LECTURE 8: PERFORMANCE MANAGEMENT IN ORGANIZATIONS.

WHAT IS PERFORMANCE MANAGEMENT?

“How I get my people to do what I want them to do,

in the way I want them to do it!”

How is it done?:

Organizations that take performance management seriously, manage a range of

different but inter-related topics such as:
 Mission (what your unit is trying to achieve)
 Vision (what things might look like if yours really was a quality outfit)
 Strategy (a long term sense of direction)
 Business plans (more immediate targets and plans for reaching them)
 Values (how people should and should not behave)
 Culture in which improving performance is valued and developed
 Monitoring of performance – at individual, unit and Guild levels
 Feedback of that monitoring to staff
 Clear goals
 A set of competencies (to describe what good performance looks like)
 Appraisal discussions
 Personal development (anything that would help people perform better – off
the job training, coaching, reading, sitting with Nellie etc)
 Management development
 Good job design (creating jobs that satisfy)
 Team working (interaction and mutual responsibility)
 Extrinsic reward and recognition (basic pay, performance pay, awards, saying
‘well done’)
 Intrinsic rewards (the satisfaction from doing a worthwhile job reasonably
well)
 Effective remedies for under performers.

Isn’t each of these a subject on its own?

Yes and many of them are dealt with elsewhere .The beauty of
performance management is that it is a way of uniting a wide array of seemingly
unrelated topics, so that you can deal with them in a coordinated fashion. This is
integration.

Is there a connection between performance management and leadership?

They are very closely linked. Performance management deals with the more
tangible aspects of getting the best out of your people – systems, techniques,
team working, structures etc. It concentrates on the ways to organize your
people. It is about management. Leadership concentrates on the inter-personal
dynamics of your relationships
with individuals and groups. Clearly the two are intertwine.

What performance do we monitor?

You need to be gathering management data at four levels:
 Inputs: Staff time, budget, data, consumables, energy, equipment
 Processes: Support, sales, teaching, research, paperwork, IT, purchasing etc.
 Outputs: Customers served, bills paid, items sold, students helped, degrees
awarded, research written up
 Outcomes: Profit in a commercial enterprise or service delivery in a service
organization (usually assessed through customer satisfaction).

What are the rules for monitoring performance?:

(a) Objective:
Introduce monitoring as one part of a bigger drive to improve customer
experience. Monitoring is a means to a bigger end and never an end in itself. If
you try to do it without the bigger objective in mind it will fail.
(b) Positive:
You are seeking to improve the customer experience and not to gather data to
blame people.

(c) Involvement:
Get those responsible to work on the monitoring, as a part of their drive to
improve the customer experience. If you choose items to monitor and you
impose them, your staff will probably be demotivated and performance will
drop. Treat your staff as
professional, responsible and motivated.

(d) Outcomes
Measure outcomes in preference to outputs. (Governments are obsessed with
outputs- numbers of patients treated, lengths of waiting lists, numbers of
students receiving degrees, numbers of children who can read and write etc).
Output monitoring has its place but remember that, if you monitor an output
with a view to driving it up or down,
your staff will focus on that to the detriment of other things. You may create
new problems but do not think that the answer, therefore, is to monitor every
output!

(e) Tough:
Challenge those who like the fuzziness of not knowing how they are doing.

(f) Choosy:
Pick only the most important factors to monitor as too many measures will be
counterproductive. If you are measuring the customer experience you will
usually be able to keep the number of questions low.

(g) Numbers
Measure performance numerically, by getting the customer to grade them on a
scale 0 to 5.
(h) Benchmark
Use the results as your baseline or benchmark, from where you can improve.
(You are aiming to raise this year’s customer satisfaction index of 3.5 to 4.0 next
year.)

(i) Communicate
Make sure the targets are known, understood and accepted. Place the indices
somewhere where everyone can see them.

(j) Reliable
Use reliable sources of data.

Performance management is the process of maintaining or improving employee

job performance through the use of performance assessment tools, coaching and
counseling as well as providing continuous feedback. That means it’s an HR
function that needs to be carried out as often as possible.

WHAT IS AN PERFORMANCE APPRAISAL?

The competent manager will constantly monitor staff performance and make
realistic and considered comments on a day-to-day basis to assist and develop
their effectiveness. A staff appraisal scheme seeks to formally encapsulate the
essence of that relationship and record comments from both sides at an annual
(or twice yearly) meeting. It is a snapshot of progress and achievement as seen
at a particular time, with ideas about improvement and development for the
coming period.

Before going on to examine the role and nature of staff appraisal in

organisations, it is important to note that there is considerable disagreement and
conflict surrounding the entire concept of appraisal. There are two main reasons
for this.

There is a substantial lack of understanding concerning the overriding

principles behind appraisal and about the best ways to carry it out. As a result,
appraisal is viewed with distrust in some organisations and has lost credibility in
others. It may be seen as alternatively a heavy-handed tool of management on
the one hand or an administrative chore with little value on the other.
 It is impossible for a good appraisal scheme to address more than a few of the
various purposes for which appraisal may be used, although many organisations
try to address them all. Some purposes sit happily together, whereas others are
bound to conflict. All the purposes need to be addressed by a caring and
developmental organisation, but different approaches need to be taken according
to the desired result.

In contrast to these two gloomy viewpoints, it must be said that there are many
organizations that have first class appraisal schemes. They serve their purposes
admirably and are well thought of by all concerned because they are seen to be
of value. These two observations about the problems with staff appraisal do,
though, provide us with a framework for considering the concept - looking at the
various purposes and the organisational context - before going on to review the
process of appraisal itself.

What are the purposes of appraisal?

Staff appraisal schemes are all concerned with taking stock of the present
situation, reviewing past performance and planning for the future. Within this
very general description, though, there are a number of different specific
purposes and outcomes of the appraisal process.

(a) The assessment of past effectiveness and setting of new performance

targets
The assessment of performance is a task that can and should be carried out at
every level in an organisation, from the chief executive to the newest office
junior. Granted, the criteria for judging will be different at those extremes, but
the principle is the same. Standards for top managers will probably be based on
corporate objectives whilst standards for clerical staff will be based on task
performance. These standards of performance may be found in job descriptions,
procedural manuals, professional codes of practice or other organisational
statements describing what is expected from a competent employee.
Appraisal can only address the achievement of standards or objectives if they
have been clearly defined and understood by all concerned. It must be clear what
levels of performance are acceptable, that the standards are valid and attainable,
and that allowance will be made for factors outside the control of the individual.
It should be remembered that not all aspects of a job can be assessed against
objectives and targets. Unless productivity is actually quantifiable, which is
more likely at the lower ends of the hierarchy, measuring success is difficult and
open to misinterpretation. Frequently, the display of certain personality traits
(such as reliability, integrity, creativity and judgment) needs to be considered
and with the difficulty of setting measurable standards for such characteristics,
final evaluation may be open to the subjective perceptions, views and biases,
etc. of the appraiser.

The setting of performance targets for the forthcoming period, in the shape of an
action plan, is not just a case of imposing objectives. In the context of appraisal,
it must be seen as a two-way exercise that locates the individual’s own
objectives in the context of those of the organization and the organization's
support. Thus, this would include:

Agreement about the overall objectives of the department/section and of the

individual within that context (ideally as embodied in an accurate, current and
developmental job description).

The establishment of the individual’s major priorities over the next period and
the extent of managerial support needed for success.

The identification of the individual’s key tasks within those priorities and the
appropriate standards of performance in terms of quantity, quality, time and
costs.

The identification of and agreement about, the level of support and guidance,
which should be offered by the manager to aid the individual to perform to those
standards.

(b) The assessment of present salary levels and setting of new levels and/or
relation of performance to pay
We saw in a previous unit that, increasingly, pay is being linked to performance.
To establish that link and measure performance, as a basis for determining merit
pay or bonuses, there needs to be some form of performance assessment. Many
organisations use staff appraisal for this purpose but this is fraught with
difficulty.

The main problem lies in the impossible marriage of a process concerned with
improving the quality of performance with one that aims to provide information
for salary review. It is clearly difficult to have a frank discussion about
performance standards and achievements when there is an overriding
implication that the discussion will be used to set salary levels. The employee is
hardly likely to expose and discuss weakness at the risk of perhaps being
penalised by the withholding of pay increases, and will probably try to over-
emphasise achievements, in compensation, to qualify for the performance-
related pay element.
Linking the two inevitably means that the pay issue will distort what should
otherwise be an honest and truthful exchange about performance. It is generally
considered best practice to try and divorce the two purposes and address them
separately by different schemes at different times. However, surveys have
shown that a substantial proportion of organisations do link them together. This
may explain some of the distrust and lack of credibility associated with staff
appraisal systems in some organisations.

(c) The assessment of training and development needs, and identification of

strategies for meeting them:

Whenever an assessment of performance is made there will be invariably an

identified need for further training or development, unless the performer is
excellent in every respect. Staff appraisal offers an ideal opportunity to
managers and supervisors to discuss training needs and identify possible routes
to achieving new knowledge and skills.

Any action plan should include a commitment to enable the individual to acquire
these new abilities and the appraiser should set time scales for the achievement
of specific objectives.
Any plans for training or development should encompass the needs of the
section or department as well as the individual, now and well into the future.
The appraiser should capitalise on strengths, seek to remedy weaknesses and
consider the individual’s career aspirations.

In some situations, or in certain organisations, training needs appraisals may be

a completely separate exercise from appraisal related to performance, although it
is difficult to envisage either one being discussed without reference to the other.
These approaches stem from a distrust of performance appraisal, a point we
shall consider below.

(d) The assessment of potential for promotion and development of

succession planning:

Organisations need to be clear about their future and part of that clarity includes
people who are going to run the show in years to come. Appraisal may help to
identify those employees who show great potential - talent spotting - and groom
them for future higher roles in the organisation. In local government terms, this
is often seen less as a parochial concern about the organisation than to the local
government service as a whole, with high flyers being marked out as being
potential chief officers for any local authority in the future.
Succession planning should be an continuous process, based on a sound
knowledge of the employee group, their collective and individual abilities and
the future needs of the unit. To be effective, a succession plan should address
organizational needs over a two, five or even a ten year period. However, the
complexities of setting future staffing targets must be mentioned here. Many
variables are in play and the task is made more difficult by unexpected shifts in
the national economic scene, in political demands, the availability of materials
and funds and the changing nature of service provision. Hence the
personalization of such activities, by endeavoring to identify and develop
individuals for specific posts in the future, is fraught with problems.

A key difficulty is finding an acceptable yardstick against which to measure

“potential”. The excellence of present performance can be measured, as can an
ability to analyse and address problems associated with the present post.
However, any assessment of ability to tackle tasks in a possible job, sometime in
the future, can only be speculative and hypothetical.

Clearly, people will stand out from the crowd as being likely to climb higher.
These need to be given every opportunity to develop their skills and knowledge,
ready for eventual promotion and increase in responsibility. These likely flyers
may become evident at appraisal meetings, although the effective manager will
notice latent ability as part of everyday supervision but labelling people as
potential top managers can be dangerous if anything more than two or three
years’ development is envisaged.

Disappointments can occur from both sides and plans can be spoiled or careers
accelerated too fast.

(e) The assessment of individual progress and assistance with career

planning decisions

Staff appraisal schemes focus attention on the individual’s performance in the

job. As well as discussing improving performance in the job in the future, the
process provides a natural forum for considering where they may be going in the
future - both from the organization’s perception and in view of the employee’s
own aims and objective. Such discussion can inform both planned adjustments
in job role and hence performance targets, and training and development plans.
This is an example of the creative use of appraisal to meet compatible purposes
within a single framework.

(f) The enhancement of motivation and communication

Rather than being a specified purpose of staff appraisal, this is a by-product of
an effective scheme. It can generate an enormous amount of goodwill and
respect for the organisation, and provide significant gains in the development of
internal communication and individual motivation.
The appraisal process should encourage a greater sense of belonging and a
feeling of co-ownership; it should foster better communications between
colleagues, upwards, downwards and sideways; it should stimulate dialogue
about successes and failures, hopes and aspirations, fears and excitements.

Above all, it should give the organisation a powerful forum for individual and
team development, personal growth and greater job satisfaction.

From the individual employee’s point of view, four elements are worthy of note:
Most people are pleased to have their work performance evaluated to have
strengths emphasised and developed, to have the opportunity to discuss
improving areas in which they are less effective and to recognise the relevance
of the part they play in the overall pattern of the enterprise.

Opportunities to discuss career development are often quite rare; the chance
offered in appraisal can stimulate personal growth and set new targets for the
future.

A creative appraisal will allow the appraisee to make constructive comments

about the level and quality of supervision received - an unusual and often very
powerful opportunity for frankness and openness (few personnel/management
texts mention the desirability of the appraisal meeting being as much about the
employee appraising the manager as vice versa, with the attendant increase in
worth and mutuality). The act of completing a careful and thorough appraisal is
a source of motivation, with a consequent enhanced enthusiasm and
commitment to the job and the organisation.

APPRAISAL IN THE CONTEXT OF PERFORMANCE MANAGEMENT

Performance Management – as an Introduction – it can be suggested that
performance appraisal is only one tool in the management tool kit that
organisations can use to direct performance and raise standards:
Mission (what your unit is trying to achieve)
Vision (what things might look like if yours really was a quality outfit)
Strategy (a long term sense of direction)
Business plans (more immediate targets and plans for reaching them)
Values (how people should and should not behave)
Culture in which improving performance is valued and developed
Monitoring of performance – at individual, unit and Guild levels
Feedback of that monitoring to staff
Clear goals
A set of competencies (to describe what good performance looks like)
 Appraisal discussions
Personal development (anything that would help people perform better – off
the job training, coaching, reading, sitting with Nellie etc)
Management development
Good job design (creating jobs that satisfy)
Team working (interaction and mutual responsibility)
Extrinsic reward and recognition (basic pay, performance pay, awards, saying
‘well done’)
Intrinsic rewards (the satisfaction from doing a worthwhile job reasonably
well)
Effective remedies for under performers.
Few employees, including few managers, see it in this context. That is one
reason why staff appraisal is so often criticised as providing no added value and
is merely a bureaucratic imposition from the personnel department. Appraisal
needs to be horizontally integrated into the other HR topics on this list – e.g.
linked with processes for personal and management development and reward, as
well as vertically integrated with the organization’s mission, vision and business
plans.

DIFFERENT APPROACHES TO APPRAISAL:

What is the organisational context for appraisal?
We noted above that some of the disagreement and conflict about appraisal
derives from the organisational context within which it is operated. In this
section we explore some of the issues involved.

(a) Organisational culture

Appraisal schemes will only flourish in an organisation where there is a culture
for personal growth and corporate development. This is not easy to achieve and
to some extent, the older the organisation and the further its roots go back to less
enlightened times, the more resistance is likely. There must also be a climate of
comfort, encouragement and nurture.

Where is appraisal most likely to fail?

Where there is a bureaucratic structure that relies heavily on control and
administrative complexity and perfection, appraisal schemes will be found to be
paperbound and rigid. A pluralist, them-and-us culture will see appraisal as a
bigbrother operation, seeking scapegoats and finding faults.

Where is appraisal most likely to succeed?

The organisation espousing concepts such as team work, creativity, clarity of
mission, innovation, growth and empowerment will cultivate and nurture
appraisal as a critical factor in their achievement. Where there is a sense of
mutual learning and shared values and perceptions, in an open and fair
environment, appraisal will flourish to the great benefit of all concerned.
Appraisal needs to be seen as an integral part of the organisation’s life and
culture, not as an isolated, self-contained exercise. To that end, any scheme must
be designed to reflect that culture and be consistent with internal practices and
procedures.

(b) Commitment and ownership

At the heart of all appraisal schemes is a highly personal interaction between the
appraiser and the appraisee. This interaction needs to be supported by a
commitment from the organization to make it a meaningful and relevant process
in which both parties can put their trust. A necessary precondition for such a
situation is that the scheme is not imposed from above but is developed and
implemented with the full support, co-operation and understanding of
management and employees throughout the organization.

All of the following groups must be fully aware of their roles in the scheme and
their involvement in its planning and design, in particular, will help create a
sense of ownership and commitment:
Senior management -who must be seen giving the scheme the stamp of
approval and participating fully themselves as both appraisers and appraisees.
Managers and supervisors (as appraisers) - who must be committed to the
success of their sections and the individuals within them, and to the operation of
a fair and objective appraisal system, including consequent support for and
monitoring of action plans, to achieve that success.
Employees (including the above categories) as appraisees - who must be
committed to the open exchange of the appraisal process and to the
implementation of action plans, given the fairness and objectivity of the system.
Personnel and training administrators - who are responsible for the co-
ordination and control of the process and implementing aspects of action plans
which lie outside the scope of line managers.
New employees - who need to be informed about the scheme and its benefits,
and to be involved in it at an early stage.

TYPICAL PROCESSES OF APPRAISAL:

Organisations tend to promote one of five broad policies on appraisal:
Tell - the manager writes a report and then tells the subject what is in it. If the
manager believes the subject can read, the subject might get to see the report and
sign to say they have seen it
Tell and share - the manager writes a report and then discusses it with the
subject
 Share - the subject and manager work together and decide what should be
recorded
You do it first - the subject carries out a preliminary self-assessment and this
is then the basis for discussion with the manager
Let’s all have a go! - 360° appraisal.

There are basically two elements to the appraisal process:

The appraisal interview itself
Follow-up action and monitoring.
However, before considering the nature of the interview itself, there are two
other aspects of appraisal schemes to note: who should conduct the appraisal and
the frequency of appraisals.

Who should do the appraisal?

There are a number of possibilities, with the option of using individuals or
combinations of people:
The immediate line manager (the “parent” approach) - clearly the one in the
best position to have observed the individual and come to conclusions about
their work, although superior-subordinate relationships are sometimes too
strained to form an effective basis for appraisal.
The line manager’s line manager (the “grandparent”) - being one hierarchic
level removed, this person may have a more detached viewpoint but may not
have the day to- day experience of working with or knowing the individual.
A non-line manager specialist (the “step-parent”) - an effective approach
where technical or very specialist activities take place, which may be outside the
professional understanding of the line manager (and which may include
personnel specialists where more or extra expertise in inter-personal
communication and behaviour is required).
A combination of the immediate line manager, with one or both of the other
people above as a team to provide a comprehensive but balanced view.
Self - often used amongst very senior people, self-assessment is becoming
more popular, especially where there is an opportunity to propose personal
development programmes and to choose whether or not any further appraisal
discussions should take place and if so, by whom. (It has been found that senior
people, who do not wish to be appraised, may accept the idea of self-appraisal
and will pursue it objectively and creatively.)

How often and when?

Appraisal should be carried out to cover specific periods; the organisation
deciding on the intervals. Most schemes are annual, although six-monthly
schemes are effective in smaller organisations. Any interval is valid, provided
the employees know what it is and recognize the importance of the interviews
when they occur. Ideally, the whole organisation should conduct appraisals
within a set time, say six weeks, to focus attention on the process and ensure that
everyone is covered at roughly the same time. Spreading it out over the year is
not conducive to goodwill and commitment.

What is the process for an appraisal interview?

An appraisal interview needs to cover three main areas:
A review of past performance in the job during the preceding period - from
both the appraiser and appraisee’s point of view.
Building an action plan for the next period - identifying realistic aims and
targets, together with the necessary actions and support required to achieve them
and dates for their achievement.
A look into the future - enabling longer term plans to be formulated in respect
of the individual’s aims and objectives and considering any steps that can be
taken to develop the individuals potential.
It is usual for action plans to be formally recorded so that they can be reviewed
and referred to in gaining support for development resources, such as training
programmes. It is also usual that such documentation needs to be agreed by the
appraisee and signed to that effect. As with all interviews, preparation is
essential and there are particular requirements relating to the interview itself, as
we discuss below.

(a) Preparation
Both the appraiser and member of staff should prepare in advance for the
interview. New employees should be fully informed of how the appraisal system
works, its scope and limitations. In particular, new employees who are expected
to appraise others should be trained fully in how to carry out appraisal
effectively and in a manner consistent with the organisation’s own methodology.
It is always necessary to send the right signals about the appraisal exercise,
allowing sufficient time for it and stressing its importance to both the individual
and the organisation as a whole. Stating that the appraisal interview will be fitted
in when each party has “a few minutes to spare” sends the wrong signal entirely
and betrays the appraiser’s attitude to the process.
Before the appraisal is carried out, the appraiser should gather all necessary
information so that constructive feedback on performance can be given. Having
a look at last year’s appraisal is essential, so that both parties can check progress
against aspirations.

Some systems operate by getting both parties to complete a pre-prepared

questionnaire - essentially both the manager and the subordinate appraise the
subordinate. This can provide a useful guide to differences in perception
between the two parties. If they differ radically, the appraisal will require the
two to explore why this is so and what can be done about it.
The appraiser should prepare fully and in writing, even if this is only in bullet
point form. Preferred outcomes will exist for both parties, so there is some
advantage in getting them to make pre-appraisal notes.

The logistics of the appraisal are important. It is psychologically bad to have

telephone interruptions or a noisy room. Absolute privacy is a minimum
requirement as there may be sensitive issues to be discussed. Some managers
insist that appraisals are conducted outside the work place.

(b) The interview

The face-to-face meeting between the appraiser and the appraisee is central part
of the appraisal system. This is a formal interview in that it must comply with a
number of procedural requirements for documentation, but there is no reason
why it should be formally conducted; the reverse is probably better. The best
appraisals are those where there are as few barriers as possible; remember that
the physical environment can itself be a barrier