This article addresses one of the most difficult systems to implement in dealing with human capital in business. Managing people, staff performance and accountability systems continue to sap organizational time, create conversations around fairness of pay for performance and question the correlation of such systems to profitability and production.
Since the 1940s when a vast majority of employers were using appraisals to document workers’ performance, businesses have yet to master the art of developing human capital performance. In fact, at the expense of likely extending that learning curve of managing people, there is a major new trend regarding performance reviews that is taking hold in a big way that will be considered in this article. For anyone who manages people, this article will provide better insight on solutions about performance evaluations, the value of consequences to enhance performance and improving human capital for better profitability.
- Understand the business history of the performance tug of war over accountability and people development.
- Debate whether consequences are relevant to improving accountability and managing people.
- Introduce a new trend in conducting performance reviews.
- Share performance evaluation tools.
- Discuss the importance of why engagement with employees is crucial to performance.
According to the Harvard Business Review (HBR) (October,2016) the timeline in which a tug of war existed between accountability and development of people began in WWI and WWII. The U. S. military created a system to identify poor performers and a ranking system of soldiers identified as potential officers. Over the next four decades, appraisals, goal setting, merit pay and development of employees became prevalent. Jack Welch from General Electric (GE) introduced the concept in the 1980s of ranking employees into 3 tiers by rewarding the top performers, accommodating the middle echelon, and coaching the bottom tier.
As the century turned, Steve Hankin from McKinsey and Company coined the phrase “The War for Talent” indicating a shortage of executives and a need to use rewards to reinforce performance. Then, organizations became flatter, had less personnel and managers had more direct reports. Most recently, Kelly Services and Adobe challenged the status quo on performance reviews by making them less formal and dropping the scored structure versions of appraisals.
The Consequences of Underperformance
Not only has business struggled with changing behavior for its benefit, so too did early legal systems of this country. As far back into the late 1770s, corporal punishment was utilized to invoke behavior change for criminals from lessor felony to misdemeanor type crimes. While some would have their ears nailed to the pillory, others were whipped or held in stocks until their trial began outside the courthouse. The most common form of punishment back then was whipping. In fact, one had the choice to be whipped or pay a fine. The wealthy paid and the poor were usually whipped.
Before the letter-writing campaign begins, the author is by no means suggesting a return to corporal punishment; far from it, what is being suggested is that delivering the notion of consequences by managers play a role in today’s human capital management. Why? Well, consider the frustration which is endured by managers of teams:
- An employee who simply cannot get over the performance hump, no matter how much coaching is done.
- A belligerent, underperforming employee, un-happy with their score, their pay change or comments received on a performance appraisal.
- Being a part of unfair evaluation results from their superior.
- Being unable to make the time to conduct the much-needed performance reviews.
- Hearing the whispers from fellow team members saying that it was about time that an under-performer was shown the exit door.
- Understandably, who has not compromised company performance for delaying obvious terminations?
Managing consequences of underperformance is an invaluable tool to establish a culture of accountability.
The fitness industry has long skirted the issue of taking a hard line on under-performers. Perhaps it is time to stop doing so? Compassion, second chances and extenuating circumstances all have a place in our human capital tool box. However, holding on to a team member too long when coaching up and progressive discipline fails, has no place in the tool box.
If underperformance continues to be tolerated, said tool box becomes ineffectual at best; worse, it becomes an anchor to sinking a team’s boat. It also espouses the often-unspoken belief by staff that managers enable such performance by allowing it to continue.
Performance Reviews and Appraisals
The ubiquitous phrase that appears in most of the written warnings in today’s work place of, “if the performance continues, further disciplinary action, up to and including termination may result” is one of the single most important phrases to be used in discipline forms. It is advisable to obtain the proper legal counsel for which phrasing makes sense for the organization. When it is used, be sure it carries the legitimacy it deserves and stand by it.
Admittedly, it will be most difficult to have termination consequences if written warnings/progressive discipline documents and performance reviews are not utilized. If an employee is terminated and is surprised by the decision, chances are it is on the employer for not being fair and forthright towards the employee prior to termination.
Setting aside the need to address poor performance for a moment, one might submit that a revolution is occurring in the age-old performance appraisal world. Annual reviews are being dropped in favor of more frequent, less formal regular conversations about performance and professional development. Josh Bersin, a business researcher, said in the October 2016 issue of the HBR that he believes about 70% of multinational companies are moving in this direction. Adobe, Microsoft, Dell, Deloitte, PwC, Gap, Oppenheimer Funds and even GE have joined the revolution. The overarching argument to do less formal appraisals is to improve current and future performance and groom for growth rather than looking at past behavior with yearend raises and or bonuses for rewards or the lack of those as punishment for a year of poor performance. Interesting!
At quick glance, such a trend may have much appeal from a time management perspective though it is less “old school,” and it may promote more communication, innovation and collaboration. It does suggest that such a less formal process might need to occur more regularly; weekly, bi-monthly or at minimum monthly “huddles” (meetings) with one’s direct reports discussing performance and development, not just delegation of tasks. Jack Welch said more recently and accurately that it is a manager’s obligation to provide candor to their direct reports. It matters not if the process is formal or not. A simple, yet effective tool for the performance toolbox is to regularly discuss with direct reports three topics:
- What I like.
- What I’d like to see more of.
- What can I do to help your performance?
These conversation starters for those huddles should be documented. These can provide an efficient way to provide timely feedback and recognition and get the employee and the direct report back on track to superior performance.
Speaking of reviews, the day of paper-based performance appraisals are likely over. Options exist online such as with Paylocity and Halogen Software, who also have mobile-based solutions related to coaching and documentation of the more informal and regular reviews of performance and professional development.
Being more electronic and strategic about talent management can go a long way in meaningful recognition, goal setting and a more robust view of performance. In the October 2015 issue of the HBR, Deloitte discovered that 58% of the managers in the organization felt that their approach did not engage the employee or their performance. They went on to say: “…we are in need of something nimbler, real time and more individualized.”
A word of caution should be exhibited before all your paper performance reviews hit the shredder. In the very valuable white paper written by the Society for Human Resource Management (SHRM) called “Building a High Performance Culture: A Fresh Look at Performance Management,” they outline strategies and practical advice around this new way of conducting performance reviews. In it they implore organizations and managers to stop trying to create a better performance review tool and instead suggest a goal to create a simpler, less administrative-process oriented appraisal that exists already. As they continue, it is clear that a focus instead on creating trust and engagement to drive performance may be more valuable than an exhaustive one which includes rankings such as these for a litany of categories:
- Needs improvement
- Meets expectations
- Exceeds expectations
- Over performer
Perhaps a committee can be formed in organizations to explore simplifying one’s current systems of appraisals?
Employee Performance Agreements & Trust
Finally, there exists two additional tools for the accountability and performance management tool box.
One comes from the auto industry by Turnaround Tour which uses an Employee Performance Agreement. This document is a form of goal setting and is a simple tool in which to start the New Year to help chart a course of success throughout the year, not just at year end. It is a document that may include:
- Goals and Desires Statement
- Specific Work Performance Expectations
- Specific Behavior Performance Expectations
- An Agreement Statement
It may include promise language in the agreement to meet or exceed goals, professional development and particulars between supervisor and employee.
The second tool that is worth pursuing is trust. Since this critical component of the human capital system and managing and engaging people must be earned, not given, it may be worthwhile to first watch the below videos by Bob Kelleher multiple times about boats sinking in organizations. It will provide a reality check about employees as whole people and inspire new ways in which to build trust through engagement. One of the new and bestselling books he wrote, called I-Engage: Your Personal Engagement Roadmap is a great source for a book club with management staff. It is a self-exploration about how engaged one is on a boat that is sinking.
Employee Engagement: Who’s Sinking Your Boat (August 20, 2013).
Employee Engagement: Why Is Your Boat Still Sinking (November 10, 2016).
Buckingham, M., & Goodall, A. (2015). Reinventing Performance Management. Harvard Buisness Review, 40-50. Retrieved from https://hbr.org/2015/04/reinventing-performance-management.
Cappelli, P., & Tavis, A. (2016). The Performance Management Revolution. Harvard Buisness Review, 58-67. Retrieved from https://hbr.org/2016/10/the-performance-management-revolution.
Pulakos, E. D., Mueller-Hanson, R. A., O’Leary, R. S., & Meyrowitz, M. M. (2012). SHRM Foundation’s Effective Practice Guidelines Series: Building a High-Performance Culture: A Fresh Look at Performance Management [PDF]. SHRM Foundation. www.turnaroundtour.com,
Working On IT Tuesdays© PayoffTools©: EPA - Employee Performance Agreement “Description and Overview” [DOC]. (2007). Automotive Service Leaders – The Turnaroundtour Company.