I've been working on analysing how our various marketing channels work for us.  It was a great reminder of the need to measure everything!  Its all very well having a feel for it, but a bit (or a lot) of data is very very useful.  The next trick of course is to have that data in an organised, simple, to-hand format that you can readily review and make decisions from.

Not hard to see the parallels with 360 degree feedback or performance review.  If I would like to discuss performance or development of an individual, some data (not necessarily numerical) is a great starting point.  Gut feel only gets you so far.

The work coincided with handing over a draft competency framework to a client.  We're putting a lot of effort in to asking the right questions of the client's managers.  They'll be using the framework specifically for a 360 degree appraisal process and it will be more than helpful if we get the measurement framework right first.

Brendan

Probably the most common section on a performance appraisal form is an objectives section.  Normally in two parts - review of past year, and setting of new objectives - and designed to get targets set against which the next appraisal can be assessed, I would say 90% of forms we see have this section.  But why?  A previous post on goal setting gives the background to how this section came to pass but we find a number of roles for which objective setting doesn't work that well.

There are two main categories of role that don't fit to the objectives structure.  First, are constant repetitive jobs.  Call centres, manual workers, programmers.  Most of these roles have their objectives built into the day-to-day role.  The objective is to do the day-to-day job correctly.  These jobs are better assessed by competence (can I do it) and key indicators (did I do it).  Objectives are useful for people who have a wider role within the organisation or have project work as part of their remit - which could of course include some of the examples I have given.

The second category is fast moving industry roles.  I once ran a call centre operation.  While I had an objective to answer 95% of calls within 15 seconds, frankly that was an hourly task not something I could achieve over a year - it was my job, not an annual objective.

I would rather see regular competency and indicator based assessments than force in an objectives section where it doesn't fit.  The key aim is to use the performance appraisal process to help people understand how they are performing, give guidance on improvement, and generate development plans that can be supported and implemented.

Brendan

One of my professors on my MBA was very concerned by managerialsm.  He had an ingrained suspicion of managers dictating what people should do.  He was scathing  on the topic of managers driving people's behaviours.  I always suspected that he saw much of what happened in business as a necessary evil.

One interesting area is the assessment of values during a perfomance appraisal - is the individual exhibiting the desired behaviours of the organisation?  The managerialistic concern is that the organisation is trying to impose its behaviours on its people.  Some indentikit indivual is turned out with individualism frowned upon and positively discouraged.

In theory I share the concern.  Diversity is beneficial both as a public good and to an organisation.  Identikit thinking leads to mediocrity.  That said, most organisations espouse a set of values that most people can sign up to.  So, as part of the performance appraisal session it strikes me as a reasonable topic of conversation.  Indeed, should a manger feel that an employee is actiing in a manner that is outside of the values or is causing problems for others due to their behaviour then it is incumbent on them to raise the issue.  The trick is to ensure the values are not a straight jacket.

At an organisation level it is useful to know where the values are less embedded than elsewhere.  Training courses around values when done properly can ensure that the appropriate culture for that industry and this organisation are developed.

So, while I shared some of my former professor's concerns, my practical experience with performance reviews is that including a values section is useful for all concerned.

Brendan

Just before leaving corporate life I had implemented a new performance appraisal process and a new pay structure.  It was ok - nothing more and I was frustrated by its impact.  Not long after, as part of my MBA, I read Herzberg's work (that he wrote it over 30 years before I was making my mistakes was just a tad frustrating!) on motivation.

I know some readers will be familiar with his findings but they are worth being reminded of anyway.  Herzberg found that hygiene factos such as money, work conditions, company policy etc. would make people unhappy if they were wrong but were not motivational.  Once you had satisfied someone's pay demands they would not be motivated by more.

Instead, motivators come from factors intrinsic to the job:achievement, recognition, personal growth, responsibility.

Performance related pay offers an opportunity to create a fairer pay system - with a number of caveats.  But, it should not be seen as a motivational tool.  Rather if you introduce a fair performance related pay scheme then you are likely to not demotivate.

The flipside of this discussion is that when designing the performance appraisal process and performance review forms you have an opportunity to cover achievement, recognition, personal growth, etc.  So a well designed and implemented performance appraisal process can play a part in motivation and support managers in building a motivated team.

Brendan

One of the main elements of performance appraisals is objective setting.  Objective setting falls out of goal setting theory which states that people who are set specific, difficult goals outperform those that are not set goals at all or are set general goals like "do your best".

Where appraisal is linked to pay or where there are real consequences to performance appraisal whether in terms of tangible or intangible rewards it is of course in the individual's interest to have a lower goal that they exceed.  Goal bartering was a large part of my annual efforts in a previous role in a large corporate.  Knowing that bonuses (and sackings) were driven by whether we hit target, all directors and senior manager's put great efforts into trying to get a low target.  Unfortunately, our Chief Executive was all-knowing and master of the black arts and would invariably set a genuinely difficult but achievable goal.

If there are no consequences - positive or negative - to the performance appraisal process then it can be ignored.  If however, the consequences are strong then there is a tendency for all concerned to moderate their goal setting based not on whether the goal is a stretch but on ensuring it is achieved. 

One route around this is regular goal setting rather than annual goal setting as is often practiced with annual performance reviews.  If objectives are set annualy then in many organisations they are arbitrary.  If they are set monthly then there is excellent data on which to set the goal (current performance) and a realistic timeperiod over which to assess performance.

It may not always be applicable but it is regularly a better place to start than an annual target.

Brendan

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Clearly an outcome of our performance appraisal software is often a rating that our clients use for pay or bonus calculations.  This use of our services together with a strong personal interest in the effects of bonuses on people's motivations keeps me looking out for evidence on whether performance bonuses work and how they are perceived.

In the Observer (UK Sunday paper) yesterday there was a small article highlighting that particular government departments had paid average bonuses of £19,000 per annum to middle management.  Now the article was not linked to performance appraisals nor would you expect it to be but the thrust of the article was that in the current climate - both economical and politcal - these bonus payments were high.

The question for me is are they truly bonus payments - are they somehow linked to performance (individual or organisational) over and above the call of normal practice.  In a business, I believe it is right that if the organisation has a great year with great profits that everyone should share some of that financial success with a bonus payment.  Why should the shareholders get all of the rewards?  In the public sector this is harder to establish.  I suppose efficiency gains could be used but that appears a dangerous path - cutting costs is easy, but sustaining a service at the same time is harder.

My other concern drives from whether a bonus is truly motivational.  I suspect it rarely is.  In general people in the private sector have greater job insecurity and so higher risk which leads to some idea that a bonus in the good times makes sense but I believe it rately motivates them on a day-to-day basis.  In the public sector, those risks are reduced and a general bonus for all is less appropriate - if there is money around put it in the basic pay and then use management methods to ensure effective performance.

I have steered clear in the above analysis of individual's bonuses.  Performance appraisals often look to determine who should get what bonus but my experience is that organisational influences drive the majority stake in performance review bonuses anyway.

Brendan

Our software allows our clients to change the text within the system - and all of our clients have more than a preference about whether their process is called performance appraisal, performance review of performance evaluation.  I guess mostly it is history and people become used to a particular term.  But, just for a moment I was thinking through which one is the one I would use.

I concluded I didn't like any of them!  First I think they are all backward looking and that is only a part of the process.  Second, appraisal and evaluation are too hard - they make me, the appraisee, a subject of the appraiser.  Generally, they are limiting - not describing the whole of the process or document but just a small part of it.  

I actually like "performance discussion".  But, I suspect that is too soft and doesn't imply the importance (do tell me if this blog post sounds like something from Goldilocks.)

I'm off on a search for terminology around this document and process.  Is performance discussion the best I can come up with?

Brendan

Let's contrast Neil Armstrong, a sports person (footballer, baseball player), and a city trader and whether bonuses would work.

General idea of a bonus is that you get some extra money for hitting some sort of target (cheap jokes about bankers would be easy to write here).

But I often wonder whether they work.  I know they are nice to receive - but do they generate additional effort to get them?

Let's take our list

Neil Armstrong.  Now, I don't know whether he got a bonus for walking on the moon but I'd bet that he would have been no more or less motivated by a financial incentive.

A sports person.  Often sports people are paid win bonuses.  If they win a game they get a bonus.  Strikers in football are often paid more for scoring goals.  I've never understood that one.  Do you change the way you play for the bonus?  Perhaps in a meaningless end of season game, but really does it work?

A city trader.  Now, on a principle level I can see that a city trader's personal goals are likely to be money driven - and so a bonus is likely to motivate them.  But, motivate them to do what?  It needs to be a very well-crafted bonus system that does not drive short-term inappropriate behaviour.

I have rarely seen or experienced a truly motivational bonus structure.  In looking at performance appraisals, I'm starting to craft my thoughts on how a bonus system could work both for the organisation and the individual.  A performance review against objectives may form part of a sensible process.  But its taking a lot of thinking to really ensure that the organisation get what it wants and the individual is not manipulated away from better behaviours than the bonus is likely to generate.

Brendan

A continued research effort around our performance review whitepaper led me back to a model we work with to describe how performance related pay fits in with performance appraisals.  The model is built from a range of standard theories - Vroom's expectancy theory, Locke's goal setting, Porter/Lawlers views on intrinsic and extrinsic rewards and others.  Diagramatically it is represented as follows



The model demonstrates the basic "line of sight" required for performance related pay to work.  If I increase my effort, then my performance should increase which lead to rewards that are aligned with my personal goals.

To achieve the link between effort and performance we need : effective goal setting for alignment, we need the opportunity to deliver that performance (e.g. the external market allows it) and the ability (often where training plays a part).  We also need to be sure that our role is clear - we don't want to be doing the wrong thing!

That performance is then rewarded - either through a feeling of a job well done, or other intrinsic rewards or through extrinsic rewards such as pay and bonuses.  That reinforcement (think Pavlov's dogs) makes us want to do it again!  Finally those rewards need to be linked to something we are seeking - our personal goals.

When put like this it leaves me a little cold and has a large company imposing managerialistic processes feel about it.  But, if you are implementing performance related pay it forms a very useful checklist and model to have in mind as to why and how you link the sections on the performance appraisal form with the pay and bonus and of course why you are doing performance appraisals at all.

Brendan

I'm putting together a white paper on performance appraisals.  Together with researching it is a great opportunity to stop for a moment and think through the performance appraisal process.

Just to keep myself fresh as I approach the topic I've looked at thinking it through from the appraisee's perspective.  And drawing on my time in corporate life and experience with a variety of clients looked at what does the appraisee want to discuss.  I've come to the following conclusions on what I wanted and what I have observed others to want.

(Please note, I am currently thinking more broadly than some 1 hour annual appraisal)

• How am I doing?  I was always very self-motivated but I did want to know my managers' and the organisation's view of how I was doing
• Am I doing the right things?  I probably wouldn't have expressed it that way - but you do sometimes get these moments of doubt at work that you may be barking up the wrong tree
• What am I going to be doing next?  I hated stagnating - I always wanted to have something different to do and something challenging
• Is there any relevant training I can access?   Most of us want to learn.
• How are things going more broadly?  I always found the appraisal time a useful moment to check out how my manager was getting on, whether there were any changes afoot.

When I was in HSBC I also wanted to know my performance grade - but I only wanted to know that because I wanted to know my pay rise.  Frankly I used to dismiss the grade as a poor method of representing a year's work.

When I look at this list I notice that it is easy to fit these appraisee needs into the appraisal process.  And you can even design performance appraisal forms that hint and nudge the appraiser to give this information.

Not a bad perspective to have taken for a while - right, back to the research.

Brendan

This question came up in a discussion group I was visiting (sorry, can't remember which one!).  You can see the theory - really the appraiser and appraisee should be big enough, brave enough, and knowledgeable enough to work out what needs to be said and what needs to be recorded.

My heart likes this - it appeals on many levels.  But my head spots the flaws.  First, the performance appraisal process has a number of objectives and some of them are organisational.  This is fine, important and easily justifiable.  The orgnisation needs some information from the process that it can analyse and a big blank piece of paper is going to make that difficult.

Second, I'd like to think that HR professionals have thought about the performance review process more than the appraiser and appraisee.  If they have, then I bet the appraiser and appraisee would like the benefit of that knowledge and a well constructed form with useful communication is the best way of that knowledge infusing the performance appraisal process.

I'm sure this question was posed to be provocative.  Examining it though quickly advertises to you the role that HR should be playing in the design of a great performance appraisal form.

Brendan

I just responded to a post on CIPD regarding designing a performance apprasial form.  Just in case you don't avidly read CIPD forums ! I thought I'd outline my response here.

"In broad principle, I would follow the following process

• What purposes has the form got to serve (rightly or wrongly the performance appraisal form is important to the organisation for a variety of reasons), e.g.

• Record objectives for later reference
• Cascading of organisational objectives / goals
• Identify individual training needs
• Assign a grade for performance related pay purposes
• Identify the competencies that you wish employees to be strong in
• Gain c.v. like information for internal recruitment
• Identify high flyers etc.

• Decide now whether the form/process can deliver all of this
• Begin to design the form content - go for completeness initially.  I'd be surprised if a couple of other organisations wouldn't give you their forms to give you a flavour of what people capture and to get some ideas going on how best to garner the infromation
• Look more at the performance review process than the performance appraisal form.  The form only needs to capture the salient parts of the conversation on performance, objectives or development.  So, a nicely laid out form with a couple of opportunities to add free text is more likely to be completed than endless free text options.
• Get a small number of people involved to review your proposal - I don't know the size of your organisation.  If it is large, then do this earlier
  • HR
  • Training
  • Manager(s)
  • Appraisee(s)
• Start to look at the communication process....ok, I'm starting to go off your original topic."

I'm currently writing a white paper on performance appraisals - you can register to receive our newsletters from this blog or our website - and this will be a starting point for me.  It doesn't feel complete yet, but it's not the worst start on getting the performance review form designed.

Brendan

We are in the midst of a popular time for annual appraisals at the moment; we see a sudden uplift in interest in creating efficient on-line performance review processes.

As ever, we advise and guide clients as to what good practice looks like when conducting the annual reviews, but increasingly we are having discussions around what should happen in-between the annual reviews....i.e. those 12 months from one review to the next...!

Not unsuprisingly, we suggest that there should be more frequent reviews over the course of the year, coupled with more forward looking conversations about what needs to happen in order for performance to improve.

Invariably for performance to improve, there has to be feedback; there has to be comment on how someone is performing in the moment, in order to raise their self-awareness and enable them to decide to do things differently.

If someone you were coaching was running a marathon and they wanted to achieve their best possible time, how often would you give this feedback? At the end of the race or as they ran?

I believe that simple is a good thing.  Google talk about simplicity in their thoughts on user interfaces ....Here is a quote from their website

A good blog post at KnowHR recently on performance reviews, which hgihlighted a recent publication offering a whole series of stock phrases for line managers to use in the annual appraisal.

I can understand the need to support line managers to help them conduct constructive performance reviews, but feel that offering 'phrases to memorise' send out the wrong message.

The review is meant to a process which leads to a meaningful conversation, just as any other conversation should be between an employee and their line manager.

Far better to offer tips, advice and guidance on how to have a meaningful and authentic conversation as two adults then to focus on getting through the process with a 'pick & mix' list

In my corporate life I was very used to an annual grade on my performance appraisal.  Indeed, many years on I can still remember some of the grades I got - I certainly don't remember my objectives or development plan items!  The annual grade is very common but, of course, very controversial.

Commonly we see two sorts of grade.  A numeric grade (1,2,3,4) or a narrative grade (Strong performer, Competent, Development required).  What we see less commonality on is how this grade is determined.

In a forthcoming white paper on performance appraisals I will spend some time on the merits or otherwise of the annual grade.  For now, I am simply looking to describe options for creating such a grade.

End of the form grade

Still the most common, there is a simple drop down box of options that the manager selects from.

Calulated average

Seemingly growing in popularity, we see grades calculated from other ratings on the annual performance review form, or built from grades in interim reviews across the year.

Suggested calculated average with override

A late entrant, but increasingly a request, is to calculate an average within the system and then give an option for the manager to override the calculation - normally with a forced narrative option to explain the discrepancy.

Forced distribution

All of the above options can be subject to a forced distribution (e.g. 20% of people will be an A, 40% will be a B, etc.).  Some form of scoring drives this distribution which can be across the whole organisation or across departments.

360 degree feedback influenced

From scoring on 360 feedback, the annual performance review grade or evaluation is influenced or calculated.

Our view

I have to say our view is not set in stone here.  In an ideal world I suspect we would avoid the annual grade - it can be distracting and it can be more controversial than it is useful.  But, if you are going to run performance related pay (a debate in itself) then a grade is likely to form an element of the review process.  I believe then that having followed a sensible process, managerial discretion is required on the grading.  Whether that is assisted - through averaging - isn't actually that important.  

With such an important topic area, training is the key to ensuring the managers' are able to apply the chosen process in a fair manner and in a way that achieves the performance appraisal process objectives.

Brendan

I have a fledgling thought about the merits of separating the annual performance appraisal process from any personal development work that comes out of a competency based feedback process - such as 360 degree feedback.

The thoughts come from the different mindset that I have seen in people when they are being assessed - particularly with a link to pay, compared to how they approach a conversation about their personal development.

I suspect that to make this effective you would have to separate that development that is linked to targets/goals and that development that is linked to personal capability or competence on a broader level.  The former will often fall out of an objective setting exercise whereas the latter tends to fall out of 360 feedback.

We notice a number of clients making 360 feedback part of the performance appraisal process - some during the annual review but many deliberately at a different time of the year.  I am coming to favour the two processes not being linked.

Brendan

I've been doing some research for a white paper we are writing on Best Practice in Performance Appraisals.  I came across an article written for a 2004 conference on performance appraisals.

The authors suggest that performance appraisals are often asked to fulfill the following goals

• feedback
• coaching
• goal setting
• skill development
• pay determination
• legal documentation
• employee comparison
• layoff selection

We often see these composite forms.  If this is all part of a one-off process then I would agree with the authors that the annual performance review is going to struggle to cope.  That said, all of these items look valid to me.  So, we need to tackle them but not in one go.

We often advocate separating forms out and having different sections stand on their own.  Skill development (or training needs) can stand alone and be completed perhaps initially as a follow on from an annual review but then updated throughout the year.  Development / feedback can be handled as part of a 360 degree appraisal process outside of the main annual performance appraisal.

As with our 360 degree appraisal white paper which you can register for from our website, we will make our performance appraisal white paper available to all of our newsletter subscribers.  More research to be done before I'm at that stage though!

Brendan

 A recent survey published in Personnel Today highlighted how HR strategy is changing in the current climate with 72% prioritising performance management in businesses where changes were being implemented.

Those organisations that were adapting to the new environment, had shifted their emphasis from recruitment to retention - despite the overwhelming talk of organisations shedding jobs, there is a real effort for many companies to ensure they manage their existing employee base to best effect whilst imposing a recruitment freeze.

This means effective performance management, performance reviews, regular feedback and a need to fully engage employees in order to maximise their contribution and retain them.

The need to identify talent within an organisation, and then to successfully manage, develop & retain that talent should always be a priority; the current situation has simply brought this more sharply into focus.

I recently attended an HR event where the topic was 'Leading HR in a recession'; a key point for me was that accurate employee performance appraisal information was critical in helping organisations through the downturn.

Hard choices will have to be made and priorities decided upon, but they should not be to the detriment of the organisation in the long term.

A way to ensure this is to base decisions upon good objective feedback (360 feedback or otherwise) and objective performance data...or as near to that nirvana as you can get.

Taking a more robust approach to performance management has never been more important as companies may have to face doing more with less.