I'm Sorry I Broke Your Company: When Management Consultants Are the Problem, Not the Solution 3/6

Part 2.

How Performance Management Demoralizes the Performers

Perf Mgmt systems only enforce the strategic objective of implementing perf mgmt systems

  • Human asset mgmt. (aka Talent mgmt.) includes: perf mgmt., career planning, competency development, incentive comp, leadership development, career / leadership coaching, succession planning and learning mgmt.

  • Replacing facts about the “war for talent” with emotional urgency.

  • Performance management systems (rooted in management by objectives) tie comp to goal achievement (and competencies and personal development).  Pay for performance.

  • Performance management as an activity doesn’t contribute to developing new products / services and helping customers. And it can take 2+ months/year.

  • What started with a strategic goal of having aligned and motivated workforce in practice has the opposite effect.

  • The key real goals of such systems and processes is managing staff costs.

Job levels and pay grades

  • Look logical, but can easily become inconsistent due to different business lines or M&A. Managers on the same level may be completely different.

  • Creating standards for titles and job levels is a very political and emotionally charged process.

  • Can’t get everyone happy. But that’s just the start.

  • Synchronizing performance appraisals and ratings is hard. Requires rigorous management training and cross-functional calibration.

  • Properly splitting large corporate goals into individual goals is hard.

Why this doesn’t usually work

  • Goal setting is never consistent, some prefer easily achievable goals, some goals can’t be reliably measured.

  • Performance is subjective, too. Meeting or exceeding expectations?

  • Goals can’t be set for too far in the future; constant updating them is time-consuming (need approvals), or goals become the reflection of achievements.

  • Goal setting/reviewing/feedback is lots of paperwork, which needs to be managed.

  • As a result, managers have less time to manage.

No amount of effort will ensure fairness in an unfair process

  • Not all goal responsibilities can be SMART.

  • Flexibility of activities (including customer service) is not SMART.

  • SMART goals don’t address the difference in managers’ expectations.

  • Mandatory ranking makes many employees disgruntled as it doesn’t match their idea of fairness.

  • Managers stand for their employees (mine vs yours), and employees are victims of their managers who can’t argue.

Biases in evaluations

  • Favouritism – we give higher ratings to the people we like.

  • Shared values and social styles – we like people like us, better ratings [MK: ubiquitous in board reviews]. Different judging criteria 

  • Age/race/sex discrimination – see above.

  • Halo/horn effect – good or bad performance is extrapolated to performance in other areas.

  • Our own treatment – we use the ratings we receive as the baseline for the ratings we give to others.

Let me tell you what I like and don’t like about you

  • Appraisal meetings are paternalistic, based on the assumption that the manager has superior judgement.

  • An employee can’t wait to get to the rating and ignores the info before that.

  • Bell-curve ratings don’t match employees’ views of themselves [cognitive bias].

  • “Above average” is an insult to top performers.

  • Performance is not improved in this process, people get demoralized.

  • Performance is improved by the coaching and in daily interactions with other people.

  • Don’t replace relationships with the process.

We’re not only in it for the money

  • Performance management is about money allocation. It’s compensation management.

  • Financial rewards make people less creative and enthusiastic about their work, destroy desire to learn.

  • Focusing on immediate task switches off our lateral thinking.

  • Rewarding people with stock options or stock may not be so motivating as the stock price depends on the market.

  • One of the solutions is an above-average salary and a simple profit sharing plan.

  • Smart managers and staff can find better use for this saved time to improve their performance.

  • [MK: a big argument for flexibility and agility, getting to individual assessments]

Part 4.