Performance management

Contents

Our approach 1

What is performance management? 2

People as assets (‘Human capital management’) 3

Defining the job 3

Improving competence 4

Setting targets 4

Motivation and attitude 4

Performance management ‘tools’ 5

Appraisal 5

Appraisal systems 5

So why do organisations have appraisal systems? 6

High challenge, high support environment 7

Performance management 7

Consultancy support for performance management 7

Using the Hersey Blanchard ‘Situational Leadership’ model for

managing performance 8

Collinson Grant

Performance management

1

Our approach

It is not easy to set up and run an effective system for managing performance.

The starting point is to decide what the strategy for the business actually is.

What is its broad context? What are its longer-term goals? This will shape

how it wants to manage people and teams.

There are three imperatives:

� to be clear about the accountability of each job. What is expected

from it? There must be measurable outcomes

� to make sure that each jobholder understands those accountabilities,

expectations and outcomes

� to set out an agreed set of measures of success for the person in the

job, and the controls necessary to review progress such as formal and

informal reviews.

Performance management should be pivotal, as it drives organisational

performance, pay (usually), training and development, promotion, and

(sometimes) dismissal.

But most organisations are dissatisfied with the way they operate it.

Performance management should not be a complex, paper-driven system.

Operational andfinancial measures and

controls

Core processesand systems

Organisationalstructure,

accountabilities andjob design

Businessstrategy

Culture

Values Knowledge

Collinson Grant

Performance management

2

Most systems have some form of annual appraisal. But all too often it is seen

as bureaucratic - as a burden imposed by Human Resources (HR) rather than

as a spur to the business.

Annual appraisal is not necessarily the right timeframe, unless the ‘cycle’ of

work is best measured annually. But some work may have a shorter (or

longer) cycle. Project-based team working, for example, needs more frequent

review. Not all working groups have the same timeframe.

If these time-spans are not taken into account, the system for managing

performance will not be fully effective, because it is not synchronised with the

business.

Nor should ‘appraisal’ be an isolated event, whatever the timescale. It is a

continuous process - and a fundamental part of a manager’s job.

‘Appraisal’ is not only the formal review. It has other components, such as:

� a pat on the back, for a one-off success

� the opposite of this, for a lack of success

� a performance/disciplinary process

� coaching.

The purpose of all these is to motivate people to achieve the objectives of the

organisation.

Any system for managing performance must fit the particular organisation

and its parts. There is no template.

� It should not be a complex, paper-driven system.

� It must be initiated by the senior managers and owned by the

business, not by HR.

� It must be synchronised with the business cycle.

� It must measure the things that are important for business success.

What are they?

� Skills in managing performance (the ‘how’) are more important than

the system (‘the ‘what’). So start with the people who will do the

managing.

What is performance management?

The term ‘performance management’ wrongly implies that it is a discrete

activity, like setting budgets or introducing new products.

Managing performance is what managers do. If they do it well, the people

who report to them will do their own jobs more effectively.

Collinson Grant

Performance management

3

Managing performance is about getting the best out of people – helping them

to achieve the organisation of the organisation.

People as assets (‘Human capital management’)

When a business acquires new assets, such as plant and equipment, it:

� evaluates different options, specifications, reliability and payback

� monitors operating performance, schedules regular maintenance, and

makes upgrades to improve productivity

� de-commissions and replaces the plant at the end of its operating life.

But when a business acquires a new employee, it:

� offers only a vague job description or instruction

� goes through a subjective and unstructured selection process or the

random formation of a team

� provides no clear objectives

� sets up no proper review of performance or development.

What influences the performance of people?

� clear accountability and targets

� competence

� motivation and attitude

� organisational factors.

The manager’s job is to provide the ‘environment’ in which people can

perform.

Defining the job

� Start with the business strategy.

� Establish the organisational structure.

� Determine the jobs required.

� Agree on the accountabilities.

� Ensure that the main processes and systems are in place.

� Provide operational and financial measures and controls.

Collinson Grant

Performance management

4

Improving competence

Understand the skills required of the job:

� technical/professional skills and ‘behaviours’.

What are the standards that must be met? Can you describe them?

� Develop the appropriate skills.

� Offer training, coaching and mentoring etc.

� Measure the improvement – how?

Be prepared to remove anyone who cannot achieve the required standards.

Setting targets

Targets should be SMART: specific; measurable; achievable; realistic; and

time-related - and consistent with the strategy for the business.

Seek improvement, beyond day-to-day activities:

� ‘continue to operate the plant efficiently’ is not a target

� ‘improve process efficiency by [x%] by [date]’ is a target.

Ensure that achievement does not detract from the performance of others.

Motivation and attitude

These are matters of ‘conduct’, not of ‘capability’.

Factors that might influence motivation are:

� pay and benefits (absolute, or relative to others)

� pay progression

� non-monetary recognition

� career opportunities

� the attitudes and cooperation of others

� relationship with the manager

� respect

� communication

� job security

� discipline

Collinson Grant

Performance management

5

� organisational constraints (such as lack of autonomy)

� personal or domestic situation

� inherent personality traits.

Performance management ‘tools’

� Performance appraisal systems.

� Competence frameworks.

� 360-degree feedback.

� Use of tool or model (Hersey Blanchard).

� Matrices of skills.

� Managerial audits.

� Assessments of personality, ability and aptitudes.

� Organisational analysis, such as labour turnover, grievances or

absence.

Appraisal

Appraisal should be a continuous process.

An appraisal review should be a ‘health-check’. It provides an opportunity:

� to recognise achievement

� to review the ‘environment’ (competence, motivation etc)

� to plan training, development and succession

� to reset objectives.

Annual might not be the appropriate time-frame. It depends on the cycle of

work (project-based jobs?)

Appraisal systems

Generally do not work well, because they:

� are bureaucratic, complex and inflexible (structure, frequency)

� provide no follow-up between formal reviews

� spotlight the performance of the manager as well as of the employee –

causing discomfort all round.

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Performance management

6

The qualities we seek in leaders (initiative, flair, vision…) are generally not

consistent with making them follow formal, structured, detailed systems.

That is why senior managers often ignore them.

Appraisal systems try to apply scientific rigour to the measurement of

performance. But human nature gets in the way.

Managers ignore the concept of normal distribution. There is little

differentiation of performance ratings.

Appraisal reviews rarely produce new information. They are often just an

exercise in fitting preconceived views into the performance rating categories.

‘It is remarkable how often the first interpretations of new evidence have

confirmed the preconceptions of its discoverer’.

(John Reader, Missing Links, referring to anthropologists).

So why do organisations have appraisal systems?

� As a control mechanism for senior managers.

� To justify the distribution of salary rises (PRP).

� To convert information on people into quantitative data (many

managers prefer numbers to people).

� To force managers to sit down with their employees at least once a

year.

� HR sees it as part of its ‘intellectual capital’.

Collinson Grant

Performance management

7

High challenge, high support environment

Performance management

Consultancy support for performance management

Collinson Grant can help:

� to set the business strategy and set up the organisational structure

� to define the jobs and competences required

� to design the process for managing performance

High

HighLow

CHALLENGE

SUPPORT

AntagonismIsolation

ContributionHigh Performance

ComfortLow Esteem

ApathyLaziness

Low

High

HighLow

CHALLENGE

SUPPORT

AntagonismIsolation

ContributionHigh Performance

ComfortLow Esteem

ApathyLaziness

Low

Building Blocks

Foundations

Individual

Trust

RespectManager

DeliverablesGoal setting Accountabilities

Monitoring Improvement

Reward Sanctions

Building Blocks

Foundations

Individual

Trust

RespectManager

DeliverablesGoal setting Accountabilities

Monitoring Improvement

Reward Sanctions

Collinson Grant

Performance management

8

� to introduce tools or methods

� to design reward mechanisms

� to coach managers (individuals or teams)

� to measure performance

� to change the culture (where the ‘environment’ inhibits high

performance)

� to restructure.

Organisations need to review how they manage performance when:

� the current system has fallen into disuse or disrepute

� an acquisition requires the integration of two systems

� money for salary rises is restricted to high performers

� a new Managing Director wants to introduce new values and measure

compliance

� the company wants to select high performers for senior positions, or

poor performers for redundancy

� they have no ‘system’ and think that they should start one.

Using the Hersey Blanchard ‘Situational Leadership’

model for managing performance

Managing people singly or collectively is made easier when the managers and

staff can refer behaviour and style to a commonly understood model. Hersey

Blanchard is one such.

Managers or leaders should adapt their style to the follower’s development (or

'maturity') - how ready and willing (that is, competent and motivated) the

follower is to do the required tasks.

The four leadership styles (S1 to S4) match the development levels (D1 to D4)

of the followers.

The emphasis that leaders place on the task in question and/or on the

relationship between the leader and the follower depends on the development

level of the latter.

Collinson Grant

Performance management

9

Style

Hersey and Blanchard’s Situational Leadership Model

Leadership style in response to

follower’s development

Low Task/directive High

behaviour

Relationship/

Supportive

Behaviour

R4 R3 R2 R1

High

S3 Participating S2 Selling

Low

S4 Delegating S1 Telling

S1: Telling/directing

Follower: R1: Low competence, low commitment/unable and unwilling or

insecure

Leader: Focus on the task rather than on the relationship

When the follower cannot do the job and is unwilling or afraid to try, the

leader takes a highly directive stance, explaining what to do but with no great

concern for the relationship. The leader may also provide a working structure

for the job and for how the person is controlled.

The leader may first find out why the person is not motivated and if there are

any limitations in ability. These two factors may be linked. A lack of belief in

personal capacity can sap confidence and reduce ability.

If the leader focused on the relationship, the follower might become confused

about what must be done and what was optional. So the leader takes a firm

stance - 'Do this' - which makes all the required actions clear.

S2: Selling/coaching

Follower: R2: Some competence, variable commitment/unable but willing or

motivated

Leader: Focus on the task and on the relationship

A follower who can do the job, at least to some extent, and who may even be

over-confident, might be de-motivated or resistant if ‘told’ what to do. So the

leader needs to 'sell' another way of working - to explain and to clarify the

decisions.

So the leader spends time listening, advising, and, where appropriate,

coaching the follower in the necessary skills.

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