Why performance management systems fail?

HR Perspective with MEMORY NGUWI

WHENEVER I have the oppor­tunity to present to HR pro­fessionals, I often ask whether their performance management systems are working. Almost 99 percent of those say their systems are not working. More than half indicate that they do not have a functioning performance management system at all. Those who have often ad­mit that it adds little value to individual or organisational performance. Over the years, through consulting, research and helping organisations design per­formance management systems, I have identified several issues that HR profes­sionals need to address.

Job performance has two important dimensions: task performance (results) and contextual performance. Task per­formance refers to the results or objec­tive outputs an employee is expected to deliver. Contextual performance refers to behaviours that support effective in­dividual, team and organisational per­formance. For example, collaboration is an important aspect of contextual perfor­mance in roles where employees must work together to achieve results. Other relevant behaviours may include helping colleagues, sharing knowledge, taking initiative and supporting team objectives. The key is to identify and assess only those behaviours that genuinely contrib­ute to effective performance in a partic­ular role. Not every behaviour is equally important across all jobs.

We have decades of solid scientif­ic research in psychology showing that goal setting can improve performance. The challenge is that many organisations complicate what should be a relatively straightforward process. My recommen­dation is to have between five and seven high-priority goals for every employee, from the CEO to the lowest level of the organizational hierarchy. The more goals you add, the greater the risk of diluting attention and effort.

Aim for a one page performance ap­praisal form. For each goal, capture only three things: the goal, the KPI or perfor­mance measure, and the target. Always start the goal statement with an action verb. Goals can have quarterly or annual targets.

Start with organisational goals owned by the CEO and cascade them to depart­mental heads, section heads and even­tually individual employees. Every em­ployee should understand how their goals contribute to higher level organisational goals. For large teams performing inter­dependent work, team performance goals may be more appropriate than individual goals.

Research indicates that participation in goal setting is not necessarily a require­ment for goals to improve performance. Goals assigned by managers can also be effective. What matters is that employees understand the goals, accept them, have the capability and resources to achieve them, and receive appropriate feedback. Managers must explain the rationale be­hind each goal and how achieving it con­tributes to departmental and organisation­al performance. Employees should never be left wondering why they are pursuing particular targets.

Feedback is important, but more fre­quent feedback does not automatically translate into better performance. Poor­ly delivered feedback can actually un­dermine performance. Give employees enough time between feedback sessions to implement what has been discussed and demonstrate improvement. Feedback should focus on performance, not person­al attacks. Negative feedback delivered as a personal attack can remain in an em­ployee’s memory for years and damage the relationship with the manager. The purpose of feedback is to help employees improve, not to humiliate them.

One practice I regularly question is the arbitrary allocation of weights to per­formance goals. In many organisations, managers simply assign percentages without a defensible framework for de­termining the relative importance of each goal. I have not seen sufficiently convinc­ing evidence that the routine use of arbi­trary goal weights improves employee performance.

If your organisation decides to use weights, develop a consistent framework that reflects the relative contribution of goals to organisational results. Avoid leaving individual managers to invent weights without clear principles. The relative importance of goals should be determined through a defensible process rather than arbitrary judgement.

This is one of the most poorly de­signed aspects of performance manage­ment systems. For objective performance measures where a higher result is better, a simple starting point is to calculate an achievement ratio. The formula is:

Achievement Ratio = (Actual Perfor­mance ÷ Target Performance) × 100

Calculate the achievement ratio for each goal and, where the measures are suitable for aggregation, average the ratios to determine overall goal achieve­ment. Measures where lower results are better, such as costs, defects and ac­cidents, require a different scoring ap­proach. You must also establish rules for exceptional results and targets that should not be exceeded.

For contextual performance, devel­op clearly defined behavioural anchors. Employees and managers must know upfront what good and poor performance look like. This reduces ambiguity and im­proves consistency in assessments.

For behaviours that can be observed by several people, I recommend consid­ering 360 degree assessments involving supervisors, colleagues, subordinates where applicable, and other relevant con­tributors. I prefer excluding self ratings from the final score because they intro­duce an additional source of potential bias. However, the assessment must be properly designed, and the different rat­ers must have sufficient opportunity to observe the behaviours being assessed. Technology has made collecting and con­solidating these assessments much easier.

From my experience, quarterly per­formance reviews offer a practical bal­ance between monitoring performance and allowing employees sufficient time to deliver results. Agree on annual goals at the beginning of the performance cycle and break them down into quarterly mile­stones. In Quarter 1, Quarter 2 and Quar­ter 3, assess progress against the agreed targets, identify performance gaps and agree on corrective actions. In Quarter 4, conduct the final assessment and consol­idate performance for the full year. This approach gives managers an opportunity to address performance problems before the year ends instead of discovering them during the annual appraisal.

The purpose of a performance man­agement system is not to produce ap­praisal forms, calculate ratings or satisfy an HR policy requirement. The purpose is to improve individual, team and or­ganisational performance. If your perfor­mance management system does not help employees understand what they must deliver, track their progress, identify per­formance gaps and improve their results, then it is not serving its purpose.

My advice to HR professionals is to simplify your systems. Focus on a few important goals, measure results ob­jectively, assess relevant contextual be­haviours, provide useful feedback and hold managers accountable for helping their teams perform. If you get these fun­damentals right, you stand a much bet­ter chance of developing a performance management system that actually adds value to the business.

l Nguwi is managing consultant at In­dustrial Psychology Consultants (Pvt) Ltd. Email mnguwi@ipcconsultants. com

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