Performance management survey

ResearchS O C I E T Y F O R H U M A N R E S O U R C E M A N A G E M E N T

Performance Management SurveyPerformance Management Survey

1

3 About This Report

4 Sponsors

5 A Message from the SHRM Foundation

6 Executive Summary

7 Survey Results

7 Overall Characteristics of Performance Management Systems

7 System Objectives: Employees Come First

8 Satisfied With Appraisals; Dissatisfied With Development

9 More Executive Support Required

9 Top Effectiveness Measures

11 System Components Are Integrated

11 Planning and Evaluation

11 Performance Planning and Evaluation: Executives Have the Edge

12 Development and Career Planning: A Need to Focus on the Future

13 Development

13 Classroom Training Popular and Preferred

14 The Fully Developed Executive?

15 Lack of Training in Feedback and Coaching

15 Rewards: Performance Pay Common At All Levels

15 Technology Industries: Champion for Non-Exempt Employees

16 The Future: More 360-Degree Feedback

18 Conclusion

19 Demographics

20 A Message from Personnel Decisions International

21 Sample Questionnaire

26 Appendix

SHRM®/ PDI Peformance Management Survey

© Society for Human Resource Management and Personnel Decisions International

ContentsContents

3

T he Society for Human Resource Management(SHRM), with partial funding from theSHRM Foundation, and Personnel Decisions

International (PDI) co-sponsored the 2000 Perfor-mance Management Survey to gather information onperformance management in today’s workplace.The following report provides an analysis of the sur-vey results, based on the responses of 480 humanresource (HR) professionals.

The traditional focus of performance managementsystems has been on performance planning and evalu-ation, rewards and discipline. In developing this sur-vey, SHRM and PDI decided to focus on a more con-temporary viewpoint of performance management. Inaddition to the traditional aspects, this survey coversdevelopment and career planning, feedback, coach-ing, training and development methods.

The study objectives were to:• measure current and best practices in perfor-mance management;• measure how organizations view the effectivenessof their current performance management systemsoverall and of specific performance managementtools; and• forecast where activity will be shifting in the nearfuture.

SHRM and PDI decided to survey SHRM mem-bers in organizations that were most likely to haveperformance management systems in place–thoseorganizations with 100 or more employees. In July2000, questionnaires were faxed to 2,710 SHRMmembers: one-third each from organizations with100-499 employees, 500-2,499 employees and2,500+ employees. Respondents could choosebetween two survey completion methods: paper oronline. Of the 480 HR professionals responding tothe questionnaire, 75% completed the paper surveyand 25% completed the web survey.

The survey report contains numerous tablesand charts that capture the participants’ responses.Several comparisons based on organization size aremade throughout the report. To see key data cate-gorized by organization size, please visit either ofthe following web sites: www.shrm.org/surveys/ orwww.personneldecisions.com. In addition,throughout the report readers are posed questionsabout their own organizations’ performance man-agement practices in order to enhance the useful-ness of the survey results. Also, the report includesa copy of the survey questionnaire and an appen-dix that contains white papers relating to perfor-mance management.


About This ReportAbout This Report

4

T he Society for Human Resource Manage-ment (SHRM) is the leading voice of thehuman resource profession. SHRM pro-

vides education and information services, con-ferences and seminars, government and mediarepresentation, online services and publicationsto more than 140,000 professional and studentmembers throughout the world. The Society,the world’s largest human resource manage-ment association, is a founding member of theNorth American Human Resource ManagementAssociation (NAHRMA) and the World Federa-tion of Personnel Management Associations(WFPMA).

The SHRM Foundation is a non-profit organiza-tion established in 1966 to fund and supportapplied research, publications, scholarships andeducational programs to help HR professionals andtheir employers prepare for the future. The Foun-dation’s goal is to continuously improve standardsof practice and performance for the HR profession

and to help HR leaders stay current with the latestdevelopments and trends.

Personnel Decisions International (PDI) is aglobal human resources consulting firm. PDI hashelped client organizations meet their businesschallenges through integrated solutions to humanresource needs since 1967. PDI works in partner-ship with clients to:• define successful performance and identify the

capabilities needed to achieve it.• measure performance and capabilities, and evalu-

ate potential.• develop the capabilities needed to be successful–

now and in the future.PDI’s goal is to help clients build effective organiza-tions and gain competitive advantage through wise-ly choosing and effectively developing their mostimportant asset–people. For more informationregarding PDI, see “A Message from PersonnelDecisions International” following the survey reporton page 20.

A Report from the SHRM®Survey Program

SponsorsSponsors

5

I t’s a great time to be a human resource profes-sional. Companies today recognize that peopleare the competitive advantage, and HR is being

asked to play a strategic leadership role in shapingtheir organization’s future. To do this, humanresource professionals will need to continuallyexpand their knowledge and competencies. That’swhy the SHRM Foundation is so important today.

Investing in Knowledge For Your Future The SHRM Foundation is a 501(c)(3) non-profitorganization that promotes research and develop-ment in the human resource field. The SHRMFoundation advances the profession and increasesthe knowledge and effectiveness of humanresource professionals through its funding of lead-ing-edge human resource research, publicationsand educational initiatives.

Sponsorship of the SHRM® Survey Program As a sponsor of the SHRM® Survey program, theSHRM Foundation is able to provide timelyresearch findings on important issues to SHRMmembers on a regular basis. For example, the fol-lowing SHRM and Personnel Decisions Internation-al (PDI) survey on performance management sys-tems offers rich insights into the importance ofemployee-oriented performance systems in today’shighly competitive work environment.

The survey findings reveal that employees todaywant to know the answer to the question madefamous by Ed Koch, former Mayor of New YorkCity: “How am I doing?” Like Koch, employeeswant feedback about their performance and whatthe organization expects of them. Furthermore,employees want information about what they needto do to develop as leaders and to increase theirvalue as employees. This important survey providesfood for thought for HR professionals especiallythe inclusion of development as part of perfor-mance management systems.

Foundation-Related Research ProjectsThe SHRM/PDI survey on performance manage-ment systems is part of the larger human resourceissues on productivity and career development. TheSHRM Foundation is particularly interested inunderstanding more about the attitudes of employ-ees today, especially in relationship to the organiza-tion. For example, here are two Foundationresearch projects currently underway that explorethis issue in more detail:

CChhaannggiinngg NNaattuurree ooff tthhee EEmmppllooyymmeenntt RReellaattiioonnsshhiipp: byLynn M. Shore, Ph.D., Lois E. Tetrick, Ph.D., and SandyJ. Wayne, Ph.D.In the competition for talent, it is increasingly importantfor organizations to understand the changing nature ofthe employment relationship. The employment relationshiprefers to employees’ perceptions of what they owe the organi-zation and what the organization owes them in return.The proposed research examines how HR practices helpform the employment relationship, which in turn, influ-ences organizational outcomes (commitment, performance,citizenship, turnover).

VVoolluunnttaarryy TTuurrnnoovveerr,, WWoorrkkffoorrccee PPrroodduuccttiivviittyy aanndd OOrrggaannii--zzaattiioonnaall PPeerrffoorrmmaannccee:: IInnvveessttiiggaattiinngg tthhee RRoollee ooff HHRR MMaann--aaggeemmeenntt IInnvveessttmmeennttss:: by Jason Shaw, Ph.D. This research project investigates the relationships betweenvoluntary turnover and organizational performance in asurvey study of 1,200 motor carriers, supplemented by twoarchival data sources. Results will enhance the scientificknowledge base and provide value for practitioners mak-ing HRM decisions that impact bottom line performance.

For More InformationContact the SHRM Foundation for more informa-tion about these and other research projects by e-mailing [email protected]. Thank you for yoursupport of the SHRM Foundation and your com-mitment to excellence in the profession.


SHRM FoundationSHRM FoundationA Message from theA Message from the

6

T he 2000 Performance Management Surveyshowed that performance management inorganizations is evolving from a system domi-

nated by the performance appraisal to a system thatfocuses on employee development. However, thetransition is far from complete. Stronger executivesupport for performance management andincreased employee participation in developmentactivities is needed in order for performance man-agement systems to truly become a tool to helpattract and retain talent.

Overall Characteristics of Performance Management SystemsRespondents gave top priority to performancemanagement system objectives focused onemployees rather than managers. Respondents were significantly more satisfied withtraditional system components — performance planning and evaluations, discipline—comparedwith developmental components — leadershipdevelopment, development planning, 360-degreefeedback, and coaching. Executive support for performance management was lacking. HR professionals reported that many executives and senior managers did not endorseor even use their performance management system.

Planning and EvaluationSeven out of 10 respondents reported that theirorganizations had written performance plans formost executives. Nearly two-thirds (64%) had perfor-mance plans for most exempt employees, and nearlyhalf (45%) had plans for non-exempt employees.

Seventy-five percent of participants reported thatmost of their executives had performance goalslinked to operating results, compared to 36% forexempt employees and 17% for non-exemptemployees.Development planning and career planning effortswere limited. Twenty-five percent of participatingorganizations had written development plans for allexecutives, and a mere 8% of respondents’ organi-zations had career plans for all executives.

DevelopmentClassroom training was the most popular methodfor professional development. Eighty-six percent ofrespondents’ organizations conducted in-houseclassroom training and 84% had employees partici-pate in external classroom training. On-the-job training and in-house classroom train-ing were rated as the most effective professionaldevelopment methods. Independent study—bothtraditional and online—was viewed as the leasteffective development method.Respondents reported that a lower percentage ofexecutives at their organizations —compared withexempt and non-exempt employees—participatedin most development activities.

The Future360-degree feedback was the only specific perfor-mance management area where companiesplanned to increase their activity during the nextyear. 360-degree feedback was used by only one-third of respondents’ organizations.


Executive SummaryExecutive Summary

•

•

•

•

•

•

•

•

•

•

7

I n today’s tight labor market, the ability toattract and retain valuable employees is a sourceof competitive advantage for organizations in

every industry. One key to attracting and retaininghigh-performing employees is to provide strongsupport for their best performance: define andestablish clear performance goals; track progressand give relevant, useful feedback; and developemployees to meet or exceed the company’s goalsand their own personal career goals.

The traditional approach to providing such sup-port has been in the form of performance manage-ment systems. But what are HR professionals’objectives for their performance management sys-tems? What are the current and best practices inperformance management? How effective dohuman resource professionals think that their cur-rent performance management systems are – bothoverall and with regard to specific tools? What arethe greatest challenges to improving performancemanagement systems? In which area of perfor-mance management will HR professionals concen-trate their efforts in the near future?

To answer these questions, the Society forHuman Resource Management (SHRM) and Per-sonnel Decisions International (PDI) conductedthe 2000 Performance Management Survey. Surveyrespondents shared their insights on current prac-

tices and anticipated activity in performance man-agement. The following pages report the results ofthis survey.

OVERALL CHARACTERISTICS OF PERFORMANCE MANAGEMENT SYSTEMS

System Objectives: Employees Come FirstSurvey participants believed that performance man-agement systems should focus on the employee.Respondents were asked to place seven perfor-mance management system objectives in rank orderbased on their importance (“1” being most impor-tant; “7” being least important). Results showed thatthe highest ranked objectives for performance man-agement systems were employee-oriented:• Provide information to employees about percep-

tions of their performance. • Clarify organizational expectations of employees.• Provide information to employees about their

development needs.Those objectives focused on providing informa-

tion to managers were ranked lower by surveyrespondents. For example, documenting perfor-mance for employee records and providing infor-mation to managers for making promotion/demo-tion decisions ranked sixth and seventh, respective-ly (see Figure 1).


Survey ResultsSurvey Results

Figure 1: Objectives of Performance Management System

AverageRankObjectives

Source: SHRM®/PDI 2000 Performance Management Survey

Clarify organizational expectations of employees

Identify developmental needs

Gather information for pay decisions

Gather information for coaching

Document performance for employee records

Gather information for promotion decisions

Provide information to employees about their performance 2.8

2.8

3.7

4.0

4.2

4.65.2

8


Satisfied With Appraisals; Dissatisfied With Development Respondents were asked to rate their satisfactionwith each of 10 performance management systemcomponents and their system as a whole. Respon-dents were significantly more satisfied with tradi-tional performance management system compo-nents than with developmental components. Forexample, a majority of respondents were eithersatisfied or very satisfied with their organizations’performance evaluations (61%), performanceplanning (51%), and discipline (51%), while onlyone in three were satisfied or very satisfied withleadership development (38%), developmentplanning (34%), 360-degree feedback (33%), andcoaching (33%) (see Figure 2). This may be due tothe fact that organizations have been using tradi-tional methods for a longer period of time, andthat many organizations have only recently startedthinking about development as part of their per-formance management systems.

This presents a gap between what HR profes-sionals ranked as their most important objectivesfor their performance management systems andhow their systems are actually working. They tend-ed to be less satisfied with the developmental areas— precisely those areas critical to achieving theirobjectives of providing information to employeesabout perceptions of their performance and abouttheir development needs (e.g., 360-degree feed-back, development planning and coaching).

If employees come first, should the focus of these systemsshift ttoo development from appraisal? Or can a systemaccomplish both?

One-third (32%) of survey respondents wereunsatisfied or very unsatisfied with their overallperformance management system. This dissatisfac-tion can largely be attributed to dissatisfactionwith the developmental components of the system— leadership development, coaching, 360-degree


20 %

40 %

60 %

80 %

51%

61%

51% 50% 49% 47% 46%

38%34% 33% 33%

Figure 2: System Satisfaction

Perfo

rman

ceEv

aluat

ion

Perfo

rman

cePl

annin

g

Disc

iplin

e

Info

rmal

Feed

back

Train

ing

Over

all

Rewa

rds

Lead

ersh

ipDe

velo

pmen

t

Deve

lopm

ent

Plan

ning

Coac

hing

360-

degr

ee F

eedb

ack

System Components

High

Low

Perc

ent S

atis

fied

and

Perc

ent V

ery

Satis

fied

9


feedback, and development planning. Many sur-vey respondents recognized that employee devel-opment needed to be viewed as a retention strate-gy. Employees continue working for organizationswhere they feel they are: being adequately chal-lenged, learning new skills and capabilities, sup-ported and coached by their manager, and pro-gressing toward their career goals.

More Executive Support RequiredClearly, executive support of performance man-agement is critical to system success. However,results showed that respondents believed such sup-port was absent. In an open-ended question,respondents were asked to list the greatest chal-lenge to improving their performance manage-ment system. Many survey respondents focused onexecutive/management support. For example,one in four respondents (22%) explicitly men-tioned that their greatest challenge was lack ofsupport/endorsement from top management,17% reported that their performance manage-

ment system was undervalued in the company,and 14% stated that lack of system use by manage-ment was an obstacle (see Figure 3).

Survey results showed that there is room forimprovement with regard to executive support ofperformance management systems at respondents’organizations. At 42% of participating organiza-tions, executives did not review the performancemanagement system at all (see Figure 4). Surveyrespondents recognized that executives needed toactively use the system and publicly support it inorder for the system to have credibility.

How would a change in executive behavior toward per-formance management improve its results? What wouldyou have executives do differently?

Top Effectiveness MeasuresRespondents were asked in an open-ended ques-tion how the effectiveness of their performancemanagement system was measured. Thirty percent

0%

5%

10%

15%

20%

25%22%

17%

14%13% 13%13%

11%

Perc

ent o

fOr

gani

zatio

ns


Figure 3: Future Challenges

Lack

of u

pper

m

anag

emen

t sup

port

Perfo

rman

ce m

anag

emen

t un

derv

alued

in c

ompa

ny

Lack

of u

se b

ym

anag

emen

t

Diffic

ult to

cre

ate

perfo

rman

ce g

oals

Lack

of t

raini

ng

Requ

ire n

ew/u

pgra

ded

syste

m

Requ

ires

too

muc

h tim

e

10


0%

10%

20%

30%

40%

50%

60%

Sr. Management

HR Management

42%

19%15%

12%

52%

37%

17%

6%

Perc

ent o

fOr

gani

zatio

ns

Figure 4: Review by Management


Frequency of Review

Not Reviewed Biennial Annual More Frequent

0%

5%

10%

15%

20%

25%

30%

35%

30%

22%19% 18%

12%

8% 7% 7%5%

3% 2% 2%

Perc

ent o

fOr

gani

zatio

ns

Figure 5: Measures of System Effectiveness

Info

rmal

Feed

back

Form

s Co

mpl

etio

n

Com

pare

d wi

thPe

rform

ance

Goa

ls

Surv

ey o

r Foc

usGr

oup

Com

pare

d wi

thBu

sines

s Go

als

Info

rmal

Disc

ussio

ns

Turn

over

/Ret

entio

n

Revie

w Ra

tings

Distr

ibut

ion

Com

pare

d wi

thCo

mpe

nsat

ion

Too

New

toM

easu

re

Train

ing N

eeds

Prod

uctiv

ityCh

ange

s


Method

11


of respondents listed informal feedback and 22%listed forms completion/timeliness of forms as themethod used to measure effectiveness of the sys-tem. Other measures are listed in Figure 5.

System Components Are Integrated When asked how well their performance manage-ment system components were integrated, 44% ofrespondents reported that their components wereintegrated or well integrated. Thirty-eight percentof respondents reported an average level of inte-gration for system components (see Figure 6).

PLANNING AND EVALUATION

Performance Planning & Evaluation: Executives Have the EdgeSeven out of 10 respondents reported that theirorganizations had written performance plans formost — at least three out of four — of their exec-utives. Nearly two-thirds (64%) of respondents’organizations had performance plans for mostexempt employees, and nearly half (45%) hadplans for most non-exempt employees.

A disparity between executives and non-exemptemployees existed in terms of linking perfor-mance goals to operating results. Seventy-five per-cent of participants reported that most — at leastthree out of four — of their executives had perfor-mance goals linked to operating results. Thirty-sixpercent of participating organizations linked per-formance goals to operating results for exemptemployees and 17% of respondents’ organizationshad performance goals linked to operating resultsfor non-exempt employees. While it is true thatexecutives often have more influence related toreaching operating results, non-exempt employeesmay feel disenfranchised because fewer of themhave stated performance goals that are directlyconnected to business results.

If non-exempt employees are typically a large percentage ofthe employee population and so few have goals related tooperating results, is the linkage really necessary?

Survey data showed equality across job levels as towho has input into performance evaluations.Approximately half of executives (55%), exempt

38%

29%

15%

14%

4%

Integrated

AverageWeaklyIntegrated

NotIntegrated

WellIntegrated


Figure 6: Integration of System

12


(61%), and non-exempt (53%) employees hadinput into their own performance evaluations.Across all job levels, the direct supervisor had themost input into performance evaluations (Figure 7).

Performance plans and evaluations were largelydone on an annual basis, with 85% of respon-dents’ organizations preparing performance evalu-ations and reviewing performance plans/goalsannually for all employees. This leaves an oppor-tunity for organizations/managers to review per-formance more often than once a year to checkprogress and to avoid annual “surprises” duringperformance review conversations.

Are there “pockets” of success in your organization thatcan be explained by the informal impact of a great man-ager? What does this say about formalizing the reviewprocess — is it really necessary? How can you transferthis success to other parts of your organization?

Development & Career Planning: A Need to Focus on the FutureAccording to survey results, 25% of participatingorganizations had written development plans forall executives compared with 17% for all exemptemployees and 12% for all non-exempt employ-ees. These percentages were even lower for orga-nizations with 100-499 employees (23% for execu-tives, 13% for exempt and 9% for non-exempt).Development plans were typically prepared andreviewed annually.

Career plans were even less commonly usedthan development plans. Sixty-three percent ofrespondents reported that their organizations didnot have career plans for executives comparedwith 66% for exempt employees and 73% for non-exempt employees. A mere 8% of respondents’organizations had career plans for all executivesand only 3% had career plans for all exempt andnon-exempt employees.

0%10%20%30%40%50%60%70%80%90%

100%ExecutivesExemptNon-Exempt

93% 96

%96

%

33%

49%

35%

55% 61

%53

%

17%

16%

10% 14

%12

%4%

9% 13%

10%

9%4% 5%

Perc

ent o

fOr

gani

zatio

ns

Group

Figure 7: Input into Appraisals

Supe

rviso

r

Othe

r Man

agem

ent

Self

Peer

s

Repo

rts

Custo

mer

s

Othe

rs


13


Organizations appear to be missing a keyopportunity to retain employees. Employees whowork for organizations that actively partner withthem to create development and career opportu-nities are more likely to stay. This is supported bya 2000 SHRM®Retention Practices Survey finding thata primary reason why employees voluntarily resignfrom their positions is to pursue career opportuni-ties elsewhere.

DEVELOPMENT

Classroom Training Popular and Preferred Survey results showed that classroom trainingreigns as the most popular method of professionaldevelopment. Eighty-six percent of respondents’organizations conducted in-house classroom train-

ing and 84% had employees participate in exter-nal classroom training. Coaching from managersand on-the-job training/action learning rankednext in terms of usage. The development methodused least by respondents was externally hiredcoaches (28%) (see Figure 8). Organizations with2,500+ employees had the highest usage level forall development methods except external class-room training. Smaller organizations (with 100-499 employees) had the lowest usage level for in-house classroom training (83%), traditional inde-pendent study (53%), online independent study(34%), and externally hired coaches (17%).Respondents were asked to rate the effectivenessof eight professional development methods on ascale from 1 to 5, where 1 is “not at all effective”and 5 is “very effective.” Survey respondents

0%10%20%30%40%50%60%70%80%90%

100%86% 84%

76% 74%

58%

44%

34%28%

Perc

ent o

fOr

gani

zatio

ns

Figure 8: Development Method Usage


In-h

ouse

Clas

sroo

m

Exte

rnal

Clas

sroo

m

Man

ager

Coac

hes

On-th

e-jo

b Tr

aining

/Ac

tion

Lear

ning

Trad

itiona

l In

depe

nden

t St

udy

Onlin

e In

depe

nden

t St

udy

Job

Assig

nmen

ts

Exte

rnal

Coac

hing

14


viewed on-the-job training and in-house classroomtraining as the most effective professional develop-ment methods, with an average 3.90 effectivenessrating. They viewed independent study — bothtraditional and online — as the least effectivedevelopment method (see Figure 9).

What keeps people from actively pursuing their ownlearning through independent study?

Although classroom training is popular andpreferred, employees are not spending a signifi-

cant amount of time in the classroom. On average,exempt employees spent 2.6 days per year in class-room training compared to 2.3 days for executivesand 2.1 days for non-exempt employees. Employ-ees at organizations with more than 2,500 employ-ees spent more time in the classroom on averagecompared with smaller organizations (see Figure10).

The Fully Developed Executive?Compared to exempt and non-exempt employees,fewer respondents reported that executives at

1

2

3

4

5

3.903.60

3.30 3.27

3.85 3.79 3.78 3.77

Figure 9: Development Method Effectiveness

Aver

age

Ratin

g

Actio

nLe

arnin

g/OT

J Tr

aining

In-h

ouse

Clas

sroo

m

Man

ager

Coac

hes

Exte

rnal

Clas

sroo

m

Job

Assig

nmen

ts

Exte

rnal

Coac

hing

Onlin

e In

depe

nden

tSt

udy

Trad

itiona

lIn

depe

nden

tSt

udy


15


their companies participated in developmentactivities such as in-house classroom training, inde-pendent study, coaching provided by internal per-sonnel, job assignments, and action learning/on-the-job training. The only development methodthat executives used more than other job levelswas externally hired coaches — of the respon-dents who do hire external coaches, 90% reportedthat executives at their organizations use externalcoaching as a developmental tool.

Exempt employees led the way in terms of par-ticipating in development activities. Nearly allrespondents reported that exempt employees attheir organizations participated in the followingdevelopment methods: in-house classroom train-ing (95%), online independent study (94%),external classroom training (93%), coaching pro-vided by managers (92%), and traditional inde-pendent study (91%).

Non-exempt employees had the highest level ofparticipation for on-the-job training (91%), andthe lowest level of participation for external class-room training (74%) and external coaches (26%).

Lack of Training in Feedback and CoachingOn average, approximately half of executives,managers and supervisors in participating organi-zations were trained in providing feedback. Threeout of four respondents’ organizations (75%)

used internal coaching, yet only one-third of exec-utives, managers and supervisors at their organiza-tions were trained in coaching others. The chal-lenge for organizations is to insure that all execu-tives, managers and supervisors are using bestpractices and appropriate methods in providingfeedback and coaching.

If your managers are trained in coaching and givingfeedback, how well are they doing it? If they need improve-ment, what will it take to help them be their best?

Rewards: Performance Pay Common at All LevelsMost participating organizations used perfor-mance bonus pay at all levels. For example, 86%used bonus pay for executives, 83% used it forexempt employees and 68% used it for non-exempt employees. The usage level for perfor-mance bonus pay was even higher at large organi-zations and those in the technology industry. Themost popular types of performance bonus pay forall levels were based on individual performance,profit sharing, and team performance.

Technology Industries: Champion for Non-Exempt EmployeesTechnology industries (e.g., finance, insurance,high tech/computers, and telecommunications;

Organization Size

Job Level< 100

Employees(n=26)

100-499Employees

(n=142)

500-2,499Employees

(n=126)

2,500 +Employees

(n=160)

OverallSurveyAverage(n=454)

Executives

Exempt

Non-Exempt

15.8 hours

21.9 hours

16.0 hours

16.3 hours

19.3 hours

17.2 hours

16.7 hours

18.6 hours

14.8 hours

22.5 hours

24.2 hours

19.1 hours

18.6 hours

21.0 hours

17.2 hours


Figure 10: Average Annual Classroom Training Hours, by Job Level

16


organizations producing or highly dependent onrapidly changing technology) as a group led theway in using performance management tools fornon-exempt employees, according to surveyresults.

The technology industry group also had thehighest usage and satisfaction levels for all devel-opment methods other than job assignments. Notsurprisingly, the biggest usage gap was in onlineindependent study. Fifty-seven percent of technol-

ogy organizations reported using online indepen-dent study, compared with 41% of manufacturingorganizations and 42% of services organizations.The technology industry group also had the high-est average annual classroom training hours for alllevels (see Figure 11).

The Future: More 360-Degree FeedbackAccording to survey results, 360-degree feedbackwas used by only one-third of respondents’ organi-

Figure 11: Usage of Performance Management Tools, by Industry Group


Performance Management ToolTechnology

Industry Group(n=99)

Manufacturing Industry Group

(n=166)

Services/OtherIndustry Group

(n=192)

Performance plans for most*non-exempt employees

60% 37% 46%

Development plans for most* non-exempt employees

26% 17% 16%

Career plans for non-exempt employees 35% 27% 21%

Link performance goals to operating results for non-exempt employees 77% 63% 53%

Performance pay for non-exempt employees 89% 71% 53%

Online independent study 57% 41% 42%

Classroom training, average annual hours per employee Executives Exempt employees Non-exempt employees

21 hours 26 hours 23 hours



*Denotes at least three out of four non-exempt employees

17


zations for executives (32%) and exempt employ-ees (29%), and only one-fifth (18%) of respon-dents’ organizations for non-exempt employees(see Figure 12). Larger organizations (with 2,500+employees) tended to use 360-degree feedback todetermine development needs and career plans.Respondents from mid-sized organizations (500-2,499 employees) reported the highest usage levelfor determining pay changes. Smaller organiza-tions (100-499 employees) tended to use 360-degree feedback to evaluate performance.

Although current usage is low, the near futurelooks bright for 360-degree feedback. Data showsit is the only specific performance managementarea where organizations planned to increase theiractivity during the next year. This is especially truefor smaller organizations (with fewer than 2,500employees). Longer term, there is opportunity fororganizations to shore up their efforts in the otherdevelopmental areas that exhibited dissatisfactionsuch as leadership development, developmentplanning and coaching.

ExecutivesExemptNon-exempt

68% 71%

82%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

32% 29%

18%

Figure 12: Usage of 360-Degree Feedback


Perc

ent o

fOr

gani

zatio

ns

Usage

Does Not Use Uses

18


ConclusionThe 2000 Performance Management Survey showedthat performance management in organizations isin transition from a system dominated by the per-formance appraisal to a more comprehensivehuman resource management system thatincludes activities such as development and careerplanning, leadership development, coaching and360-degree feedback. However, the transition is farfrom complete.

The biggest challenge facing HR professionalsas they make this transition is to gain executivesupport for performance management systems.Currently, many executives are not reviewing orusing the system, nor are they participating indevelopment activities as much as other job levels.Executives need to be active “role models” for per-formance management and publicly support it inorder for systems to have credibility.

According to survey results, the most importantperformance management system objectives were

employee-focused. However, HR professionalswere not satisfied with system components thatwere most likely to help employees improve theirperformance — coaching, leadership develop-ment, 360-degree feedback and developmentplanning. This dissatisfaction may be due to thefact that many organizations have been using tra-ditional methods (e.g. performance appraisals, dis-cipline) for a longer period of time and have onlyrecently started to use developmental tools as partof their performance management system.

Several performance management systemaspects require additional focus, includingincreased support and review from senior manage-ment, more emphasis on formal feedback systems,development and career planning. These aspectswill allow the performance management system toreach its full potential as a tool to fully utilize thepotential of the existing workforce, to retain cur-rent employees and to attract additional talent asnecessary.

19


DemographicsDemographicsNNuummbbeerr ooff EEmmppllooyyeeeess –– TToottaall CCoommppaannyy::Fewer than 100 employees 2%100 to 499 employees 31%500 to 999 employees 14%1,000 to 2,499 employees 13%

2,500 to 4,999 employees 8%5,000 to 9,999 employees 7%10,000+ employees 20%No response 5%

NNuummbbeerr ooff EEmmppllooyyeeeess –– TThhiiss LLooccaattiioonn::Fewer than 100 employees 15%100 to 499 employees 45%500 to 999 employees 16%1,000 to 2,499 employees 11%

2,500 to 4,999 employees 4%5,000 to 9,999 employees 3%10,000+ employees 2%No response 4%

UUnniioonniizzaattiioonn ((eexxeemmpptt eemmppllooyyeeeess iinn uunniioonnss))::None 59%Less than 10% of exempt employees in unions 12%11 to 50% of exempt employees in unions 14%

More than 50% of exempt employees in unions 9%No response 6%

TTyyppee ooff OOrrggaanniizzaattiioonn::Manufacturing 35%Finance/Insurance 13%Health Care 11%Services–profit 9%High Tech/Computers 5%Nonprofit 4%Transportation 4%

Wholesale/Retail 4%Education 3%Government 3%Telecommunications 2%Utilities 2%Agriculture/Other 1%No response 4%

20

A Message from Personnel Decisions International (PDI)In today’s workplace, “human capital” is the prima-ry constraint in meeting organizational goals.Attracting and retaining talented employees andmaximizing their performance have become ofparamount importance. Thus, the role of HR pro-fessionals has never been more crucial to organiza-tional success.

At PDI, we are committed to helping the HRcommunity succeed and believe that providing use-ful information, such as the Performance Manage-ment Survey, to HR professionals is our mostimportant role. We are proud and excited to co-sponsor the 2000 Performance Management Surveywith SHRM, and are confident that the informationprovided in this report has been helpful to you.

Our Performance Management PerspectivePDI is dedicated to advancing performance manage-ment practices. We believe that a holistic approachto performance management that focuses on defin-ing, measuring and, most importantly, developingcapabilities is key to success. Our goal is to help ourclients to advance their performance managementprocesses so far that performance evaluations are nolonger needed — employees will receive feedbackand develop capabilities daily, thereby eliminatingthe need for an annual evaluation.

About PDIPersonnel Decisions International (PDI) is a globalhuman resources consulting firm. Our services andtools are developed out of extensive research andmore than 30 years of experience with client orga-nizations around the world. We know our servicesare effective because of our on-site, validated resultswith real clients in real business situations.

We work in partnership with our clients to pin-point their business needs, then bring together PDIconsulting, services and tools to meet those needs.The solutions we create can be applied to individu-als, teams and organizations. PDI solutions helpour clients to define, measure and develop capabili-ties for successful performance.

PDI has more than 20 operating offices aroundthe world. Each office is staffed with consulting psy-chologists experienced in the cultures of their par-ticular region. Every PDI client is served by a teamof people selected from one or several offices forthe expertise required by the client’s business need.

For More Information:Contact PDI for more information about our capa-bilities related to performance management orother business challenges. Call 1-800-633-4410 orvisit our web site at www.personneldecisions.comfor further information.


A Message from PDIA Message from PDI

SHRM/PDIPerformance Management Survey

Summer 2000 Thank you for participating in the SHRM/PDI Performance Management Survey 2000.

The objective of this survey is to understand current practices in the entire area of performance management, including performance planning and evaluation; development and career planning; feedback, coaching, training and development, and rewards. All responses are confidential.

Please complete the survey by July 28, 2000 and fax back to SHRM at (703) 836-0367 or mail toSHRM, Survey Research, 1800 Duke Street, Alexandria, VA 22314. Or you may complete thissurvey online at http://www.surveyhost.com/perform/. Your password is "survey".

If you have any questions about the survey, call Tom Eckstein or Sarah Kiecker, representatives forPDI, at 800-750-4077.

1. Overall Characteristics of your Performance Management System

1a. Using the following scale, please rate yoursatisfaction with the following parts of yourcurrent performance management system.

(Check one box per row.) Performance planning/goal setting . . . . .

VeryUnsatisfied . .Neither .

VerySatisfied NA

Performance evaluation . . . . . . . . . . . . . . . . .Development planning . . . . . . . . . . . . . . . . .360-degree feedback . . . . . . . . . . . . . . . . . .Informal feedback . . . . . . . . . . . . . . . . . . . . .Coaching and/or Mentoring . . . . . . . . . . . . .Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Leadership development . . . . . . . . . . . . . . . .Rewards . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Discipline . . . . . . . . . . . . . . . . . . . . . . . . . . .Overall performance management system . .

1b. How frequently is the effectiveness of yourPerformance Management System reviewedby

Senior Company Executives? . . .

QuarterlySemi-

Annually AnnuallyEvery 2Years

NotReviewed

Human Resources? . . . . . . . . . . . . . . .

1c. How is the effectiveness of your Performance Management System measured?

1d. In your opinion, how well integrated with each other are thecomponents of your performance management system(performance planning and evaluation; development and careerplanning; feedback, coaching, training and development, andrewards)? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

NotIntegrated

2 3

Average

4 5

WellIntegrated

1e. Rank the importance of the following performance management systemobjectives. Place a "1" next to the objective that's most important, a "2"next to the objective that's second most important, etc. If any item listedbelow is not an objective of your organization's performance managementsystem, check the box labeled "NA" (not applicable) in the second column.

Clarify organizational expectations of employees . . . . . . . . . . . . . .

NA

Provide information to managers for coaching purposes. . . . . . . . . . . . .Provide information to managers for making pay decisions . . . . . . . . . .Provide information to managers for making promotion/demotiondecisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Provide documentation on performance for employee records. . . . . . . .Provide information to employees about perceptions of theirperformance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Provide information to employees about their development needs. . . . .

Other

2. Characteristics of Performance Planning/Goal Setting and Evaluation

2a. What percentage of employees from each ofthe following groups have WRITTENperformance or goal plans? (Check one boxper row.)

Senior Executives . . . . . . . . . . . . . .

None<

10%10% -24%

25% -49%

50% -74%

75% -99% All

Exempt . . . . . . . . . . . . . . . . . . . . . . . . .Non-Exempt . . . . . . . . . . . . . . . . . . . . .

2b. How frequently are performance evaluationsconducted for employees in the following groups?(Check one box per row.)

Senior Executives . . . . . . . . . . . . . . . . . . .

QuarterlySemi-

annually AnnuallyEvery 2Years Other

Exempt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Non-Exempt . . . . . . . . . . . . . . . . . . . . . . . . . .

2c. How frequently are performance plans/goalsreviewed with employees from the followinggroups? (Check one box per row.)

Senior Executives . . . . . . . . . . . . . . . . . . .

QuarterlySemi-

annually AnnuallyEvery 2Years Other

Exempt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Non-Exempt . . . . . . . . . . . . . . . . . . . . . . . . . .

2d. What percentage of performance plans foremployees in the following groups haveperformance targets directly connected tooperating results? (Check one box per row.)


None<

10%10% -24%

25% -49%

50% -74%

75% -99% All


2e. Who has direct input into the performanceevaluation process? (Check ALL thatapply in each row.)

Senior Executives evaluations . .

DirectSuper-visor

OtherManage-

ment Self PeersDirect

ReportsCust-omers Others

Exempt evaluations . . . . . . . . . . . . . .Non-Exempt evaluations . . . . . . . . . .

Complete and return by July 28, 2000

3. Characteristics of Development and Career Planning3a. Percent of employees from each group with

a WRITTEN development plan for next 12to 18 months? (Check one box per row.)


None<

10%10% -24%

25% -49%

50% -74%

75% -99% All


3b. How frequently are development plans preparedfor each group? (Check one box per row.)

Senior Executives . . . . . . . . . . . . . . . . . .

QuarterlySemi-


NotReviewed

Exempt . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Non-exempt . . . . . . . . . . . . . . . . . . . . . . . . .

3c. How frequently are development plans reviewedfor each group? (Check one box per row.)

Senior Executives . . . . . . . . . . . . . . . . .

QuarterlySemi-


NotReviewed

Exempt . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Non-exempt . . . . . . . . . . . . . . . . . . . . . . . . .

3d. Percent of employees from each group witha WRITTEN career plan for next 2 to 5years? (Check one box per row.)


None<

10%10% -24%

25% -49%

50% -74%

75% -99% All


4. Characteristics of Feedback, Coaching and T&D4a. Which of the following development methods are used in your organization? (Check yes or no in the first two columns below for all that are used.)4b. For each method used in your organization, please indicate which employee groups participate. (Check all groups participating in the last three columns below.)

In-house, instructor-led classroom programs . . . . . .

Yes NoSr.

Execs. ExemptNon-

exempt

External instructor-led classroom programs . . . . . . .Independent study using traditional methods . . . . . .

Independent study using online materials . . . . . . . .Externally-hired coaches . . . . . . . . . . . . . . . . . . . . .Internal Coaches (HR, managers or other employees)Systematic job assignments, job rotation . . . . . . . . .Action Learning and other On-the-Job training . . . .

4c. How effective do you believe the following development methods are as used by your organization?

In-house, instructor-led classroom programs . . . . . . . . .

Not at allEffective .

SomewhatEffective .

VeryEffective NA

External, instructor-led classroom programs . . . . . . . . . .Independent study using traditional methods . . . . . . . . .

Independent study using online materials . . . . . . . . . . . .Externally-hired coaches . . . . . . . . . . . . . . . . . . . . . . . . .Internal coaches (HR, managers, other employees) . . . .Systematic job assignments, job rotation . . . . . . . . . . . .Action Learning and other On-the-job training . . . . . . . .


4d. Percent of employees from each of thefollowing groups who are trained to providefeedback to others? (Check one box perrow.)


None<

10%10% -24%

25% -49%

50% -74%

75% -99% All

Managers . . . . . . . . . . . . . . . . . . . . . . .First-Line Supervisors . . . . . . . . . . . . .

4e. Percent of employees from each of thefollowing groups who are trained to coachor mentor others? (Check one box perrow.)

Senior Executives . . . . . . . . . . . . .

None<

10%10% -24%

25% -49%

50% -74%

75% -99% All

Managers . . . . . . . . . . . . . . . . . . . . . . .First-Line Supervisors . . . . . . . . . . . . .

4f. Average number of hours of overall classroomtraining provided per year for each employee group?(Check one box per row.)

Senior Executives . . . . . . . . . . . . . . . . . . . .

None< 10hrs.

11 -20 hrs.

21 -40 hrs.

41 -60 hrs.

> 60hrs.

Exempt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Non-Exempt . . . . . . . . . . . . . . . . . . . . . . . . . . .

4g. What percent of the following employeegroups receive formal 360-degreefeedback? (Check one box in eachrow.)

Senior Executives . . . . . . . . . .

None<

10%10% -24%

25% -49%

50% -74%

75% -99% All

Exempt . . . . . . . . . . . . . . . . . . . . . Non-Exempt . . . . . . . . . . . . . . . . .

4h. How is 360-degree feedback usedfor each group? (Check all thatapply.)

Senior Executives . . . . .

Evaluateperformance

Determinedevelopment

needsDetermine

pay changesDeterminecareer plan Do not use

Exempt . . . . . . . . . . . . . . . .Non-Exempt . . . . . . . . . . . .

5. Characteristics of Rewards

5a. What basis does your organization use for performance bonus pay for the following employeegroups? (Check all that apply per row.)

Senior Execs. . . . . .

IndividualTeam

PerformanceCompetency

or Skill Profit Stock None Other

Exempt . . . . . . . . . .Non-Exempt . . . . . .

5b. Describe other performance bonus pay methods used.


6. Future Activities6a. Using the following scale, please rate how much emphasis your

organization will place on the following parts of its performancemanagement system in the next year.

Performance planning/goal setting . . . . . . . . . . . . . . . . . . . . . . . . . 1

Less

2 3

Aboutthe same

4 5

More

Performance evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 3 4 5Development planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 3 4 5

360-degree feedback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 3 4 5Informal feedback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 3 4 5Coaching and/or Mentoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 3 4 5

Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 3 4 5Leadership development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 3 4 5Rewards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 3 4 5

Discipline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 3 4 5Overall performance management system . . . . . . . . . . . . . . . . . . . . . . 1 2 3 4 5

6b. What do you believe is the greatest challenge to improving your organization's current performancemanagement system?

7. Organization Characteristics7a. Number of Employees in This Location

Less than 100100 - 499500 - 9991,000 - 2,4992,500 - 4,9995,000 - 9,99910,000 and over

7b. Number of Employees in Entire Organization

Less than 100100 - 499500 - 9991,000 - 2,4992,500 - 4,9995,000 - 9,99910,000 and over

7c. Percent of Employees inUnions

NoneLess than 10%11 to 50%Over 50%

7d. Primary IndustryComputers, components andsoftwareManufacturing - non-durablesManufacturing - durablesTelecommunications

TransportationUtilitiesWholesale/RetailFinanceInsurance

HealthServices -- profitServices -- non-profitEducationGovernment

Other:

8. OptionalName: Company:

Phone: May we contact you if we need toclarify any of your answers? . . . . . . . . Yes No

Please fax your responses to 703-836-0367 or mail it to SHRM, Survey Research, 1800 Duke Street,Alexandria, VA 22314 before July 28, 2000.

Results will be available in October, 2000. SHRM members may obtain the report summarizing surveyresults at no cost at www.shrm.org or may purchase a copy from the SHRM Store.

Thank you for your time and experience.

26

C ompetition abounds in the business market-place as well as in the talent marketplace.CEO after CEO calls for increased individual

and organizational performance, while at the sametime organizations wage campaigns to win thehearts and minds of employees and candidates.

With this increased emphasis on performanceimprovement, competition for employees, andintense drive for increased retention, one wouldthink that organizations would get better at perfor-mance management which is one of the primaryorganizational processes that can result in real, tan-gible improvement in performance, attraction, andretention of employees. Yet, performance manage-ment retains its untapped potential because organi-zations continue to limit it to an HR administrativesystem which remains surprisingly unrelated to thecurrent or future business needs and continue tofocus much of the performance managementprocess on activities which actually serve to demoti-vate employees.

Strong, effective performance management systemsare one key to attracting and retaining high-valueemployees. Employees perform best – and stay withtheir employer – when they receive the proper sup-port from management, and when they know thattheir efforts will be rewarded. In an effective per-formance management system, goals are clearlydefined, progress is tracked, feedback is providedregularly, performance is evaluated fairly and equi-tably, and career and development opportunitiesare available.

Despite its heightened importance, many compa-nies fail to provide strong performance manage-

ment systems. PDI believes that organizations candramatically improve the effectiveness and rele-vance of their performance management processesby creating the foundation of the system in theorganization’s competitive strategy and consideringthat performance management actually beginsbefore employees even join the organization.

PDI’s Talent Pipeline (Fig. C) illustrates that byaligning the business and human capital strategiesof the organization from the start, a companyincreases its ability to identify the right people,make a compelling offer, develop a talent-buildingculture, and implement a strategy for maintaininggreat talent.

With the Talent Pipeline in mind, two major factorspoint toward the problems in today’s performancemanagement systems:

• Few performance management systems are linkedto the overall organization’s strategy or objectives.For example, if a company’s goal is to develop digi-tal commerce capabilities, it’s vital for employees’individual performance plans to include develop-ing their personal digital commerce abilities.Unless this connection between personal and com-pany goals exists, employees can easily feel that theydon’t make a difference to the overall goals andsuccess of their employer.

• Too many performance management systems arefocused on measurement rather than development.Emphasizing evaluation and expectations ratherthan personal development puts employees on thedefensive and demotivates them to participateactively in the process.


PERFORMANCE MANAGEMENT SYSTEMS:A Vital Key to RetentionBy Diane MarentetteCourtesy of Personnel Decisions International

A PDI White Paper

27


There is a better way to get the most from a com-pany’s human capital and develop a culture inwhich employee training and development islinked directly to the organization’s goals. Butknowing what is wrong with today’s performancemanagement systems and fixing them are two dif-ferent things. To help find the way, we first needto explore the weaknesses of traditional perfor-mance management systems.

Traditional Performance Management SystemsA common blueprint for performance manage-ment systems includes four phases: performanceplanning, ongoing coaching and feedback,appraisal of accomplishments, and identifyingareas for improvement. Typically, these elementsfollow an annual cycle.

The cycle, as illustrated here (Fig. A), begins witha planning process to set expectations for both theemployee and employer. Throughout the year, theemployee’s performance is guided through ongo-

ing coaching and feedback. Toward the end of thecycle, the employee’s performance is evaluated.Finally, this evaluation is shared with the employeeto help improve his or her performance.

But something crucial is missing from this blue-print: This traditional system is not configured todirectly support the employers’ overall goals andexpectations. Beginning employee performanceplanning without understanding an organization’sstrategy is like pouring concrete for a new build-ing’s foundation before the blueprint is finished.

Securing a strategic foundation will not only buildemployees’ confidence in the relevance of theprocess, it will also make it possible to link theachievement of employees’ performance goalsdirectly to the organization’s operating results.Currently, this isn’t happening very often, even inthe upper echelons of organizations.

To lay the foundation properly, PDI contends acompany must identify its strategic business goals,

THE TRADITIONAL PERFORMANCE MANAGEMENT SYSTEM

PerformancePlanning

Identifying areas Ongoing coachingfor improvement and feedback

Appraisal of

Accomplishments

Figure A

28


translate them into business plans, and incorpo-rate them into a “Performance Model” thatdefines the performance needs required toachieve the organization’s expectations and goals.(See Fig. B)

This performance model will spur top manage-ment to recognize the needs of the organizationin human capital terms and understand thedemands the organization will place on its employ-ees. For example, if the organization’s businessgoal is to grow aggressively in a highly competitivemarket, performance models should emphasizecultivating business development skills that thecompany doesn’t yet have. The performancemodel will also identify resources that must beacquired or developed to reach those perfor-mance expectations–this allocation of resources is

the true beginning of the performance manage-ment cycle. In addition, linking organizationalgoals with staff development will help attract exec-utive support for performance management sys-tems.

Performance PlanningThe traditional system begins with a planningprocess intended to reveal and clarify perfor-mance expectations of both the employee and theemployer. Most organizations have a very struc-tured planning process, with written goals for eachemployee.

When done well, the goals laid out in the perfor-mance plan are specific and comprehensiveenough for employees to truly understand theorganization’s needs. Often, performance plan-

Performance

Planning

Identifying areas Ongoing coachingfor improvement and feedback

Appraisal of

Accomplishments

Figure B

AN IMPROVED PERFORMANCE MANAGEMENT SYSTEM

Strategic Business BusinessGoals Plans

Performance Model

29


ning is not done well, however. Overall, thisprocess can do well at clarifying expectations ofboth employees and the employer. However, twoglaring problems complicate most performanceplanning processes: 1. If a performance model doesn’t exist, individ-

ual employee goals may not be linked to the performance needs of the organization. The goals set during performance planning should extend from the organization’s performance needs as outlined in the performance model.

2. These goals are often simply handed to employ-ees with little discussion of how achieving them will fulfill the organization’s needs. Therefore, employee buy-in to accomplish these goals may be low, leading to limited enthusiasm to do the work.

Ongoing Coaching and FeedbackOnce goals have been established, the typical per-formance management system requires the man-ager to hold performance reviews with the employ-ee periodically and to provide ongoing coachingand feedback. This frequent communication alsosupplies opportunities to revisit the goals and con-sider any changes that should be made to reflectchanged circumstances.

Surprisingly, coaching and feedback aren’t oftenregarded as very important. Few managers cur-rently provide regular coaching and feedback, andsome simply don’t do it at all. And, even manyhuman resource professionals don’t considercoaching to be an important objective of a perfor-mance management system.

Appraisal of AccomplishmentsToward the end of the cycle, the employee’s per-formance is evaluated. This information can be

used to benefit both the company and the employ-ee, such as:

• to recognize employee accomplishments• to make compensation decisions• to determine development needs

But consider the sensitivity surrounding evalua-tion. While it is important for employees to under-stand their level of performance, it is humannature for people to feel that they are doing agood job–perhaps even a great job. It can be verywounding for the ego should the performanceevaluation find differently. Feeling one’s effortsare unappreciated–compounded by the compa-ny’s failure to provide help for improvementthrough coaching and development–demotivatesemployees and can perpetuate subpar perfor-mance.

Identifying Areas for ImprovementTypically, performance evaluation information isshared with the employee to improve his or herperformance, usually through the use of a devel-opment plan. Like performance planning, devel-opment planning is often dictated by the manag-er, whose suggestions for improvement are expect-ed to be acted upon whether the employeebelieves in it or not. Yet without the employee’sagreement that improvement in a specific area isnecessary, it is very unlikely that any real improve-ment will happen. What’s more, if these areas ofimprovement are not linked closely to organiza-tional goals, the employee will see even less reasonto work to improve.

Overall, there are two main weaknesses of the tra-ditional performance management system. First,employees are often not clear how their perfor-mance goals link to the companies’ needs and

30


expectations — whether because no performancemodel was created or because the link was notexplained to the employee. And secondly, notenough value or effort is given to supporting theemployee’s ability to perform at their best.

A Better Way–PDI’s Talent PipelineWhile most traditional performance managementsystems don’t even start to engage employees untilafter they’ve been on the job for months, PDIbelieves that optimizing employee performancebegins even before the person is hired.

Managers, co-workers and the general work envi-ronment all affect employee performance. TheTalent Pipeline outlines five specific junctures thathave a critical impact on how well employees per-form.

AttractAs soon as the performance model identifies aneed to fill or create a position, the company mustidentify its current and future expectations forthat position. This will help the company define acompelling value proposition for candidates andmarket that message to the right audience.

The company needs to communicate that itexpects its employees to be constantly learning

and growing so they perform well in their currentand future roles. In return, the company offers itsemployees the opportunity for continuous learn-ing and the chance to grow into new, more inter-esting and rewarding roles.

SelectScreening and pre-employment testing processescan help determine if the candidate has the skillsand personality traits that match the company’sexpectations. Then, for much the same reason,those expectations should be discussed with thecandidate during the interview process. The inter-view is an opportunity for candidates to share whatmotivates them and what they expect from theircareer and their employer. This communication iscritical for finding the right person — someonewho possesses the required competencies, has theability to adapt to changes in expectations as futurerequirements become necessary, and who is a likelyfit with the organization’s culture and values.

The employee must clearly understand the expec-tations of the job — or at least have a “realistic pre-view” — in order to decide whether he or she is aright fit for the company and the position. Align-ing the company’s needs with those of the poten-tial employee is critical to maximizing the perfor-mance of each new employee.

BusinessStrategy

HumanResourceStrategy

PDI’S TALENT PIPELINE

Performance Model

Attract Select Mobilize Develop Retain

Figure C

31


MobilizeOnce an employee is hired, he or she needs to bemobilized to do the job and meet or surpassexpectations. This means the company and themanager need to communicate clear and accurateexpectations. The employer must orient theemployee to the organization and his or her newrole, and provide the training needed for theemployee to perform the job.

The culture of the organization and context of thework will greatly affect how successful the employ-ee will be. Along with day-to-day information abouthow to use the fax machine and where to pick up apaycheck, companies must help the new employeebegin to understand the unwritten rules of workingwithin the organization’s culture – those thingsthat can’t be understood until they are experi-enced. The company must take care to integratenew employees into company activities, groupmeetings and social events to help them under-stand the organization’s culture and heritage, whatit stands for and how it operates. Lessons learnedand mindsets locked in during this acclimationprocess can last the entire tenure of a person’semployment, affecting the performance and suc-cess of both the employee and the organization.

Mobilizing requires ongoing evaluation, feedbackand adjustments, and is frequently the driverbehind traditional performance management sys-tems. However, key characteristics of successfulmobilization are: 1) the regular clarification ofperformance expectations, and 2) the ongoingfeedback and coaching provided to help theemployee perform at his or her best immediatelyand consistently.

This is not a one-sided process. The manager andthe employee must work together to ensure buy-in

and even enthusiasm for meeting expectations,being open to feedback, and regularly exchangingideas about how everyone involved can achievetheir best and the company’s best. PDI developedthe GAPS Model (Fig. D) to highlight the criticalinformation needed during the mobilizationprocess.

GGooaallss aanndd vvaalluueess:: The only way to ensure peoplewill perform their best is to understand what moti-vates them. Managers should not assume theyknow what matters to employees – they must askthem. Regular conversations about what getsthem charged up, what they like to do, and whatthey care about will help the manager understandwhat drives their behavior. The more that isknown about an employee’s personal interests, val-ues, desires, work objectives and career aspira-tions, the better prepared the manager is to talkabout their performance.

AAbbiilliittiieess:: Managers must explore the employee’sview of his or her own capabilities, style and per-formance – especially in relation to importantgoals, values and success factors. This providesgreat information about how employees see them-selves compared to how others see them.

PPeerrcceeppttiioonnss:: Managers should share with employ-ees how others perceive their capabilities, style,performance, motives, priorities and values. Oth-ers’ perceptions aren’t necessarily true, but theydo represent a slice of reality. It is the manager’srole to help the employee understand the realitycreated by identified perceptions and to helpthem decide whether they can be successful inthat setting. This can be the basis of change, oncean employee understands how his or her owngoals may not be met successfully without his orher attention.

32


SSuucccceessss ffaaccttoorrss:: Managers must clarify what mat-ters to other people in the organization, includingthe manager as well as others important to theemployee’s success, such as senior management,peers and direct reports.

Once the dialogue between the manager andemployee has strengthened to a point where infor-mation is available to both in all “cells” of theGAPS model, related and important conversationscan take place.

• Is there a gap between what the organizationexpects of the employee (success factors) andwhat the employee wants to do (goals and values)?

• If so, is it possible for both to be accomplished?

• If not, is this job or even organization the bestplace for this employee to be successful?

• Is there a disconnect between what the employ-ee thinks he or she is good at (abilities) and whatothers perceive (perceptions)?

• What impact is that having on the employee’sability to accomplish his/her own goals?

Throughout the mobilization process, these conver-sations deepen the commitment to high levels ofperformance, as well as help the manager and theemployee understand the constraints to achieving it.

DevelopBecause evaluation and feedback are part of mobi-lizing an employee, it is important to follow upwith opportunities for the employee to develop inthe areas where he or she needs or wants toimprove. An employee who is encouraged andenabled to develop his or her skills will be muchmore satisfied and loyal to the employer. Also,

GAPS Where the person is

Where the person is going

The Person’s

View

Other’sViews

ABILITIESHow they see themselves

GOALS & VALUESWhat matters to

the person

PERCEPTIONSHow others see

the person

SUCCESS FACTORSWhat matters

to others

Figure D

Copyright © 2000 Personnel Decisions International Corporation. All rights reserved.

33


increasing an employee’s versatility, adaptability,and effectiveness for future assignments and chal-lenges will make him or her a more valuable andvalued employee.

The organization’s culture is critical to develop-ment. The Successful Executive’s Handbook (PDI,Oct. 1999) lists ten characteristics of an environ-ment that supports employee development:

• Open discussions with people about perfor-mance and development needs are common.• People feel like they get honest feedback.• People feel responsible to focus and meet theirobjectives.• Leaders encourage others to take appropriaterisks to pursue learning.• People are willing to try new things.• New ideas and fresh perspectives are welcomed.• People can challenge the status quo.• The culture encourages people to do new things.• People are held accountable for meeting objec-tives and delivering on commitments.• People trust their leaders to walk their talk.

Enhancing the organization’s culture to supportdevelopment has a tremendous impact on enhanc-ing performance of individual employees. Whenemployees can expect honest, candid feedback onall aspects of their performance, they will workharder to avoid unpleasant feedback and generatepositive feedback. If employees are encouraged tobe curious and challenge the barriers that stifletheir performance, they are more likely to

improve their ability to overcome those barriers.Finally, if employees are held accountable forenhancing their performance, the organizationwill see the support of development throughoutthe culture.

RetainEmployee turnover costs companies both hardand soft dollars. It is expensive to interview, hireand train someone. Plus, an employee’s departurecan cause poor customer service, reduced moraleand employee uncertainty. The time and energy ittakes to hire a new employee pays off only if theemployee was right for the job in the first placeand stays with the company.

Many elements affect retention, including thelevel of compensation and benefits, work environ-ment comfort, relationship with co-workers andboss, feelings of being appreciated, and personalfactors that are completely uncontrollable by thecompany. However, the connection betweenenhancing performance and retention is strong —when people are actively and passionately pursu-ing being their best, they are less likely to leave.

By the time the employee is being provided withdevelopment, it should be clear which employeesare not a good fit with the position or the organi-zation. Releasing with dignity those who don’t fitand helping them find other opportunities is not apunishment. In fact, it is just one more step neces-sary to help them achieve their best performanceand be personally successful.

34


Enhancing PerformanceEmployees perform at their best when theiremployer’s strategic goals, human capital deci-sions and individual employee goals are aligned –and when employees are given the support theyneed to achieve those goals.

Sticking with a performance management systemthat regularly reminds employees of their inabilityto satisfy some organizational need can reduceperformance and may even cause the loss of apotentially good employee. In today’s tight labormarket, that lost employee represents lost dollarsand lost opportunity.

Human resource professionals and their compa-nies should ask some hard questions about whatthey are accomplishing with their performancemanagement systems. What will it take to improvethe system for the betterment of employees and,in turn, the company? Do not assume the answerto these questions will be too hard to implementor too expensive. It costs too much not to providethe support that will drive employees, and theiremployers, to the best performance possible.

35

O ne of the critical human resource issues ofthe 21st century is an organization’s abilityto refine and develop mechanisms to pro-

vide meaningful job performance feedback to allemployees. A positive and coherent understandingbetween the employee and supervisor as to what isacceptable job performance is essential for allemployee and management work relationships tosurvive.

Optimum development and proper utilization ofeach employee is essential to the success of anyorganization. “How am I doing?” is often one ofthe most urgent questions on an employee’s mindtoday. Providing factual, candid and objectiveanswers to this question is an effective means ofenhancing employee development and sustaininga sound employee relations program. The enhancement of understanding can beaccomplished in two basic ways:

JJoobb DDeessccrriippttiioonnss All employees must understand what is expectedof them in the performance of their jobs. Behav-ioral research data clearly indicates that manyorganizations throughout a global economy todaycontinue to persist in assuming the employee“knows” what is expected without ever discussingthe expectations of the job to be performed.

PPeerrffoorrmmaannccee AApppprraaiissaall Employee opinion survey data indicates the needfor employees to be given continuous perfor-mance feedback in a constructive, coaching, men-tor relationship. Management creates a high per-centage of its problems by totally ignoring the“need” to inform the employee how he/she isdoing, thus creating a high level of uncertainty,anxiety, low productivity and in many cases theloss of a loyal and productive employee.

Appraisal has been defined as the act of the judg-ing quality and value. Performance appraisal with-in the organizational context is the supervisor’sjudgment of how well an employee performshis/her job based on established job measure-ment criteria. Note that it is job performancewhich is being appraised and rated. A perfor-mance appraisal that focuses primarily on employ-ee personality traits does little to enhance produc-tivity or identify training, career developmentalneeds, potential promotability, and contributionsan employee is making toward meeting organiza-tional objectives.

Why Have A Performance Appraisal Program?Volumes have been written on the subject ofemployee performance appraisal. The argumentsfor and against formal appraisal systems continue.The increased demand for accountability by gov-ernment agencies and related legislation, whichwe will address later, including legal challenges ofhuman resource decisions, have made perfor-mance appraisal systems almost a necessity ratherthan a luxury for all organizations.

The human resource professional must direct aperformance appraisal system for many reasons,not the least of which is a well documentedmethod that can be accepted as a valid defense inlitigation proceedings. The Equal EmploymentOpportunity Commission’s Uniform SelectionGuidelines have literally forced performanceappraisal systems into being.

There are many other valid reasons to conductemployee performance appraisals and manypotential uses for the information generated.Decisions related to promotability, advancement,selection for training, salary administration, disci-pline and even potential termination may flow


PERFORMANCE APPRAISAL AS AN EMPLOYEE DEVELOPMENT TOOLby Howard M. Pardue, Ph.D., SPHR

An SHRM® White Paper

36


from the results of an objective performanceappraisal process.

What Elements Make A Good PerformanceAppraisal System? Ideally the ingredients of an effective state-of-the-art performance appraisal program should bedesigned to ensure: 1. That all employees are periodically interviewedregarding their career progress to assist them indeveloping to the fullest. 2. That a systematic measure of an employee’soverall value to the organization is recorded. 3. That essential information concerning thestrengths and weaknesses of all employees in rela-tion to career development including potentialfor advancement and suitability for other posi-tions and training is recorded.

The major underlying principles of a truly partic-ipative, performance oriented appraisal programare as follows: 1. The appraisal of a subordinate’s job perfor-mance is a part of the normal day-to-day responsi-bility of every supervisor and relates directly tohis/her responsibility for planning and assign-ment of work. 2. Criteria for job performance must be relatedto the job itself. Sufficient flexibility should bemaintained so that achievement measures can beset to reflect accurately and realistically theunique requirements of different positions, levelsof assignment and operating conditions. 3. Improvement in job performance can beaccomplished most effectively if the employeeparticipates directly in establishing the achieve-ment measures for his/her job. To do a betterjob, the employee should know what is expected,how he/she is doing on the job and where assis-tance can be obtained when needed.

4. Employees are inclined to accept suggestionsfor improving and/or maintaining their perfor-mance when they are provided feedback on acontinuing basis. 5. The supervisor’s prime responsibility is tocoach and collaborate in an individual’s develop-ment. Two major forces in an employee’s devel-opment must be given full consideration toachieve maximum results:

a. The employee must recognize and under-stand the responsibility of his/her immediatesupervisor as that of an active partner and coachin providing career and job related assistance.

b. The supervisor must recognize and be con-cerned with the employee’s personal aspirations,motivation and career growth needs. 6. An effective performance evaluation systemrequires supervisors to communicate job stan-dards and other expectations to employeesbefore the evaluation period begins. By doing so,employees know what constitutes good perfor-mance and the supervisor can then more objec-tively assess performance. 7. Effective compensation systems must link per-formance achievements to salary increase consid-erations. Even the best compensation plan is diffi-cult to administer if performance is not the majordetermining factor in granting salary increases. 8. Frequent feedback sessions must be conductedwith employees throughout the evaluation peri-od. Periodic “mini-session” reviews, held perhapsmonthly helps minimize the employee frombeing surprised at appraisal time, and helpsmaintain focus. 9. Career pathing and counseling must be a partof the performance review cycle. By focusing onperformance accomplishments, more preciseguidance can be given to employees about careeroptions with the company, and the achievementof agreed upon milestones.

37


Performance Appraisal Legal Issues Earlier mention was made of the need to designappraisal programs that will meet legal guidelines.Defending performance appraisals has attractedincreased attention in the last few years, especiallysince most organizations are now aware thathuman resource decisions based on performanceappraisals can affect employment conditions forprotected employee groups.

The seriousness of this problem is underscored bythe fact that several million employees have theirjob performance appraisal annually for purposesof salary review, promotion consideration, humanresource development progress, and potential cor-rective action items.

Although several articles which have appeared inhuman resources literature since the mid-70’shave been useful in highlighting specific legalissues involving performance appraisal, few havearticulated the relative importance of the variousfactors that explain how organizations can effec-tively develop and successfully defend their perfor-mance system before the Equal EmploymentOpportunity Commission or in the courts.

All organizations must understand how vulnerabletheir performance appraisal programs are to litiga-tion and whether they are likely to be successful indefending their programs in the event of an officialcomplaint. In the event the employer fails to showthat its performance appraisal program wasdesigned and administered on the basis of the Uni-form Selection Guidelines established under theauthority of Title VII of the Civil Rights Act of 1964as amended, the court may render the employerliable for back pay, court costs, specific managementtraining programs for and/or promotion of protect-ed group employees as part of the case settlement.

An analysis of recent court decisions reveal thatcircumstances involved in a successfully defendedperformance appraisal programs are described asfollows: 1. Supervisors were given specific written instruc-tions and training on how to complete theappraisals. 2. Job content was used in developing the basis ofthe appraisal instrument. 3. Appraisals were behavior oriented rather thanpersonality trait oriented. 4. The results of the completed appraisal werereviewed with the employee appraised and theemployee was given the opportunity to commentand submit written comments if appropriate.

In addition, privacy legislation has been intro-duced or enacted in numerous states since theearly 90s. In 1996 the Privacy Protection StudyCommittee released a report titled “Personal Pri-vacy in an Information Society.” Among the 34recommendations made by the Commission wasthe suggestion that an effective privacy protectionpolicy must provide employees access to recordsrelating to their qualifications for promotion, payraises or to records relating to discipline andpotential termination.

Beyond the direct and potential legal implicationsrelating to employee access to their records, thereare other strong reasons for allowing such access.First is the issue of employee confidence in theperformance appraisal system’s reasonablenessand fairness. If the results of performanceappraisals are withheld, uncertainty and suspicionwill surely result. Second, if appraisals are to influ-ence performance in a positive way, results mustbe communicated. Third, access to results pro-vides an opportunity for an individual to chal-lenge judgments or to correct simple mistakes

38


which are inevitable in any system. Finally, accessto such information is essential if the due processrights of employees are to be assured.

In the final analysis, the integrity, the effective-ness and the legal defensibility of a performanceappraisal system will depend on its legitimacy as atool for making employment decisions.

Employers should attempt to reduce the possibili-ty that an employee will be able to establish aprima facie case of discrimination if for examplethere is a disproportionately small percentage offemales and minorities in the top four EEO cate-gories by establishing affirmative action goals. Sec-ond, the employer must be certain that the con-tent of the performance appraisal system is basedon job content and that performance measuresare job related, and are not based on generaltraits that lend themselves to opinion, subjectivejudgment and rater bias. Third, in administeringthe program detailed and clearly written instruc-tions must be given to each manager. Finally, themanager must be required to discuss the ratingresults with each employee to ensure appraisalsessions are productive and contribute to employ-ee effectiveness. Each manager must be trained inhow to rate employee performance and how toprovide feedback in a positive fashion.

Conclusion The 21st century promises a more demanding andvisible role for all human resource professionals.This role requires developing a futuristic strategicplan which articulates human resource programswhich address a myriad of issues. Creating andmaintaining viable performance appraisal pro-grams is essential to organization growth. Yet, evenmore significant initiatives will be developing avisionary human resources agenda that is integrat-

ed into the organization’s mission and to correlatespecific programs such as compensation issues,performance appraisal and job evaluation process-es conceptually and operationally.

In the 21st century continued changes will occurin terms of who works in organizations, why theywork and what they do. A major part of the humanresource professional’s responsibility will be tocoach operating managers and supervisors to real-ize that the manner in which they manage key HRdecisions such as promotion and termination is ofinterest to several parties, to include one or morefederal regulatory agencies. Senior executivesmust be prepared and encouraged to implementstrategies for managing employees in ways that arefair and ethical and will meet government andpublic scrutiny standards. Clearly, supervisorymanagement development must move from a onetime orientation session to regular developmentalprograms to update, enlighten and expand basicmanagement leadership skills. Designing effectiveperformance appraisal programs to meet theneeds of the organization and its employeesrequires substantial effort, dedication and commit-ment from the CEO down through all levels of theorganization.

Thanks to Howard Pardue, PhD., SPHR, for contribut-ing this article. Many of the suggestions and philosoph-ical views in this article were inspired by cumulativeexperiences as a practitioner and consultant in coordi-nating the implementation of organization-wideappraisal programs in a variety of industry segmentsand cultures. This paper is intended as general infor-mation, and is not a substitute for legal or other profes-sional advice.

For more information on this subject, send an e-mail tothe SHRM Information Center at [email protected]

39

I n the 21st century, we cannot continue to emo-tionally abuse our most valued assets (employ-ees) with the annual bloodletting called

Performance Evaluation. In today’s business envi-ronment where competitive advantages are deter-mined by price, speed and quality, we need anevaluation process that promotes the corporategoal of Continuous Improvement on an individuallevel. We need to replace Performance Evalua-tions with Process Evaluations!

SStteepp ##11 -- TThhee PPrroocceessss--OOrriieenntteedd JJoobb DDeessccrriippttiioonnLet’s start with the basics - the Job Description. Inreviewing the garden-variety job description, asidefrom the standard sections for ADA compliance,reporting lines, KSA requirements, etc., there is asection that describes the job with the heading

Activities, Responsibilities, Duties, or Tasks. Thissection is supposed to be representative of the jobto be performed. However, it typically only pro-vides a cursory list of activities such as: • Prepares a variety of reports • Handles customer complaints • Provides accurate and timely information • Establishes and maintains close liaison with

clients. This section of the job description should identifythe core activities of the job along with the mostsignificant process steps for an activity and thequantitative standards for each process step. Forexample, the above activity, “Prepares a variety ofreports,” can be broken down into the specificreports to be completed with process steps andoutcomes for each report as follows:


Change Performance Evaluations to Process EvaluationsBy Richard J. Lukesh

An SHRM® White Paper

TASKS/DUTIES PROCESS ACTIVITIES & INPUTS STANDARDS & OUTPUTS

PROCESS-ORIENTED JOB DESCRIPTION

Completesmonthly SalesReport.

Collects Sales Rep Monthly TerritoryWorksheets via fax or e-mail.

Calls Sales Reps about missing Work-sheets & information missing from theWorksheets.

Inputs Worksheet data on Excelspreadsheets.

Prints & proofs Sales Report.

Delivers completed Sales Report to VPof Sales.

By 5:00PM on the last workday ofeach month.

By 11:00AM on the 1st working dayof the new month.

Zero misspelled words & financial datamust balance with Region Summaries.

Between 9:00AM & 11:00AM on the2nd working day of the new month.

40


An entire job description written in a process-ori-ented format accomplishes the following: • A manager can identify the major process stepsand outcomes for which an employee will be heldaccountable. • An employee will have a clear understanding ofthe expectations of each activity. • A manager can monitor changes in the numberof core activities along with the time commit-ment and costs of process activities as those activi-ties increase or decrease with business volume. • The employee and manager can jointly andobjectively review process steps and outcomesthat affect departmental performance.

By developing a Process-Oriented Job Descrip-tion with an employee, the manager has laid thefoundation for Continuous Improvement on anindividual level.

SStteepp ##22 -- TThhee PPrroocceessss EEvvaalluuaattiioonnIn today’s customer competitive environment,companies are installing Customer RelationshipManagement (CRM) systems as a way to individu-alize product and service offerings to the specificneeds of each customer. Can we in managementafford to do any less with our employees?

The days of the “one evaluation form fits all” arelong gone. If we are going to reduce accelerateddepreciation (turnover) of our people assets, weneed to respond to the day-to-day issues of thejob (the processes) that affect the quality of worklife for each employee. A Process Evaluation rep-resents a major tool for improving quality of worklife. However, the format of a Process Evaluationbecomes critical to its success.

If a Process-Oriented Job Description is properlydeveloped, then 99% of the Process Evaluation

form is complete. To finalize the Process Evalua-tion, a manager simply adds three columns nextto the Standards & Outputs column with theheadings:

• Falls Below Standard • Meets Standard • Exceeds Standard.

These three choices to the outcome of a givenprocess step parallel the concepts used in processcontrol charts to determine whether a process is“in control.” In Statistical Process Control (SPC)terms, a process is described as “doing its best”and “in control” (Meets Standard) when theprocess outcomes behave with random variabilitywithin the Lower Specification Limit (LSL) andthe Upper Specification Limit (USL) of theprocess. Employee performance (process out-comes) can be thought of in the same terms andeven plotted on control charts to determine if theoutcomes are stable and predictable, or whetherthe outcomes represent excessive variation thussignaling the presence of “special causes.”

In essence when a Process-Oriented Job Descrip-tion is developed correctly, the manager simulta-neously creates a position specific Process Evalua-tion form. At the time of the Process Evaluation(NOT Performance Evaluation), the employeeand manager discuss the processes and outcomesof the position and jointly review strategies toimprove quality, reduce cycle time and lowerprocess costs. This process review simply analyzesthe three dimensions of competitiveness (quality,speed, price/costs) on a micro level that theorganization should be analyzing on a macrolevel. Additionally, the Process Evaluationupdates the job description yearly.

41


For an executive who is assigned strategic goalssuch as “Improve market share by 10%,” theprocess-oriented format works equally well. Aprocess-oriented goal would require an executiveto identify the process steps and benchmark stan-dards for each step. A goal, such as improvingmarket share, may have 25 significant steps, manyof which are highly interdependent on otherareas such as suppliers, manufacturing, marketresearch, advertising, recruiting and training ofnew sales reps, etc. These steps must be preciselyorchestrated to achieve the desired output; oth-erwise, the year-end evaluation results in execu-tive finger pointing and excuses. It is the orches-tration of these steps, as well the outcome of eachstep, that an executive should be measuredagainst, not just the end result.

The Process Evaluation creates a collaborativeemployee/manager environment where theProcess-Oriented Job Description becomes thedriving element of a company’s ContinuousImprovement effort and the job descriptionbecomes a work-in-process rather than a onceand done event.

SStteepp ##33 -- TThhee BBeehhaavviioorr AAsssseessssmmeennttQuestion: “Can an employee ‘meet the standard’on every process output and be fired for poor per-formance?” Answer: “No!” However, the employeecan “meet the standard” on every process outputand be terminated for unacceptable behaviors.

There seems to be an unwritten rule in businessthat suggests we hire people for their hard skillssuch as degrees, achievements and experience,but we terminate them for lack of soft skills suchas ability to work in a team, misplaced emotion,inability to change, inconsiderate treatment ofsubordinates or customers, etc.

The truth is that employers have a right to expectemployees to exhibit certain positive behaviors orat the very least not exhibit certain negativebehaviors. On the other hand, employees havethe right to know what behaviors the employerwill reward and punish.

If a manager has an employee who “meets the stan-dard” on all process outputs, but is a disruptiveforce within the organization, the manager has anobligation to confront the employee with theerrant behavior and develop a plan to minimize oreliminate the behavior. If the behavior does notchange, the employee may be terminated.

Simply stated, an employee must meet the behav-ior expectations of his/her manager. Despite thefact that two separate managers may have differ-ent behavior expectations for the same depart-ment, employees must satisfy the behavior expec-tations of the person in charge. For example, anindividual who manages a Collection Agency maydemand that employees present themselves todelinquent accounts in a very demanding andconfrontational manner. Another person manag-ing the same Agency may require Collectors touse a “soft-sell” consultative approach. In eithersituation, employees who may have been risingstars under one manager are now examples ofunacceptable behavior to the other manager.

This example illustrates the need for a managerto develop a representative list of behaviors thathe/she considers exemplary of successful/topperformers and those behaviors considered typi-cal of unsuccessful/low performers. By creatingthis list of behaviors, the manager can objectifymany of his/her subjective behavior expecta-tions. This behavior list can then be distributedto employees, reviewed with the employees and

42


should be part of an employee-manager discus-sion disassociated from a Process Evaluation. It isimperative that the Manager reviews this behav-ior list with Human Resources to avoid any dis-crimination problems as a result of identifyingbehaviors that represent ethnic/cultural differ-ences.

The behavior list forms the basis of a BehaviorAssessment in which the manager engages anemployee in a discussion about the manager’sobservation of positive and negative interperson-al skills exhibited by the employee. Clearly, thisexercise is very subjective compared to the objec-tive Process Evaluation. However, the manager ispaid to maintain a productive and cohesive team.With every team there are rules of behaviordesigned to maximize the output of the team orat the very least minimize disruption to the team.When an employee does not play by the man-ager’s rules, despite how subjective the rules maybe (Caveat: the rules must be legal), the manag-er, as the team’s coach, is obligated to “bench theplayer,” regardless of the exemplary individualoutput of the person.

By separating Behavior Assessment from ProcessEvaluation, a manager separates any errant

behaviors from outcomes of the job. If however,the behavior is a factor that truly affects a processoutcome, then the specific behavior needs to beaddressed in the Process Evaluation as a “specialcause” that affects the variability of the processand causes the process to be “out of control.”

For example if an employee were frequently latefor work but “meets standard” on all outcomes, itwould be inappropriate to commingle anexchange about this behavior at the Process Eval-uation, as this may tend to hinder the employee’sfull participation in the discussion of processsteps and outcomes. However, in the case of aCollection Agency employee who falls below theLSL of the Collection Ratio for the Agencybecause of an abrasive phone presence, theProcess Evaluation would be an appropriate set-ting to review this behavior as a “special cause” ofvariation in process output. In this latter situa-tion, the employee and manager would brain-storm a list of “special causes” that could affectthe process outcome (Collection Ratio) to whichthe manager would add his/her observations ofthe employee’s abrasive telephone mannerisms.An action plan would then be developed to mini-mize or eliminate all of the “special causes”affecting process outcomes.

43


Conclusion Many organizations have established ContinuousImprovement programs that affect the high visi-bility processes with the largest impact on thebottom line. However, these same organizationsfail to realize that the high visibility processes aresupported by a collection of low visibility input-process-output events.

As the objective and quantifiable techniques ofContinuous Improvement are applied to individ-ual positions in a Process Evaluation, the natureof the employee-employer relationship becomesmore collaborative and less confrontational.When employees comprehend how their posi-tions can be enriched by process improvementmethodologies, the extension of the ContinuousImprovement philosophy to major business

processes is not such a huge cultural or educa-tional leap.

A Process Evaluation is a tool for dramaticallyimproving individual quality, productivity andefficiency while eliminating historically one ofthe most hated employment events - the AnnualPerformance Evaluation.

Thanks to Richard J, Lukesh for contributing this arti-cle. It is intended as information only and is not a sub-stitute for legal or professional advice. Richard J.Lukesh is a Principal in the consulting firm of Region-al Services, Inc. based in Exton, PA.

For more information on this subject, send an e-mail tothe SHRM Information Center at [email protected].

Performance management survey

Education

Transcript of Performance management survey