As the year draws to an end and many organizations approach the end of a performance cycle, many leaders face questions such as these: How can we do it better next year? What new strategy should we adopt? How can we retain talent? How can we make our workforce more efficient?
While many branches of management provide ample, informed answers to guide an organization toward success, I am going to discuss five employee performance management pitfalls that I have noticed when working with different organizations and suggest ways to address them.
Pitfall #1: Failing to align employee performance to the organization’s performance: I have encountered numerous situations in which employee performance is neither linked back to the organizational performance nor what the organization hopes to achieve. Employees’ objectives, KPIs (key performance indicators), and targets function more as a to-do list, whose importance and relevance for the organization no one has the slightest idea about; neither are they curious to check. It is very common in these organizations to find overachievers whose achievement of targets is superior, sometimes to 200%, while the overall performance of the organization is generally falling behind.
Solution: Apply a proper process of cascade in which the strategic goals of an organization cascade down to individual employees so that the progress of the strategy can be accurately measured and assessed, and the causes of the poorer results can be tracked down and addressed before it is too late. This does not mean that all employees will directly contribute to the strategy, as within the workforce there are “driver” positions as well as “enabler” positions. But the drivers will have a clear understanding of what they are driving, while the enablers will be better equipped to support these.
Pitfall #2: Not having a clear process for measuring the performance of the employees: While some organizations boast a full EPM (employee performance management) cycle and sometimes even automated platforms, the process is now several years old, the people who implemented it might have since left, some documentation is nowhere to be found, and therefore many parts of the process have become arbitrary or are interpreted and applied in a variety of ways, depending on the understanding of the appraiser. Symptomatic of this pitfall is either that a manager’s performance is stellar while the performance of their overall team is average or poor, or that employees with similar achievements are rated wildly differently.
Solution: There are four main parts to the solution:
- Documenting the process in minute detail, especially those aspects where subjectivity may kick in, such as rates, what they mean, what thresholds exist within which those rates should be applied, etc. The documents should also contain the methodology that the organization has adopted to set personal performance goals, KPIs and targets, and how these are linked to the higher purpose of the organization. Should the methodology for managing performance at corporate level change, these documents would have to be reviewed and updated.
- Training new employees to ensure they know how their own performance requirements will be set, assessed, what happens if they overachieve or underachieve, and what they should expect from their appraisers or line managers. When a person is hired in a managerial position, they should likewise be trained on how the organization expects them to communicate or negotiate performance requirements with their team and employees, and the different biases and how to avoid them, as well as make them aware that the poor performance of a team generally reflects their own level of performance as managers.
- Communicating regularly and intensifying efforts closer to key dates in the performance cycle. Find a creative and entertaining way of serving the employees bite-sized pieces of key process and methodological aspects, focusing on those that have been an issue in the past.
- Assessing whether the process has been understood and applied consistently across the board by asking for direct feedback or reviewing some of the appraisals. Early on, it might require extensive effort to accomplish this with a larger number of employees. However, as the process becomes more established, the sample size can be diminished.
Pitfall #3: Having a clear employee performance process but letting in personal bias: Many organizations have a perfectly well developed EPM, however, in spite of employees reaching targets, they let personal biases interfere, such as personal relationships, the halo effect, stereotyping, or the “good guy” bias. Another type of discussion that can interfere with employee performance decisions relates to the employee’s value. Although discussions about an employee’s value is welcome in an organization, and the performance information may serve to support this, employee value actually belongs to decisions that need to be made between the CEO, HR and the strategy department once a clear strategy has been delineated and key strategic competencies identified. Once that discussion has taken place, it is assumed that the employees will have the objectives, KPIs and targets adjusted to their roles and the performance expectations of the organization derive from them.
Solution: Always run the appraisal by at least one more manager who possesses a degree of neutrality. It can be someone from HR or simply someone familiar with the performance required from the employee who can serve as an equidistant observer and advisor. Committees or panels to decide final performance for those cases in which there is no disagreement between the manager and employee should NOT take place.
Pitfall #4: Having a compensation and rewards system that works independently of employee performance: Most commonly found in government organizations, this pitfall is generally hidden behind excuses of criteria externally imposed, such as grade, rank, years worked in the organization, and so on. Not connecting the two systems inevitably leads to employees not taking the performance cycle seriously, as well as increased frustration and decreased motivation for what is perceived to be the subjective distribution of rewards.
Solution: Make sure that your compensation and rewards system is based on the performance of the employees.
Pitfall #5: Only rewarding your employees financially This is a more old-fashioned approach that disregards the fact that the large majority of employees put as much emphasis on non-financial compensation as on salary increases and bonuses. There is even a more dramatic shift toward non-financial compensation rewards, as millennials now in the workforce are more willing to stay in jobs that align with their aspirations as well as convictions about life, work and social challenges.
Solution: Build into your rewards system non-financial aspects that may range from training to official communications, providing in-confidence access, assigning more autonomy and responsibility or gifts. Note that the return on investment for non-financial rewards is three times higher than the return on financial ones, while generally costing the organization less.
Some of these solutions are more common sense than rocket science; however, a word of caution. In many instances there may be barriers to implementation due to corporate culture issues. When such instances occur, change management plans should be designed and implemented to accompany enhancements to the employee performance management process, with the leadership playing an active role and “walking the talk.”