple-mentations tend to focus on rolling outformal administrative processes and tools(e.g., competency models, rating scales,and automated systems) rather than trainingmanagers and employees how to engage ineffective performance management behav-ior (e.g., setting expectations, providingfeedback, and helping staff solve prob-lems). However, it is the informal processof engaging in these behaviors day-to-daythat determines performance managementeffectiveness, not the tools and steps thatcomprise the formal system.

    In this article, we argue for a shift in thefocus of performance management inter-ventions in two important ways. First, webelieve unbridled implementation of perfor-mance management system changes shouldcease. This is because making changes tothe formal performance management sys-tem has not been shown to improve per-formance management effectiveness. Fur-ther, implementing new practices that seemcompelling but are difficult or impracti-cal to sustain can cause negative conse-quences, such as eroded credibility andincreasingly negative attitudes towards per-formance management. To illustrate thesepoints, we provide examples of the dif-ficulties involved in implementing fourpopular performance management prac-tices below. The second shift we proposeis to devote more attention to improvingmanageremployee communication andaspects of the manageremployee rela-tionship that are foundational for effec-tive performance management. Althoughwell-developed tools and systems can facili-tate performance management, these alonedo not yield effective performance man-agement, as this can only occur betweenpeople. We thus propose an approach for

    enhancing manageremployee communi-cation and relationships that we believeholds promise for yielding sustainable per-formance management improvement.

    What It Takes to ImplementFour Popular PerformanceManagement Practices

    Popular Practice 1: CascadeOrganizational Goals toIndividual Employees

    One of todays popular performance man-agement practices is to cascade organiza-tional goals from the top and refine themthrough each level until they reach individ-ual employees. The idea of linking objec-tives across organizational levels dates backmany decades to discussions of managingby objectives (Rodgers & Hunter, 1991).Proponents of cascading goals argue thatthey help everyone understand how workis related across organizational units andlevels, and they also align the work ofindividuals and units with the organiza-tions direction and priorities (Hillgren &Cheatham, 2000; Schneier, Shaw, & Beatty,1991). Although understanding these rela-tionships is important and helps to avoidconfusion, redundancy, and turf battles,there are questions as to whether or nota formal process of cascading goals is themost effective way to achieve this.

    Although the rationale underlying cas-caded goals makes sense, creating thecascade itself is extremely challenging oper-ationally. First, high-level organizationalgoals are often lofty and broad, whichoften causes confusion and frustration whenmanagers attempt to cascade them. Sec-ond, the process of cascading goals throughmultiple levels necessitates many meetingsthat are contingent on the previous levelcompleting their cascade. As a practicalmatter, although the organization and per-haps its largest divisions may have goals,it has been our experience that cascadedgoals rarely reach past the highest few lev-els. Thus, it can take months of work wellinto the performance management cycle

  • Why is performance management broken? 149

    Table 1. Popular Practice 1: Cascade Organizational Goals to Individual Employees

    Proponents advocate Reality

    Cascade goals so that each level supportsgoals relevant to the prior higher level

    Organizational goals can be lofty anddifficult to cascade down to individuals

    Help employees gain an understanding ofhow their work relates to higher levels

    It is time consuming and difficult to cascadegoals, especially the first time

    Align the employees activities with theorganizations strategic direction and goals

    Considerable consultant or HR time isneeded to facilitate the cascade

    If employees do not attach a high value tocascaded goals, the burdensome processwill be frustrating and yield negativeattitudes

    The advantages associated with cascadinggoals can be achieved through moreinformal and simpler communicationprocesses

    before individual objectives can be writ-ten, although the process becomes moreefficient after it has been completed once.

    Given that less than 10 hours per year,on average, is devoted to performance man-agement activities per employee (Brentz,Milkovich, & Read, 1992), the decisionto implement a formal cascade must bemade with a corresponding commitmentto devote significantly more time to per-formance management activities. Becausethe process of cascading goals is difficultand burdensome to execute well, it oftencollapses under its own weight. Althoughtraining managers how to cascade goals ishelpful, facilitated sessions with trained pro-fessionals yield higher quality cascades withless frustration and wheel spinning thanwhen organizational members attempt tocascade goals on their own. In lieu of a for-mal cascade, informal discussions amongleaders, managers, and employees can beequally useful in gaining a common under-standing of direction, roles, and boundariesso that work can proceed in an organizedmanner.

    Bottom line recommendation regardingcascaded goals. In light of the complexity,practical implementation challenges, andpotential risk for failure, we do not recom-mend that cascaded goals be implementedin the vast majority of organizations. If the

    practitioner or organizational decision mak-ers believe that there is an organizationalissue or problem that is best addressedby cascaded goals, they should be imple-mented only if commitment to the resourcesand time that are necessary to achieve qual-ity results can be secured from all involvedparties (Table 1).

    Popular Practice 2: Set SMARTPerformance Goals

    A popular practice today is to evaluateperformance based on whether employeesmeet SMART (specific, measurable, attain-able, relevant, time-bound) goals devel-oped at the beginning of the rating cycle.The stated advantages of the goals are to(a) provide customized performance expec-tations and criteria based on the employeesspecific job, (b) drive employees to achieveimportant results, and (c) remove unfairsubjectivity from the evaluation process.Although it is certainly important for man-agers to communicate what they expecteach employee to achieve, it is not clearthat setting formal goals for each employeeis the most effective way to accomplishthis or that this is even viable for alljobs. Even when well-researched guidelines(Locke & Latham, 1990) for setting goalshave been used, significant challenges have

  • 150 E.D. Pulakos and R.S. OLeary

    been reported (e.g., Government Account-ability Office, 2008).

    Jobs that lend themselves best to set-ting goals have relatively static performancerequirements and defined productivity met-rics, for...