Ensuring Accurate Assessment In Performance Management

The process might just be the problem. Many frustrated managers today are forced to either be true to the terminology and process (yielding an inappropriate performance rating or pay result), or be less than truthful with the language (yielding the "correct" performance or pay result).

Yet with such admirable workplace goals as enhancing dialogue and communication, targeting specific goals, measuring and improving employee (and therefore organisational performance), where do these programs go wrong? And more importantly, how do we get it right and actually measure and reward effective performance?

The first flaw: The language

The most common performance management programs have a performance scale that is meant to assess performance relative to a set of expectations, goals or standards, along the lines mentioned above: exceeds, achieves or does not meet expectations.

The fundamental flaw in the language above is an implication that an employee's actual performance is a "surprise" relative to the performance expectations set at the beginning of the performance period.

Being true to the language and terminology of the process, any "surprise" of exceeding expectations is likely to be the result of an under-performing employee who simply meets their manager's expectations, or an average performer who occasionally goes above the call of duty. Conversely, a manager is generally not "surprised" when their solid performers perform effectively.

For example, a manager sends the mightiest warrior to "slay the dragon", not to sweep out the kitchen. If the warrior does exactly what they were sent to do - namely, slay the dragon - the employee did not "exceed expectations", but merely "achieved expectations". Is "achieved expectations" an appropriate message to send to the Warrior, whose accomplishment just significantly advanced the cause of the organisation?

Organisations do a lot of management and employee training trying to convince people that "achieves expectations" is good - but in a world of increasingly challenging expectations, most employees will admit it does not feel good, much like receiving a high school report card comprised of Bs.

In either case, the manager is forced to be intellectually dishonest with both the process and the employee. Having to choose between accurately measuring performance and measuring the employee's contribution to advancing the cause of the organisation, the manager either abdicates responsibility for the rating ("HR made me do it") or rates the employee as "Exceeds Expectations" when each knows it is not the case. Further, this broadcasts to the employee that it is okay not to follow the rules, creating additional dysfunction to the performance management system.

The second flaw: Goal setting process

Often, managers complain that the goal-setting process is not consistent across the organisation.

Outside of incumbent populations that have the same circumstances surrounding their roles, the goal-setting process can only be consistent in theory. For example, 300 manufacturing employees in the same location doing the same job can have consistent goals, but 300 salespeople in 100 different locations must have varied goals based on location-specific differences.

The reality is that the performance management processes we are familiar with, are most often applied to individual contributors and management positions in organisations of various size and industry. In today's world, the number of multiple incumbent positions with exactly the same expectations is limited, if not extinct. Even in positions with the same title, expectations vary - this difference cannot be brushed off as "it works in theory".

The second flaw, therefore, is that we are applying a theory relevant to large populations of similar jobs to increasingly individualised roles. Setting goals to consistent levels can only lead to mediocrity. The deeper question is how to measure consistently when highly individualised roles exist. The goal-setting process should not be consistent, as managers would be deficient in their duties if they sent the squire to slay the dragon and the warrior to polish the armor.

The third flaw: Forced distribution

To avoid over-inflating goals, the process of forced distribution is sometimes used. Again, in theory, across an organisation, some individuals' performances should be higher or lower than their peers.

As many know through experiencing Forced Distribution first-hand, it is an organisational rule that for every performance review cycle, a fixed percentage of employees must be rated as "exceeds", "achieved", and "did not exceed" expectations. Inherent in its name, Forced Distribution can create an inaccurate picture of organisational performance, but is often used to keep performance management scores "in check".

The theory breaks down when it is applied to smaller groups or highly individualised jobs. It also breaks down in organisations seeking to have an evenly distributed ranking of performance. Over time, there should not be an equal number of employees in the highest or "outstanding" category as the number of individuals in the lowest or "unsatisfactory" category.

Over time, individuals select in or select out of organisations, based upon their level of success in the environment. Over time, the distribution of performance should naturally skew towards the higher performance ratings.

The challenge is to determine the "right" distribution of performance for the type of organisation and culture you desire.

The fourth flaw: Using performance ratings inappropriately with other rewards

When used appropriately, in conjunction with other rewards (base salary, merit, incentive plans, spot awards, developmental assignments, promotions, etc.), effective performance management can be a powerful tool in a manager's arsenal.

However, when other tools are not available, or are not as powerful as they can be, managers will use the performance management process as the only tool they have. In those cases, managers may overrate an individual's performance in order to avoid alienating or losing the employee altogether.

When used in this way, again, trust is broken across the organisation. If the performance management process is not used to accurately reflect performance, it loses all ability to impact performance.

Again, the organisation has forced a manager to choose between intellectually dishonest alternatives to end up at a "best of worst" choice position. Here are some examples.

This exemplifies how the system forces managers to wedge employees into a cookie cutter distribution, when the reality is that the distribution is different. The result on the organisation is two-fold:

1. a mis-reviewed employee, and
2. an inaccurate snapshot of the organisational performance distribution.

What are some solutions?

The good news is that many organisations are getting serious about accurately measuring performance and making an effective link between pay and performance. There is no perfect answer, but many have had success changing the tools. The types of things that have worked are:

1. Changes to the language
   
   Organisations are moving away from "meets" and "exceeds" language to terminology that shows more recognition for achievements, such as "solid achievement" or "commendable" performance. In the case of performance management, where it should be about communication, words not only matter, they are critical.
2. Differentiating the actual measurement tool for different types of employee roles 
   
   Rather than having an administrative assistant compete directly against the sales staff, organisations are recognising that there are fundamental differences in expectations for roles that are:
   
   
   • "value creating" (such as sales or leadership),
   • "value providing" (such as operational and administrative positions), and
   • "value protecting" (such as legal, compliance, and other roles).
The differentiation of the nature of the roles allows managers to set effective goals and manage performance.

1. Considering performance management in the context of total rewards 
   
   Organisations are getting better at understanding the power of the many forms of rewards available and getting smarter about the power of them working together. For example, organisations are more specific about tying "ongoing job accountability" performance to merit or base salary increases and tying "above and beyond" objectives strictly to incentive awards.
2. Reconsidering the performance distribution that is appropriate for the organisation 
   
   What general wants to go into battle by limiting their top performers? High performing companies want as many high performing employees as they can get.
   
   One option, among many, is to vary the performance distribution based upon organisational performance relative to competitive peer performance, as top performing organisations should have top performing individuals.
3. Invest in and improve goal setting processes 
   
   Organisations need to ensure whatever measuring stick they are using is accurate to begin with. Alignment from organisational-level mission and goals down to individual performance expectations is essential. If employees don't know where they are going, it is highly unlikely they will reach the desired destination.

In summary, the first step is admitting there is a problem. The key is defining the problems and forging new solutions to further your ability to improve organisational - and employee - performance.