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]