Why Is Performance Management Broken?
Post on 29-Sep-2016
Industrial and Organizational Psychology, 4 (2011), 146164.Copyright 2011 Society for Industrial and Organizational Psychology. 1754-9426/11
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: email@example.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
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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
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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
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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
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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 example, many manufacturingjobs. However, setting goals for todaysincreasingly knowledge and service-basedjobs is more challenging. The fluidand unpredictable nature of these jobsmeans that ones objectives can changefrequently, necessitating continual revi-sion and increasing the work associatedwith performance goals (Cascio, 1998;Pulakos,Mueller-Hanson, &OLeary, 2008;Pulakos & OLeary, 2010). Even when jobsare relatively predictable, goals set at thestart of the performance cycle often cannotaccount for special assignments or otherduties that may arise during the year. Goalsalso do not work well when goal attain-ment is dependent on factors outside theemployees control or that are team oriented(Lawler, 1994; Locke & Latham, 1990; Ploy-hart & Weekley 2009). Some jobs do notlend themselves to setting objectives at all,such as many R&D jobs in which it is impos-sible to predict when and what discoverieswill occur.
Assuming that goals are practical ina given situation, evaluations have con-sistently found poor quality goals, evenafter training. They often read like generictask statements rather than goals withmeasurable outcomes, and the specificity,complexity, and difficulty of the objectivesvary considerably for employees occupyingidentical jobs (e.g., Government Account-ability Office, 2008). Especially duringinitial implementation, it helps to havecoaches available to provide feedback onthe relevance, clarity, and equivalence ofthe goals for similarly situated employees,as this both improves the quality of the goalsand further trains managers and employ-ees to write better ones. Other strategies toenhance the quality and fairness of goalsinclude (a) implementing a process similarto frame-of-reference training (Bernardin &Buckley, 1981), in which managers reviewand discuss goals to ensure that they are
sufficiently specified, consistent, and fair;(b) collecting and storing high-quality goalsin a searchable database organized by joband level so they are accessible and canbe used as a starting point to develop goalsfor others; and (c) evaluating employees notonly on whether they achieved their goals,but also on the difficulty and complexityof what they contributed. Although evalu-ations of difficulty and complexity intro-duce subjective judgments and thus theneed for subjective criteria against whichto make such evaluations, we have foundthat incorporating these factors provides amuch fairer and more accurate assessmentof contributions.
One final issue with goal-based perfor-mance management systems is that therecommended number of objectives peremployee is usually three to five per year.What this means is that the goals will nec-essarily represent major projects or piecesof work and thus be at a fairly high level. Itis a mistake to assume that high-level goals,even with associated measurable criteria,will be sufficient to ensure the desired out-comes. This is because higher level goalsneed to be translated into more specificplans, activities, milestones, and interimdeliverables that employees will accom-plish day-to-day to meet their larger objec-tives over the course of a year. Managershave an important ongoing role in moni-toring how goals are being translated intodaily work activities and helping employeesidentify and remediate gaps that may causeshort falls in their performance.
Although managers need to tell employ-ees what they are expected to achieve, theissue is whether this is best accomplishedthrough setting formal goals at the begin-ning of the rating period or engaging inmoreinformal and ongoing manageremployeediscussions in which expected results arecommunicated and adjusted as circum-stances unfold. Even in relatively stablejobs with reasonably defined outcomes,developing effective and fair goals can bechallenging and require considerable timefrom both managers and employees. How-ever, even after extensive guidance and
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training, the quality of goals is often stillpoor, leading some to suggest that writingeffective objectives is simply too hard andnot worth the effort. It is certainly not real-istic to expect goal-based systems to workwell immediately following implementationbecause it takes experience to develop goodgoals, deliver on them, and put the infras-tructure in place that is needed to supportan effective system.
Bottom line recommendation regardingSMART goals. In the vast majority of worksituations, especially those characterized byknowledge and service work, the complex-ity, practical implementation challenges,and potential risk for failure are too greatto recommend formal goal setting andevaluation against those goals for indi-vidual employees. Formal individual goalsshould be considered only in those rarejobs and situations in which they can beeasily established and aligned with thework (i.e., performance is not affectedby factors outside the employees control,goals and performance measurement areclear-cut and objective, etc.). However,
team or unit goals can be practical todevelop and evaluate in many of todaysorganizations. Although we recommendlimited and prudent use of individual goalsoverall, clearly communicating expecta-tions and providing on-going feedback asthe work progresses is essential for effectiveperformance management (Table 2).
Popular Practice 3: Rating Competencies
Although goals that are purported to driveresults are popular today, an exclusive focuson results can yield deficient performancemeasurement because little or no consid-eration is given to how employees goabout accomplishing work (Borman, 1991).Although one might achieve impressiveresults, overall performance is not effec-tive if individuals are extremely difficult towork with or otherwise exhibit ineffectivebehavior. Performance that reflects how anemployee accomplishes work is typicallyevaluated by rating their competencies (e.g.,communication, critical thinking, man-aging resources, etc.). When competen-cies were first introduced, there was no
Table 2. Popular Practice 2: Set SMART Performance Objectives
Proponents advocate Reality
Managers and employees collaborativelyidentify performance objectives specific tothe employees job
Writing good performance objectives is verydifficult; considerable training and facilitationare needed; examples help
Use of objectives communicates andclarifies what employees are accountablefor delivering
Ensuring objectives are fair for similarly situatedemployees requires review and monitoringacross employees
SMART objectives drive employees toachieve important results
Some jobs are too volatile for objectives to bepractical
Individual objectives do not work well whenthe work is team based or dependent on factorsoutside the employees control
Objectives must be translated into specific workplans and deliverables in which managers havea significant ongoing role
The difficulties, complexities, and timeassociated with objectives-based systems yieldhigh implementation risk
The advantages of setting formal goals can beachieved through more informal discussion
Note. SMART = specific, measurable, attainable, relevant, time-bound.
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agreed-upon definitions or procedures fordeveloping them. As a result, there is agreat deal of variability in the quality ofthe competencies that appear in differentorganizations performance managementsystems.
An important step forward in developingcompetencies was to define them in termsof performance standards that describe dif-ferent levels of effectiveness. In spite of thefact that no one rating format has beenshown to be superior to others in termsof rating errors or accuracy (Landy & Farr,1980), one advantage of performance stan-dards is that they communicate what isexpected of employees, thereby increasingthe transparency of the evaluation pro-cess. Standards also provide uniform criteriaagainst which managers evaluate perfor-mance, thus enhancing fairness. It is impor-tant to note that behavioral rating standardshave been extensively researched and usedoperationally for decades. However, thewidespread development of competencymodels defined by behavioral performancestandards and their prominent use in perfor-mance management systems is a relativelyrecent popular practice.
Although managers and employees havegenerally reacted positively to performancestandards overall, they also present imple-mentation challenges that need to beaddressed. The most critical and persistentproblem is inconsistency in ratings acrossmanagers. Employees want to be treatedconsistently and fairly, and a key indica-tor of this is whether or not they receivethe same ratings as others who are sim-ilarly situated and perform equivalently.The problem is that managers interpretany rating scale or set of rating standardsfrom their own viewpoints (Jamieson, 1973;Strauss, 1972). For example, one managermay believe that a relatively simple infor-mation cataloging project is difficult andcomplex, whereas another manager mayfeel that the design and implementationof a customized information managementsystem is only somewhat complex. Onemanager may think that technical expertiseis most important, whereas another may
feel that being a team player is what mat-ters. If there is no mechanism in placefor addressing these differences, employ-ees will be held to inconsistent standardsacross different managers, in spite of thefact that all employees are supposedly ratedagainst common standards. Managers useof their own idiosyncratic rating standardsnot only undermines the accuracy of per-formance measurement but can also lead toperceptions of unfairness, with consequen-tial negative impacts on employee attitudesand motivation (Dipboye & de Pontbraind,1981; Greenberg, 1986).
Another issue is that there are strongoutside factors that influence the ratingsmanagers provide, which is why ratingformat has likely accounted for little vari-ance in ratings. For example, leniency is achronic problem that results from managersrating most of their employees at the highend of the scale. Because most employeesdo not want to hear that they are merelymeeting expectations for the job, managersfeel pressured to rate everyone above themidpoint of the scale. In addition, man-agers generally want to send encouragingmessages to employees to protect their rela-tionships with them and avoid unnecessarymotivational problems. As a result of theseinfluences, managers often shift their ratingsto the higher end of the scale and compressthem within a more limited range of ratings.
Rating calibration is a process in whichmanagers within a unit discuss their rat-ings of employees to identify where theymay have inadvertently applied differ-ent standards or rated too leniently. Dis-cussing specific examples of performancehelps managers align their views of howto interpret and apply standards, whichincreases rating consistency across employ-ees (McIntyre, Smith, & Hassett, 1984;Pulakos, 1984, 1986). An interesting aspectof the calibration process is that it makesmanagers more accountable for the rat-ings they provide. This is because theyhave to justify their ratings to other man-agers, who can be as knowledgeable as themanager about how employees perform.Fellow managers do not usually let each
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Table 3. Popular Practice 3: Use Rating Standards to Evaluate Employee Behavior
Proponents advocate Reality
Use of predefined, job-relevant ratingstandards to rate employee behavior
There are significant outside forces operatingin organizations that yield inaccurate ratings
Behavioral standards facilitatecommunicating expectations andtransparency
Even with defined rating standards,managers interpret them from their ownviewpoints and apply them differently
Rating standards improve the consistencyand accuracy of ratings across managers
Obtaining more accurate and consistentratings from managers requires calibrationand monitoring
Failure to calibrate ratings can result in useof idiosyncratic standards across managers,unfair treatment of employees, andconsequential dissatisfaction with thesystem
other off easily if they believe an employeehas been rated unfairly, creating peer pres-sure that provides a powerful incentiveto make accurate ratings. Initially, calibra-tion sessions take time, but once managersdevelop a shared frame-of-reference forevaluating performance, calibration discus-sions require much less time and effort.Investing in trained facilitators for the initialprocess helps managers illuminate areas ofagreement and disagreement more quickly.
Bottom line recommendation regarding rat-ing standards. In many if not most work sit-uations, a formal evaluation will be neededfor administrative purposes, and this is usu-ally some form of defined numerical rating.Although implementation of rating stan-dards is more complex than may be appar-ent and is often underestimated, assigningnumerical ratings based on standards hasbeen shown to have merit and is generallywell received, although not entirely devoidof challenges. Calibration helps to ensurethat rewards associated with the ratings aremore fairly and uniformly distributed acrosssimilarly performing employees, and this isthus important to mitigate perceptions ofunfairness and actual unfairness that canundermine confidence in the performancemanagement system. Accordingly, imple-mentation of numerical performance ratingsbased on performance standards that are
assigned via a calibration process is recom-mended (Table 3).
Popular Practice 4: Gather PerformanceInformation From Multiple Sources
As managers, peers, direct reports, andcustomers see different aspects of a per-sons performance, multisource assess-ments enable a more complete assessmentof performance. Collecting performanceinformation from multiple sources can bedone informally or formally. If done infor-mally, managers simply ask those withdifferent relationships to the employee forfeedback on the persons performance, andthey incorporate this into their ratings. Ifdone formally, a more complex processis required. First, with the exception ofsupervisors, multisource ratings are usu-ally collected from at least three raters persource (e.g., peers, customers, etc.) to pro-tect the anonymity of individual raters andincrease the reliability and accuracy of thefeedback obtained (Ghorpade, 2000; Wald-man & Atwater, 1998). Because ratings areusually reported separately by rating source,automated tools to collect, analyze, andproperly integrate them are also needed toefficiently manage the process.
Multisource ratings are usually usedstrictly for development. If ratings areto be used for decision making, it
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Table 4. Popular Practice 4: Gather Performance Information From Multiple Sources
Proponents advocate Reality
Multisource rating information provides amore complete picture of the employeesperformance
Collecting multisource information formallyrequires automated tools to handle more complexdata collection and reporting requirements
Performance information from differentrating sources should be collected
When ratings are tied to rewards, multisourcerating quality decreases; managers shouldconsider multisource information but must decideon the final ratings
Use of multisource ratings for decision making risksintegrity, fairness, and confidence in the system
is recommended that managers serveas gate keepers, gathering and combin-ing information from the different ratingsources, judging its credibility and qual-ity, and balancing it against other avail-able information. The reason more con-trol and proper integration of informationis important for decision-making purposesis because direct reports, peers, and cus-tomers often do not have the qualifica-tions, perspective, or motivation to makeaccurate and effective ratings. Evaluationstudies of multisource ratings we have per-formed have revealed some instances ofpeers colluding to rate each other effec-tively when ratings are tied to outcomes.Research has also shown decrements in thequality of multisource ratings for decisionmaking compared to development (Gre-guras, Robie, Schleicher, & Goff, 2003),raising further questions about the accuracyand integrity of multisource ratings that aretied to the outcomes.
Bottom-line recommendation regardingmultisource ratings. Multisource ratingsoffer significant potential value, especiallyfor developmental purposes. If they areimplemented following the guidelines thathave evolved based on research and prac-tice, they can add important and use-ful information to the performance man-agement process. However, whether ornot their cost and complexity provide asufficient return to justify their use needsto be evaluated on a case by case basis(Table 4).
Performance management strategies andpractices run rampant, and there alwaysseems to be a new twist that promisesimproved results. For example, it hasrecently been argued that SMART goals areineffective and need to be replaced withHARD (heartfelt, animated, required, dif-ficult) goals (Leadership IQ, 2005). Newapproaches like this are readily imple-mented, only to frequently result in dis-appointing outcomes, particularly in theearly years of the change management pro-cess. This, in turn, leads to frustration andnegative attitudes that increasingly alien-ate managers and employees from engagingin formal performance management activ-ities. Given that many changes to perfor-mance management tools and systems overdecades of practice have proven ineffectivefor addressing the problems that plague per-formance management, there is little reasonto believe that further tool or system mod-ifications will prove fruitful. Instead, webelieve that fundamental change is neededin how performance management is imple-mented and viewed, from an administrativeexercise to the most important tool man-agers have to help them accomplish workthrough others.
In our experience, this occurs only whenmanagers and employees see value in theperformance management system for them-selves rather than something that is imposedfrom HR. Engaging these stakeholders indiscussions about the philosophy and use ofperformancemanagement as well as design,
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policy, and implementation decisionsbuilds ownership in and value for the sys-tem.We believe that implementing a systemthat users value needs to be coupled withinterventions that focus on improving man-ageremployee communication and thoseaspects of the manageremployee relation-ship that are essential for effective perfor-mance management. Although some mightview these types of interventions as simplythe next new approach, there is extensiveresearch and numerous real-world evalua-tion studies (discussed below) that showthe importance of effective communicationand relationships for effective performancemanagement. Yet, addressing these factorsdirectly in performancemanagement imple-mentation has been relatively rare.
Interventions to ImproveManagerEmployeeCommunication and Relationships
The effectiveness of the relationshipbetween a manager and an employee has aprofound effect on how they engage in theperformance management process and theoutcomes they experience (Daniels, 2000).In fact, it has been argued for many yearsthat one of the most important determinantsof whether or not performance manage-ment will achieve its maximum benefit isthe quality of the manageremployee rela-tionship (Beer, 1981; Pulakos & Wexley,1983; Wexley & Pulakos, 1983). Petersonand Hicks (1996) have supported thisnotion in discussing trust as an essen-tial prerequisite for effective developmentand coaching. These authors report thatemployees who have solid, trusting rela-tionships with their managers are morewilling to follow the managers lead andmore confident they will be treated fairly.Effective manageremployee relationshipshave also been associated with perceptionsof performance management fairness andprocedural justice (Beer, 1981; DeCotiis &Petit, 1978; Wexley & Klimoski, 1984).Trust, effective communication, and goodmanageremployee relationships were also
recurring themes in the attitude survey stud-ies discussed earlier in this article as wellas important engagement levers (CorporateLeadership Council, 2004; Creative Met-rics, 2008; Harter, Schmidt, & Hayes, 2002;Office of Personnel Management, 2007).
Developing interventions to impactcommunication and relationships requiresunderstanding what these things mean inthe context of performance management.This is a criterion definition problem likemany others we confront in which mod-els are needed that specify the criticalbehaviors that lead to desired outcomes.Toward this end, the Corporate LeadershipCouncil (2002) conducted a large-scale,cross-organizational study to investigatefactors that lead to higher levels of per-formance effectiveness and more favorableattitudes. The study examined many vari-ables, such as features of the performancemanagement system itself, the organiza-tions culture, and the existence of for-mal and informal review processes, amongothers. The results revealed that specificmanager behaviors are some of the mostimportant drivers of performance. Theseinclude (a) helping employees understandwhat they are expected to do in suffi-cient detail to deliver it, (b) supporting andhelping employees find solutions to prob-lems, (c) playing to employees strengthsrather than their weaknesses by giv-ing them assignments they can do well,(d) developing employees productively byfinding a balance between acknowledgingstrengths and contributions and address-ing development needs, and (e) engagingin regular, informal performance conversa-tions in which managers provide feedbackthat is fair, accurate, and helps employ-ees do a better job. Although formal per-formance management systems attempt todrive these manager behaviors through theuse of formal tools and processes, thisapproach has not proven effective and hasled to our contention that interventionsshould more directly target manager behav-iors that lead to effective performance andemployee attitudes.
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Although not specifically addressed inprevious research, we also believe that thereare key behaviors exhibited by employeesthat facilitate or impede effective relation-ships and communication with managers,as these are two-way processes ratherthan something the manager does to theemployee. For example, employees cannotassume managers are mind readers, andthey need to be accountable for initiat-ing performance conversations when theyencounter difficulties or want to learn moreabout the managers views. Employees alsoneed to react well to the feedback theyreceive, so managers will be motivated tocontinue providing it. Finally, for relation-ships to work best there needs to be mutualtrust such that managers can count on theiremployees as much as employees need tocount on their managers.
Although some managers naturally cre-ate high-trust relationships with theiremployees, a frequent finding in attitudesurveys is that many employees reportpoor communication and low trust withtheir managers (Mercer Human ResourceConsulting, 2005; Office of Personnel Man-agement, 2005, n.d.). Whether these viewsresult from poor relationships or contributeto them, effective performance manage-ment is inhibited. When managers do nothave open relationships with employees,they are reluctant to provide candid feed-back and have honest discussions for fear ofreprisal or damaging relationships. Employ-ees who do not trust their managers arereluctant to engage in open dialogue withthem for fear that the managers will usethis information to deny them rewards orotherwise retaliate against them. The dys-functional behavior and attitudes that resultfrom poor communication and lack of trustare so derailing that performance manage-ment cannot be effective until intentionalaction is taken to address these issues.
We believe that an important first stepin maximizing performance is to helpmanagers and employees understand thecritical role that performance managementplays in enabling work to be performed. Anissue that needs to be addressed, especially
in the first-line supervisor ranks wherestrong technical skills are prevalent, is thatmanagers often do not understand the roleof a manager and what is expected of them.For example, managers who complain thatthey are too busy to spend time on perfor-mance management are likely spending toomuch time performing technical work ratherthan using performance management toaccomplish work through their staff. Thus,effective performance management beginsby ensuring that managers and employeesunderstand their respective roles and thebenefits each receives when performancemanagement is done well, thereby answer-ing the question, Whats in it for me?
In addition to changing how perfor-mance management is viewed, we believethat training is needed to facilitate acquiringthe skills and driving the behavioral changesthat are foundational for effective perfor-mance management, such as learning howto (a) build trust through creating support-ive and open relationships, (b) engage incontinuous informal performance conversa-tions, (c) diagnose and productively addressperformance issues, and (d) deliver andreact to feedback conversations construc-tively. In addition to training, posttraininginterventions are needed to solidify attitudi-nal and behavioral changes and to promotetraining transfer to the work context. Wediscuss each of these topics next.
Without a basic level of trust, it isunlikely that communication and engage-ment between a manager and employeewill be productive or lead to positiveoutcomes. Alternatively, when there isa high level of trust between managersand employees, they are more comfort-able with each other and more willing andable to engage in effective performancemanagement. Peterson and Hicks (1996)provide a set of behaviors that helpmanagers build trust with their employees,along with rationales for why these areimportant. Example behaviors include mak-ing realistic commitments and following
Why is performance management broken? 157
through on what is promised, keepingemployees informed, showing support andnot blaming when something goes wrong,helping employees solve work problems,protecting people who are not present, shar-ing information even handedly and openly,and communicating consistent principles,among others. To develop a solid relation-ship, managers also need to get to knowtheir employees and what is going on intheir lives inside and outside of work. This isimportant so that they can better understandand effectively deal with circumstances thatmay be affecting the employees work.We would expect training that increasesawareness and helps managers engagein relationship-building behaviors to havedirect effects on performance and attitu-dinal outcomes as well as indirect effectson these variables through facilitating moreeffective performance conversations.
Conducting EffectivePerformance Conversations
The importance of feedback to the per-formance management process has beenconsistently acknowledged for decades inthe research literature (Bernardin & Beatty,1984; Ilgen, Fisher, and Taylor, 1979;Lawler, 1994; Maier, 1958; Murphy &Cleveland, 1995). The effects of feed-back have the potential to be profound,influencing both future performance (Ilgenet al., 1979; Kluger & DeNisi, 1996) andjob and organizational attitudes (Ilgen,Peterson, Martin & Boeschen, 1981; Pear-son, 1991). Given the criticality of feed-back, numerous researchers have inves-tigated how to most effectively conductperformance feedback review sessions (e.g.,Burke, Weitzel, & Weir, 1978; Cederblom,1982; Nathan, Mohrman, & Milliman,1991; Nemeroff & Wexley, 1979; Pearce& Porter, 1986), the models and principlesfrom which have been widely incorpo-rated into standard performance manage-ment training for managers.
Although at least one or two formal feed-back reviews are usually required in theformal performance management process,
the reality is that informal, continuousfeedback is the most important and pow-erful feedback that can be given. Boththe research and practice literatures haveadvocated that feedback be provided imme-diately following effective or ineffectiveperformance (e.g., Gregory, Levy, and Jef-fers, 2008; Kirkland & Manoogian, 2007;Wexley, 1986). The Gregory et al. (2008)literature review specifically highlights theimportance of continuous feedback to helpemployees make real-time alterations intheir behavior, enabling them to performtheir work more efficiently and effectively.In addition to the research literature, effec-tive performance conversations and con-tinuous feedbacks have also been shownto relate to higher levels of performanceand engagement in the field survey researchstudies cited earlier (Corporate LeadershipCouncil, 2002; Creative Metrics, 2008;Harter, Schmidt, & Hayes, 2002; Officeof Personnel Management, 2007). Informalfeedback discussions were also one of thetop-five factors associated with high per-forming teams in the Corporate LeadershipCouncil study (2002).
Informal feedback is different in naturethan formal feedback. First, it typicallydeals with a specific matter rather than abroader evaluation over time and multiplecompetencies. It can include strategizingwhat to do, deciding next steps, analyzingwhat went right or wrong, and/or discussingwhat to do differently next time. Formalfeedback tends to be initiated, led, andcontrolled by the manager, whereas infor-mal feedback relies more heavily on two-way accountability and interaction. Bothemployees and managers initiate informalfeedback discussions, and employees areusually fully engaged in these with theirmanagers. Although the importance of two-way participative engagement is a commontheme in discussions of formal feedback,it is more characteristic of informal thanformal feedback.
Many managers and employees natu-rally engage in informal feedback conver-sations, but these are likely more intu-itive than intentional. By understanding
158 E.D. Pulakos and R.S. OLeary
the value of informal feedback and recog-nizing opportunities for it, both managersand employees can take better advan-tage of these to enhance learning andperformance outcomes. Compared to theprevalence of training on conducting for-mal feedback review sessions, training onhow to conduct informal feedback con-versations is rare. For managers, trainingshould include learning about the con-cept of informal feedback, its contributionsto effective performance management, andhow to communicate with employees ina constructive, candid, and timely man-ner so employees are open to hearing theirmessages. One caveat and something thatshould be included in training is the dif-ference between conducting performanceconversations with inexperienced versusexperienced employees: The former aregenerally open to and looking for feedbackbecause they are in a learning mode,whereas the latter tend to be more confidentin their capabilities and approaches.
Finally, manager training should alsoinclude the importance of providing posi-tive feedback. Recognizing effective perfor-mance is easy, but many managers neglectto do this to the extent they should, perhapsbecause they expect effective performance.However, positive feedback for a job donewell is desired by most people, and givingsuch feedback can improve both employeeattitudes and subsequent performance out-comes. Feedback that acknowledges con-tributions also paves the way for moreproductive and credible discussions aboutareas for improvement because these arebalanced by recognizing areas in which theemployee does well.
Diagnosing the Cause of PerformanceProblems
Managers need to be able to diagnose whyan employee is experiencing a performanceproblem. This is important because whatthe manager should do to address aperformance problem varies based on itsunderlying causes. Peterson and Hicks(1996) cite several potential causes for
performance problems. One frequent causeis simply that the employee lacks clearexpectations, which are generally easy toclarify. In other cases, the employee maylack the skills to perform and need formaltraining or further job experience. Lack ofmotivation is another source of performanceproblems, which can be because of the cir-cumstances at work or home. Environmentor work process factors are yet other reasonsfor performance problems. For example, theemployee may not have the tools that areneeded to perform work or may be relianton others who are not delivering, in whichcase additional resources or other interven-tions may be necessary to address the issue.The bottom line is that managers need tounderstand that performance problems existfor different reasons, and they need to beable to diagnose these accurately to addressthem effectively.
Delivering and Reacting to Feedback
Most employees want to do a good joband are appreciative of ideas for improvingtheir work products or outcomes, whenfeedback is delivered in an appropriateand helpful manner. This does not happento the extent that it should, however,because many managers do not alwaysdeliver feedback productively and in away that mitigates defensive reactions fromemployees. However, even if managersdeliver feedback effectively, employees donot always react to feedback effectively.Depending on employees personalities,they will be more or less open to feedbackand more or less willing to accept it,with numerous potential reactions varyingfrom appreciation to depression and anger.Managers thus benefit from training torecognize and effectively manage differentreactions to feedback, whereas employeesbenefit from training on how to effectivelyand constructively receive feedback.
One important caveat regarding the over-all strategy and training suggested here
Why is performance management broken? 159
is that it is important not to oversim-plify what is required to achieve sustain-able changes in perceptions, attitudes, andbehavior that will enhance performancemanagement effectiveness. Certainly train-ing is a reasonable first step, but this willserve as an introduction, at most, that needsto be followed up with additional inter-ventions to promote training transfer andongoing evaluation to assess whether or notmanageremployee relationships and com-munication and their hypothesized conse-quencesperformance and attitudesareimproving. We acknowledge the possibilitythat the training and training transfer strate-gies proposed here may prove to be just asdifficult, frustrating, and ineffective as thosethat have been aimed at making changesto the formal system itself, and they willcertainly require resources and commit-ment to implement well. However, giventhe number of different system changes thathave been tried and proven unsuccessful,we feel that there is merit in attempting awholesale different approach to improvingperformance management. We certainly donot expect that training will address per-formance management ineffectiveness toa person, but even modest improvementsmay have meaningful positive impacts onemployee attitudes, engagement, and per-formance overall. At least, organizationsmay avoid investing significant resourcesin changing their performance managementsystems yet again, which is virtually guar-anteed to produce no results.
Regarding posttraining interventions,employee surveys are used to collect infor-mation on the extent to which managers areexhibiting effective performance manage-ment behaviors. Providing individualizedfeedback to managers based on responsesof their direct reports pinpoints areas wherethe managers may need to adjust theirbehavior and reinforces the need to engagein effective performance management moregenerally. Another strategy to reinforcetraining is to provide simple job aids tomanagers to encourage them to engage ineffective performance management behav-iors on an ongoing basis. For example,
managers can periodically be asked bytheir managers to jot down and commu-nicate one or two particular strengths andareas to work on for each employee. Inform-ing employees that managers are doing thispractically ensures subsequent performanceconversations. Another aid is to provide alist of trust-building behaviors taped to themanagers computer monitor, a constantreminder to engage in these. To the extentfeasible, demonstrating the impact of inter-ventions on important performance metricsat local levels is a powerful way to build thebusiness case for and reinforce effective per-formance management. A further step is toimplement more individualized programsor processes for situations in which stan-dard training interventions do not producethe desired results. These could include butmay not be limited to individual coachingor employee reassignment programs.
The posttraining interventions describedabove are largely behavioral in nature,implying the key issue is that managers andemployees lack the knowledge and skillsthey need to engage in effective perfor-mance management. We believe that lackof knowledge and skills associated witheffective performance management is infact a significant problem that needs tobe addressed. However, in addition to thestrategies discussed above, additional inter-ventions will likely be required to motivateand solidify behavioral change, such asrewarding effective managerial behavior,making managers accountable for effec-tive behavior, and providing leadership andpeer models of effective behavior. Althoughsuch ongoing interventions to facilitatetraining transfer are costly to implement andmaintain, one of the key reasons employ-ees leave a job is because of ineffectivemanagers (Harvey, Stoner, Hochwarter, &Kacmar, 2007).When the high costs that areassociated with turnover (i.e., hiring, train-ing, and productivity loss associated withonboarding new staff) are considered, train-ing and related interventions that reduceunwanted turnover typically produce com-pelling ROI, and this is especially true if they
160 E.D. Pulakos and R.S. OLeary
are accompanied by improved performanceoutcomes and attitudes.
Summary and Conclusions
There is strong agreement that performancemanagement is the most difficult humancapital system to implement successfullyand have work effectively over time.The inherent difficulties that plague per-formance management have commandedan enormous amount of attention fromresearchers and practitioners. Most of themany attempts to improve performancemanagement have focused on operational-izing different approaches to it (e.g., ratingsbased on achieving goals vs. ratings basedon job-relevant behavior) within formal sys-tems that prescribe specific steps, tools,and processes. Unfortunately, this focushas yielded largely disappointing resultsand the formula for effective performancemanagement is yet to be discovered. Nev-ertheless, declining to assess performanceand provide feedback is neither a viablenor acceptable strategy to achieve effec-tive management, meaning that we mustcontinue attempting to improve how perfor-mance management is conducted in orga-nizations. A golf analogy helps illustrate ourview of performance management.1 Thegame of golf is a particularly difficult skillto acquire. Most golfers fail to break a scoreof 100. Adding to the complexity of thesport is the fact that improvement is oftenelusive. Sometimes the answers to prob-lems are counterintuitive. For example, attimes the best way to improve your shotdistance may be to slow down your swing.Only the very best golfers are able to con-sistently score par or better. However, weknow that golfers who play frequently typi-cally improve their game and that repetitionand refinement lead to better results. The
1. The golf analogy was provided by our colleague,Thomas K. Coghlan, who has extensive experienceand insight into what it takes to successfullyimplement performance management processesin organizations and with whom we have beenfortunate to collaborate on a highly complex, large-scale performance management intervention.
focus isnt on redefining the game of golfbut improving ones skill in executing thevarious demands of the game.
We have argued here that interven-tions to improve performance managementshould cease their almost exclusive focus onreinventing formal systems. Using examplesof four popular practices, we demonstratedhow implementing approaches that makesense in theory can result in significantcost and resource requirements that areoften not apparent initially. When thesenew approaches then fail to work well, theunintended consequences are that perfor-mance management loses credibility and isdevalued by both managers and employees.In lieu of making further changes to for-mal performance management systems, webelieve that attention needs to be devoted totraining managers and employees about thebenefits of effective performance manage-ment and how to engage in this as a day-to-day means of accomplishing work. Previousresearch has shown that important perfor-mance and attitudinal outcomes are at leastpartly a function of manageremployeecommunication and relationships. Specificbehaviors on the part of both managers andemployees were hypothesized as impor-tant contributors to these, and training andtraining transfer interventions were recom-mended as the primary strategies to teach,reinforce, and further motivate these criticalbehaviors.
Although the results of prior researchindicate that effective manageremployeecommunication and relationships posi-tively impact important outcomes, addi-tional research that directly examines thecausal effects of performance managementbehaviors on proximal (e.g., frequencyand effectiveness of performance conver-sations, continuous feedback) and distaloutcomes (e.g., performance effectiveness,turnover) is needed. Understanding suchcausal relationships will not only help buildthe case for investing in the types of inter-ventions we are proposing, but it will alsohelp in designing those interventions to bemaximally effective. For example, knowingthat certain behaviors have the strongest
Why is performance management broken? 161
impact on important proximal and distaloutcomes facilitates decisions about therelative amount of training that should bedevoted to different topics and what behav-iors should be the focus of posttrainingaccountability and reward systems. Thus,shifting the focus of our interventions todirectly target and reward effective per-formance management behavior needs tobe accompanied by more field researchlike the Corporate Leadership Council studythat identifies what matters most in drivingimportant outcomes.
Although we have argued that attentionshould be directed away from the formalsystem, this leaves open the question ofwhether a formal system is needed and ifso, what that system should contain. Somehave suggested eliminating performancemanagement processes entirely (Culbert,2010), and this may be viable when thereare no ties between ratings and outcomes,such as pay. When pay or other outcomesare tied to performance, however, there isusually a perceived if not actual need fora formal system and administrative ratingof record. Having a formal system alsoprovides a safety net of sorts because ithelps ensure at least some performanceinformation is communicated to employeesfrom managers who may otherwise grosslyneglect their performance managementresponsibilities. For these reasons, decisionmakers usually opt to have a formalperformance management system in placein most situations.
In designing the formal system, it isprudent to consider organizational mem-bers appetite and tolerance for formal per-formance management requirements. Forexample, if informal feedback is regularlyprovided as a natural course of events,requiring managers to schedule feedbacksessions at specific points in the yearwill likely be seen as burdensome andunnecessary. Similarly, if an organizationis a pure sales organization and goals comedown to revenue and profit targets, anelaborate and time-consuming process tocascade goals will not likely be credible
or well received. It is important to realisti-cally assess what performance managementfeatures organizational members will valueand use in their particular context. Even iftools and processes are embraced initially,organizational members will not complywith burdensome requirements over timethat do not add value.
In our own work, we have learnedthe value of implementing straightforwardand simple formal appraisal systems ratherthan burdensome ones that often comewith high costs and can collapse fromtheir own weight. We recommend keepingcomplex processes, formal requirements,and administrative demands to a mini-mum so that managers and employees canspend their time focusing on the moreimportant aspects of performance manage-mentcommunicating where the groupand each employee fit within the largerorganizational context, setting behavioraland results expectations, and providingongoing coaching and feedback. Althoughwe argue for a simple approach to the for-mal system overall, we have found thatnumerical ratings that are based on well-defined performance standards and man-ager calibration are uniformly well receivedand useful in practice. Performance stan-dards provide a structure and context thathelps managers communicate expectationsand organize their feedback. Importantly,standards can be written to incorporateresults expectations, thus marrying evalua-tion of what was achieved with how it wasachieved. This provides a more straightfor-ward, integrated evaluation that representsthe sum total of performance effectivenessand avoids many of the problems we dis-cussed previously that plague goal-basedsystems. Performance standards have thefinal added benefit of helping employeesunderstand the different aspects of perfor-mance on which they will be evaluatedand what differentiates the different levels ofperformance effectiveness. Addingmanagercalibration to the use of numerical rat-ings based on performance standards helpsstandardize interpretation and applicationof the standards across employees, thereby
162 E.D. Pulakos and R.S. OLeary
increasing the likelihood that rewards willbe distributed fairly.
In conclusion, we have argued herethat the combination of documented per-formance standards to support ratings, for-mal manager calibration, and training andtraining transfer strategies to improve man-ageremployee relationships and commu-nication will be optimal practices in manysituations. This is because this combina-tion provides managers and employees withstraightforward tools that facilitate perfor-mance management, while training andreinforcing them to exhibit behaviors thatare essential for effective performance man-agement outcomes. Alternatively, the com-plexity involved in practices like cascadedgoals or SMART goals limits their appli-cability and potential effectiveness. Weacknowledge that the training and train-ing transfer strategies suggested here areneither inconsequential nor easy to imple-ment, but we feel based on our experienceand the research evidence that they havesufficient potential to produce more sig-nificant and sustainable performance man-agement improvements that they warrantfurther exploration and research.
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