ontroduction to performance management
...smiths College, University of London “ The concept of 360° feedback makes a lot of sense and, if used well, should have a great deal to offer. It seems to suit the move towards the less hierarchical, more flexibly structured and knowledge-based organisations of the future”. Fletcher, C (1997) Appraisal: Routes to Improved Performance. Institute of Personnel and Development, London. The table below shows the benefits of 360° Feedback that ABCGlobal Treasury Services PLC in the UK are missing out on; To the Individual To the Colleague To the Organisation Encourages self awareness Assesses them against their defined competencies Confirms their strengths Focuses on self development The opportunity to give feedback Promotes openness in relationships Improved teamwork Improves performance Encourages better working relationships Promotes an open & honest culture Cost effective use of development resources Clear focus on individual development plans When questioning Chris on the recent leavers within the organisation, she said that with the exit interviews she had conducted, the majority of leavers who had left over the previous 12 months had done so because lack of Career Development. This in itself could be altered if they were to identify the developmental needs of individuals through their performance management system and act on them accordingly. They have a good system in place that could perhaps decrease the staff turnover. When looking into Performance Management as a whole within Sony, I discovered that they don’t place great emphasis on reinforcement of performance standards. As a result of this they have on a few occasions found themselves facing disciplinary procedure with staff. It appears that there are certain things that ABCcould do to alleviate such problems in future. Performance Management Systems Companies use varied systems to manage performance, they tend to chose which system to use based on the organisational culture and while some systems such as the 360° appraisal system works well for some organisations, others this would not suit culturally. Some of the systems available include, but are not limited to: strategic development and review; management by objectives; non-financial performance measures both in terms of formal and informal process; incentive/bonus scheme; personnel appraisal and review. Some of these systems are more favoured than others and indeed the type of industry can influence the systems used eg. Investment banks and the financial industry favour the incentive/bonus scheme – they pay large bonuses for the best performers. These incentive driven systems are often criticised because they are purely results driven and there is little or no development involved for the individuals and when the results slow down or stop then contracts are often terminated. These systems all have their advantages in managing performance but in recent times there has been a shift in what was the traditional approach of reward driven systems to more developmental systems. The reason for this shift in approach is mainly because organisations now place more emphasis on improving performance through development rather than by reward. The aim is to closer correlate the relationship between the individual’s objectives and those of the business. This appears to be the case within Sony, with their competency framework and 360° feedback there should be a clear link, however as we saw any system is only as good as the people that use it. Any performance management system will only be effective if there is dual involvement between management and staff and both have a clear input into the system. According to various writers (Armstrong and Baron, 1998: 80-1; Williams, 1998:3 Lowry, 2002: 130-1) performance management systems have a number of central characteristics, they should: Clarify and help translate corporate objectives into individual, team departmental and divisional objectives Provide regular communications about business plans and progress in achieving objectives Create a shared understanding of what is required to improve performance and how it is to be achieved Encourage self-management of individual performance Require a management style that is open and honest, and encourage two-way communication between superiors and subordinates Systematically measure and assess all performance against jointly agreed objectives Are a continuously evolving process in which performance improves over time (Armstrong and Baron, 1998: 80-1; Williams, 1998:3 Lowry, 2002: 130-1 cited Marshall & Wilkinson 2002) All performance management systems should certainly be a two-way system where communication flows in both directions, upwards as well as down from the top. This ensures that employees feel valued and that they have an input into their own development and success as well as that of the business. Any performance management system can be broken down into three stages, the initial stage is the induction – this is the stage that can be crucial for a company to get across its strategic objectives and plans for the future to the individual and to get that initial commitment from them. For the Individual this is first contact with the organisation and the first chance to see where their role fits into the overall business and how their performance can impact on the success of the business. The second stage is known as the review and appraisal stage and this is the ongoing interaction between staff and management and also the formal performance review on an annual basis. The ongoing interaction can take the format of one-to-one meetings that are pre arranged to discuss how the individual is getting on in their role or on a more informal basis by general chat to see how things are going. Whatever format this review takes its important for the manager to find time to do this as it helps the individuals understand what is expected of them and whether or not they are meeting that expectation. The annual performance review can again take different forms but it is usual that this is a formal meeting where performance and behaviours over the previous year are discussed. The outcome of this review will normally determine salary increase and/or bonus and objectives for the following year are agreed. This is also the time when developmental needs are identified although is it important that this is not the only opportunity for managers to discuss development with staff, this again should be an ongoing process. The third stage is reinforcing performance standards and this is when the individual is not meeting the normal performance standards required to fulfil the role. Things that should be monitored are things like poor performance and this can be for a number of reasons, i.e.: inability to perform the role and therefore training is needed or a one-off dip in performance and this could be for personal reasons. Unless these things are noted early on and a conversation is held with the individual then they can spiral out of control. The biggest problem with this stage can be that managers sometimes refuse to recognise there is a problem until it is too late and what could have been solved early on with a simple chat and failure to do this can often lead to tougher measures been taken. For any performance management system to work it is important that a Company invest the time and money in ensuring that all three stages are addressed and if so then fewer problems are likely to arise with employees. The use of Appraisals within Performance Management Performance management has seen a vast change both in the attitude towards it and the tools that are now within it. If we look at performance management 10 years ago, attitude has been the most significant change, historically managers appraised employee’s performance on an annual basis and this was normally done in a very bureaucratic manner. The aim now is that manager’s mange by agreement rather than by command and this encourages the integration of the individuals and the organisations corporate objectives. It is becoming more obvious that today, organisations use performance management in a much more strategic way to ensure optimum effectiveness from both the organisation and the individual. Research carried out by the IRS Employment Review into why organisations were using performance appraisals found the following results: Nine out of 10 firms use appraisals to identify skills gaps and development needs. More than half of public sector bodies and over a third of private sector organisations use the process to target training and development needs. Eight in 10 use it to evaluate performance - 46 per cent in the public and 36 per cent in the private sector while a third want to identify and acknowledge performance and ensure managers communicate with staff. A fifth use appraisals to make reward decisions, this is more often the case than in the private sector - 15 per cent - than in the public sector at 4 per cent. Identifying poor performance is the reason given by 17 per cent of the 95 respondents (54 public and 41 private) and increasing productivity is cited by just 9 per cent. (People Management - 4 March 2003) We can see from the above results that 90% of respondents said it was to identify skills gaps and development needs, we can therefore see that the old approach is quickly moved towards something that is now being used as a strategic management tool. The worrying thing about the results is that only 17% of respondents stated that they used appraisals to identify poor performers, this could be quite concerning if we assume that poor performers are not being identified outside the appraisal system and are being ignored. The problem is that sometimes in the case of poor performance, it is often too late by the time the problem is recognised to do anything about it; this can have grave circumstances for both the individual and the organisation. Objective setting has become a major part in the appraisal system of most organisations and this is a good way of ensuring that the company objectives flow downwards and influence the individual’s objectives. The review of the objectives which can be done either monthly or quarterly also helps move the view of appraisal systems away from being an annual event to being more continuous assessment. If individuals have clear objectives that are reviewed at regular intervals then this should also help poor performers to be identified quicker and a resolution found thereafter. There are different methods of doing the appraisal, the traditional one-to-one meeting with the manager, 360º Feedback and a method, which is becoming more common with the advancement in technology, on-line appraisal. No matter how an appraisal is carried out the aim should always be the same; the aim of appraisal as described in the IDS study of Appraisal is that an appraisal is: An analysis of past performance over the year Monitoring an employee’s skills, abilities and competencies Identifying training needs and creating a development plan (IDS Study 667 – April 1999) Traditionally in performance appraisal. The emphasis was placed on past performance whereas now although past performance is still an integral part of the review the appraisal is now used as tool to plan for the future rather than focussing on the past. In all appraisals, for them to be a fair and objective exercise there needs to be ethnicity and according to Winstanley and Stuart-Smith (1996) the following ethnical approach should be taken: Respect for the individual – people should be treated as ’ends in themselves’ and not merely as ‘means to other ends’; Mutual respect – the parties involved in performance management processes should respect each others needs and preoccupations; Procedural fairness – the procedures incorporated in performance management should be operated fairly to limit the adverse effect on individuals Transparency – people affected by decisions emerging from the performance management process should have the opportunity to scrutinise the basis upon which decisions were made. If these principles are followed then no matter how you choose to do your appraisal, it shouldn’t make a vast difference, as it will be an objective look at the past with the focus being on the future. As mentioned previously the shift in the whole attitude towards appraisal has also come with a move forward in the methods of carrying them out. The 360° feedback approach has become increasingly popular and as seen with ABCit can either work really well or can be equally as disappointing if not carried out properly. Balanced Scorecard The concept of the Balanced Scorecard can first be traced back to 1990 when the research part of KPMG, Nolan Norton Institute performed a study of “Measuring Performance in the Organisation of the future”. The reason for the study was that the participants though that the reliance on financial- performance measures was hindering organisations from creating an environment of future economic value. The results of the study found that a lot of organizations face barriers when they are trying to promote their business strategy the following barriers were identified: The vision barrier, th...