I recently facilitated a round-table discussion on Performance Management, with senior executives from commercial, not-for-profit and public sector enterprises. Our topic was current practice in Performance Management, and was hosted together with my colleagues at Bravo Consulting Group.

At the outset, we posed a number of discussion points, including:

Are there direct correlations between Performance Management, Employee Engagement and Productivity?

How is Performance Management linked to Rewards, Recognition and Compensation?

Do your people understand the context for Performance Management?

We also discussed the true costs of Performance Management systems (time, resources, software, administration), as well as the different attitudes of management, team leaders, HR and employees toward current processes.

The good news is that all the organisations represented are running annual or semi-annual employee appraisals. There was also an increased focus on performance outcomes (i.e., it’s not just about effort expended on job-defined tasks, but more about what is being achieved and how). And our participants reported the importance of using appropriate tools to deliver effective employee communications around corporate strategy, organizational goals, change management and project roll-outs to ensure greater alignment with, and context for Performance Management.

However, we identified a number of key challenges and critical issues facing any organization that takes Performance Management seriously, or who wishes to increase the effectiveness of their current practices:

1. Negative Perceptions of Performance Management

Despite the widespread use and acceptance of Performance Management systems, there remains considerable negativity around the process, the context, and the even discussions themselves. There appears to be a sense of foreboding when it comes to the mid- or end-of-year appraisal, a fact that was borne out for me just a few weeks ago: I was in the furniture display area of a well-known department store, when I overheard the floor manager say to one of her sales colleagues: “Mike says he’ll do your one-on-one at 3pm today.” What might appear to be a fairly innocuous statement visibly filled the employee with dread, at the prospect of his annual review. Surely Performance Management discussions should not be fraught with such unnecessary anxiety or stress?

2. Performance Management Systems Are All Different, And Too Rigid

Our round-table participants all reported using different software (and paper-based) systems, which is understandable given the proliferation of HRMS tools that support Performance Management. But many of these systems resemble accounting or project management software, and lack more qualitative or cultural performance measures. Alternatively, systems tend to be rigid, process-driven applications that often take a checklist and compliance approach to conducting Performance Management. They can also suffer from a “one size fits all” solution, and don’t readily help organizations to develop meaningful performance measures or point-in-time indicators, mainly because they are backward-looking and use retrospective data. Shouldn’t Performance Management help employees move towards the job that they want (and towards their longer-term career objectives), rather than confining the discussion to current or out-dated tasks?

3. Formal Processes Are Disconnected From Informal Processes

By making it a “process” (and an infrequent one at that), Performance Management becomes artificial, and divorced from day-to-day reality. This can result in performance issues being stored up and only “discovered” during the formal appraisal – which will add to the anxiety and stress if long-term resentments about manager-employee behaviours and relationships are only brought to light during the Performance Management process. A common outcome from the formal Performance Management process is a corrective or punitive response, due to the absence of continuing efforts to manage and direct performance. Why should employees only hear feedback about their performance at the end of the year, when it might be too late to address the issue, leading to knock-on implications for remuneration, recognition and promotion. Shouldn’t Performance Management be part of the everyday dialogue between colleagues?

4. Many Managers Are Simply Ill-Equipped To Have The Performance Conversation

Without the appropriate skills to foster meaningful and open dialogue with their direct reports, managers end up having to manage the Performance Management conversation, rather than helping their people self-manage their own performance. This awkwardness is compounded if there is a lack of organizational context for Performance Management; worse, poor performance is ignored or circumvented because managers do not feel confident to start the dialogue, which is not fair to the individuals concerned if they are not given the opportunity to discuss what might be the root cause of a performance issue. If there is no dialogue around Performance Management, how can employees know what they are being held accountable for, or appreciate the consequences of not meeting performance goals and objectives?

5. Performance Management Systems Ignore The Middle Majority

Most Performance Management systems (certainly the ones I have been exposed to) end up using forced bell curve distribution analysis to classify employees according to high, middle, low and under achievement categories of performance. I recall one former colleague who used to cite Garrison Keillor when annual appraisal ratings had to be allocated according to the expected distribution curve: “Well, that’s the news from Lake Wobegon, where all the women are strong, all the men are good-looking, and all the children are above average.”

When we asked our participants “what keeps you awake at night?”, one CEO commented that he worries about the middle 60%-65% of his employees – the bulk who “do a good job” – because more of his attention and focus is on the high and low performers (the top and bottom 15%-20% respectively). This “bias” can distort management perspective, and lead to disaffection in the middle band, unless there are adequate ways to recognize and reward solid performance independent of annual compensation or promotion. (This issue is particularly acute in Australia when we consider the impacts of slower economic growth, comparatively high wages and sluggish productivity – yet, employers face a war for talent as new and highly valued skills become harder to resource.)

Conclusion

If Performance Management could become a continuous dialogue, backed by meaningful performance criteria and underpinned by a greater emphasis on employee self-awareness and self-directed Performance Management, then organisations could spend more time on strategy and execution, and less time on managing individual performance. Not only would this create greater cost efficiencies in the Performance Management process itself, it would likely lead to improved productivity outcomes because there would be more clarity and engagement around goals, outcomes and incentives.