The missing link in PMS

Future of Performace Management

My interview published

Future of Performance Management System

What is currently missing in the way overall employee performance is being managed?

Most of the times, the performance management system is just a ritual. This is because the missing part of the system is “purpose”. Manager and Employees have their own perceptions about the performance management system. Their “purpose” is to compensate their employees. Hence higher rating is always perceived for a higher merit increase. It is leader’s job to give the larger purpose to the system..i.e. it is not just for the merit increase but recognizing employee contribution and his development areas to be a better employee in the organization.

On the organizational level, this should be the integrity exercise not just to complete the process and run the yearly exercise.

Second missing point is the “relevance” of such systems to the current business scenario. The PMS system is established and very rarely it is reviewed periodically. Performance is always important, but the actual results are always considered rather than how these results are achieved. I am speaking about behaviors. Do we really consider the right behaviors and values while evaluating employees?

Third missing point is “the way it is conducted and communicated.” Are managers trained properly to give the right feedback? Are they giving the feedback based on the events and circumstances? It should not be an annual ritual. Performance Management System should be one of the milestones in the journey of the employee lifecycle.

Fourth missing point is misinterpreting performance to the potential. The general tendency is to identify the talent based on the performance instead of potential. Hence, I always advise delinking the performance management system. Compensation and identifying the talent based on performance.

Given that a company’s workforce now has a significant proportion of virtual and freelance workers, how should performance management include them?

I will suggest having regular business performance meetings, department performance meetings and then individual feedback sessions for team regularly. Business performance meetings can be monthly and quarterly individual feedback sessions. During such meetings focus should be on actual performance and peer learnings.

During periodical feedback sessions focus can be on “how” part on behaviors and development needs and employee should get the sense that managers are supporting them instead of identifying faults.

Managers need a lot of training on coaching, feedback giving and other aspects of performance management.

What are employees, managers, and decision-makers looking for to make performance management more effective?

I think it is about “expectations management”. Employees and managers including decision makers have their own expectations from each other. If you make these expectations clear, then effectiveness will be there. This can be done with more concrete goals (SMART-objectives), aligning goals to the common purpose of the organization and job purpose; Qualitative feedback about the job; and trying to put the expectations well documented.

Transparency and openness is the key to any effective performance management system.

What are some of the new things being introduced in Performance Management that are working/not working?

It is evolution. There is no rocket science. It should not be the copy paste system. It should be relevant and aligned with your business needs. Some trends are as under:

• There are companies who are eliminating the bell curve. Still, people are rated but not calibrated in force rating.
• There are companies who are focusing more on development discussions instead of KRAs and KPIs. KRAs and KPIs are still set up but these are not an integral part of the jobs now.
• Companies are delinking performance with the potential and running separate talent calibration sessions for identifying the talent, (HiPos, TiPos).
• Few companies have in fact total stopped the annual appraisals for a merit increase. Compensation is paid based on the matrix which is based on role, comp ratio with a certain percentage of appraisal rating.

If not periodic appraisals, then what & how?

The word” Appraisal” is not relevant today. It is an evaluation of the performance based on “what” (achievement) and “How” (behaviors, values, purpose). With this understanding, it can be any time as an organization deems fit. However, it should be the right time for the feedback.

I always suggest that you can have business performance reviews monthly and half-yearly formal feedback sessions with employees.

Informal feedback sessions and coaching sessions should be regular and this is one of the vital responsibility of people managers.

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Related Resources:

• Time to review your performance management system
• Compensation….Give me more…but why & how??
• Do you have your PDP, IDP?
• Feedback should not be like GSM

Time to review your performance management system…

“You are asking employees to be collaborative and at another side everybody in the organization is assessed based on their individual targets. Where individuals are more focused towards their own targets, how can they be collaborative. In fact, “my targets” feeling is actually detrimental to team spirit.” One employee was challenging his supervisor during annual performance evaluation meeting. Superiors are superiors and they have explanation for everything, but when they don’t have any valid justification, they refer the matter to HR.

The supervisor also referred the employee to HR. When employees went to the HR Manager, she actually had no explanation either. The performance management system was established in the company almost few years back on the recommendation of some top consultant. When the system was implemented the circumstances were different, however there were no changes in the performance management system.

Above story is common in corporate world. Almost everybody follows the similar performance management system, same KRA and KPI system; based on “What should be achieved”. Some organizations add the element of “How it should be achieved” by introducing some competencies, capabilities and behaviour where they make the system more equivocal. At the end of the year. Off course they also don’t forget to classify their employees in forced distribution. By doing this all, they don’t even consider the nature of their business. At the end of the year, it becomes just one of the rituals and tool for giving salary hike to beloveds in the hand of line managers. You can see the examples where business is not doing well, but employees in team are rated excellent. Most of the times, HR is clueless as usual. Line managers are more smarter than HR to adjust any HR system as per their convenience.       

Deloitte consulting had published the research on global HR trends and clear cut assumption is related to performance management. It says,:    

“Today’s widespread ranking- and ratings-based performance management is damaging employee engagement, alienating high performers, and costing managers valuable time.

Only 8 percent of companies report that their performance management process drives high levels of value, while 58 percent said it is not an effective use of time.

Leading organizations are scrapping the annual evaluation cycle and replacing it with ongoing feedback and coaching designed to promote continuous employee development.”

We need the system where employee would be evaluated but also be fairly evaluated. However the system should be in align with your organizational business and culture. If your business needs more teamwork and collaborative thinking, you may have to choose the combination of team based and individual based targets and complimented by bahviour, but if your business needs “daily bout” like FMCG segment or media marketing,  you may choose to have more focus on individual targets.

I am not saying the whole performance management should be replaced, but we need to take the holistic approach as per the business need and cultural context of the organization.   

Also read Performance Rating Or Quota System....

Your views please….

Compensation….Give me more…but why & how??

There is lot of discussion and research on motivation of employees. What actually drive them to stay in the organization is always a question. Human being will have different aspirations, inclinations and drive in their life, however fundamentally they work for their livelihood. They want to make their and their family life easy and future safe and everybody should do that. During compensation review season, there is lot of discussion around water cooler. Salaries of friends are publicly discussed and sometimes people are unhappy with the rise others get and not what they get.  As per the Kenexa research only 51% employees in multinational companies feel that they are fairly paid.   

Managing underperformance…

“Sir, I did not even know, what are the expectations from me by my boss. And now, you people are telling me that my performance is not at par. If this is a case then why this was not communicated earlier. I would have made improvement.” One so called underperformer employee was complaining after he was rated below expectations after annual performance review sessions.

Managing underperformer is always challenging task. Sometimes even managers do not take concrete stand on this. However assume that you have everything in place and you identified underperformers in the organization, how you would deal with them?

What is underperformer?

 Underperformers are poor performers are those who fails to perform the duties as per the job profile and KPIs. But it is not only about the results, it is also related to non-compliance of set behaviours, rules and regulations and policies of the company. However underperformance is not the misconduct. Sometimes it is just making people aware about the same. Sometimes, expectations are not clear; they don’t know the dos and don’ts in the organization.

Reasons for underperformance

There are many reasons why an employee may perform poorly. Some of the common reasons are:

• An employee is not clear about expectations, performance goals and KPIs.
• Relationship with superiors and interpersonal differences
• Mismatch of the job profile and employee capabilities.
• Lack of personal motivation, low morale in the workplace and/or poor work environment
• Personal issues such as family stress, physical and/or mental health problems or problems with drugs or alcohol
• Cultural mismatch

How to deal with them? Is sacking them is the only solution?

Most of the time, poor performers are treated without logic. Sometimes manager does not want them in their team due to personal biases.  Direct termination in such cases is not the solution. Dealing with underperformance can be challenging and confronting for employees and employers alike, but it does need to be addressed. Managers need clear procedures, organizational support and the courage and willingness to manage the issue.

Methodological approach:

Identify the problem

It is important to understand the key drivers of performance or underperformance within the workforce. It is also important to correctly and specifically identify the problem.

Assess and analyze the problem

Once you identify the issue behind being poor performance, it is a time to analyze it how serious the problem is, how long the problem has existed, and how wide the gap is between what is expected and what is being delivered.

Once the problem is analyzed, call the meeting with employee to discuss issues.

Meet with the employee to discuss the problem

During the meeting the employee should be able to clearly understand:

•          what the problem is

•          why it is a problem

•          how it impacts on the workplace, and why there is a concern.

The discussion should end with the solid results and agreeable solution.

Jointly devise a solution

Where possible, it is important that a solution is jointly devised with the employee. An employee who has contributed to the solution will be more likely to accept and act on it.

When working out a solution, the employer should:

•          Explore ideas by asking open questions

•          Emphasize common ground and keep the discussion on track

•          Focus on positive possibilities, and offer assistance, such as further training, mentoring, flexible work practices or redefining roles and expectations.

A clear plan of action should be developed with the employee to implement the solution. This can be in the form of a performance agreement or action plan. A performance agreement or action plan can:

•          Reflect an understanding of performance expectations and what is to be achieved over the specified time period (performance improvement milestones)

•          Clarify roles and responsibilities of the employee

•          Include strategies for training and career development

•          Include timeframes for improvements (these may vary depending on the issue and needs of the business, however it is important to give an employee adequate time to improve their performance) reinforce the value and worth of the role being performed. 

A date should be set for another meeting with the employee to review progress and discuss the employee’s performance against the agreed action plan.

The HR and line manager should keep a written record of all discussions relating to underperformance in case further action is required. Generally, it may also be used as evidence if legal action is taken about the matter.

Performance Rating or Quota System

That was first Monday of May. I just finalized the list of officers and engineers who were selected for 2-year Executive Management Development Programme (EMDP) which was suppose to commence from Jun end. EMDP was sponsored by the company and was affiliated with renowned management institute.

Let me tell about the course.

Criteria for selection were as under:

1) Employee must complete minimum five years with the company.
2) He should be rated minimum “Meets Expectations (ME)” during last three years Performance Appraisal.
3) He should complete other training programmes related to the managerial and executive effectiveness. (These programmes are residential programmes from 3-8 days)

Methodology for selection was as under

a) Every year the list of the officers who fulfils above criteria is declared,
b) Management Institutes carries Entrance Test (Written, GD, Presentations and Interview)
c) The participants are assessed thoroughly.
d) Final list of successful employees is declared for the course

Employees who are selected for the course have to sign three years Bond with the company. During the course every participant has to give the presentation on the progress and he has to take one developmental project in a month. This course has to be done after officer hours. Management Institute has designed the programme, which suits the requirement of the company and its business.

30 Employees were selected for the course and I sent the list to my VP for his final approval.
I relaxed as I completed one task. The whole process was smooth. VP called me on phone and told that the list is fine with him. I just made a circular with details plan for communication. I save the file and was suppose to fire the print.

I saw Mr. Pradeep Jani coming towards me. Pradeep is a Sr. Manager and a very good Automobile Engineer who was handling the team of 10 engineers and around 150 blue-collar workmen on assembly line. He was known for his short temperament and for his reactive personality among all the employees.

“Come on Pradeep. How are you?” I asked
“You people are not making me fine” he responded
“What’s happened yaar, we are here for you, tell me what’s happened?
“Tell me what the criteria for the selection for EMDP?” he asked. I explained him whole process.
“If your process is so through why I was not called for the entrance test? I am an old employee, competed almost 11 years in the company, I am good engineer. My performance is good. Then why I was not called. Raman who is junior to me, new in the company got the opportunity?” He blasted on me.
“Cool down Pradeep. Let me check the case, will you take a coffee?” I got two cups from vending machine.
Pradeep was furious on me and was holding me responsible for not calling him for appearing for the test.
I check the personal history of Pradeep and told “Pradeep, I am sorry, but you are not consistent during last three appraisals”
“How? How you can say this?
I explained him about that data which was available on HRIS. Data shows that Pradeep was rated ME two times and one time RME, i.e. “Reasonably meets expectations”. It means he meets expectations, but need more consistent in his work. He agreed with the data available.
“Oh, Vinod, I was not knowing this fact that my rating will be linked everywhere. Otherwise I had not agreed with…..” He left the sentence in between.
“Yaa, tell me” I asked him
He was reluctant to tell. I decided to go in detail.

Problem

“When last time, our Performance Appraisal was done, I had a long discussion with Mr. Ramchandran (Pradeep’s immediate boss). He was fully agreed with the achievements I had done. However he told me that he had to rate the employees in different tiers (i.e. Performance classification). I was rated “ME’’ for last two years. He told that there would no effect on payouts (i.e. Performance Bonus) though the overall rating is “RME” This year he will rate me “RME” because he had decided to rate other and everybody should get the opportunity.”


Every department head has to follow the performance bell and during every appraisal, the employees would be classified in different tiers. The department head decided to classify the employees not on Performance but just on quota system. The purpose of the performance appraisal and classification is not at all achieved.

This may happened in most of the organizations. The line managers are responsible to break the system. Managers are for planning, organizing, assessing, for everything. It is a democratic way to rate the people in different performance tiers.

But then if something goes wrong the employees and even his line managers will first blame HR. I don’t know when the line managers will be responsible and accountable for the performance of their team?

(This story is reproduced. I had already published this story 2-1/2 years back on different forums.)