Most organizations love the concept of managing performance, and most employees think of this exercise in a narrow dimension. They often think of the dialogue as heavily loaded with a pre-determined agenda focused on a financial outcome for them. Is it about managing performance, or managing the behavior that will produce the performance? And if it is indeed about influencing the person so that he has clarity of agreed outcomes and the support available to him to achieve these, are organizations doing lip service to it or are they serious about the process? Are they really influencing his behavior or is the Performance Management system seen as a fixed match?
This is not just a provocative statement. The biggest power that a manager possesses is his freedom of discretion or latitude in decision making. Traditional HR depended on tools like the Bell Curve to ensure that the financial burden of salary increases was managed. The underlying assumption was that the Gaussian curve would apply to any organization. The curve itself challenged the line manager and in his mind deprived him of the latitude in rating his people. In my view this was more an emotional response than an objective one. He resisted the Bell Curve simply because he thought it took away his power. A research paper I read (done at IIM-A) spoke of replacing the Bell Curve with the Power Curve. It hinted that the performance of the organization was driven by a minority of superstars, supported ably by a thick band of moderate performers and had a small base of dead wood.
Let me share my own experience of observing the PMS across multiple organizations:
1. Does it measure business outcomes or activities:
I have seen some of the senior-most managers try and hide behind activities and avoid committing themselves to clearly stated financial or business or people outcomes. They would keep them very open-ended and this sends a message to their teams. In future I see business holding their leaders accountable to at least 70% outcome driven KPIs. "Keeping team motivated" will no longer be a KPI with 25% weightage!
2. Individual goals vs Team goals and Functional vs Process goals:
While we love to talk about inter-dependence and collaboration, how many of us are measured on team goals? Unless you measure and reward on team based goals, especially at senior levels, correct messaging will not happen. I am not talking of a small portion of Variable linked to company's revenue and profit. Companies will need to look at larger KPIs that transcend at process or project outcomes than on functional outcomes.
3. Kill the Bell Curve. Long live the Bell Curve:
If organizations can move to measuring people with a solid linkage to business outcomes, they may still get a curve resembling the Gaussian Bell Curve, but closer to the Power Curve I mentioned above.
4. De-link development dialogue and appraisal discussion:
Unless organizations invest heavily in creating an honest culture where people are trained to have difficult conversations, the appraisal discussion will risk being an one dimensional wherein rating and financial outcome will hang heavy. Organizations could do well with having a dedicated dialogue backed by a good assessment process that focuses on development journey and career ladder of the person. This is where the employee, unburdened of the pressure of linking feedback to monetary outcomes will be encouraged to have a good discussion on how can he grow better.
5. Increased Frequency:
Digitization, business outcomes based discussions and a development plan that is being closely tracked; all these are fertile ingredients for encouraging a quarterly discussion on development. In most organizations a lot of performance feedback is real time and a lot of performance discussions are embedded in the multiple reviews most organizations have as a part of their governance structure. In addition to the structured quarterly or half-yearly dialogues, organizations will increasingly depend on performance feedback through the year using digital platforms.
6. A good balance of "What" and "How":
As we focus on the business outcomes, we need to assess the competencies that led to these. That will help us understand whether these success or failures were going to sustain and what kind of development needs emerge in helping the leader get to the next step.
7. Global frameworks:
Organizations need to have global frameworks backed by strong digital backbones so their entire global footprint is being motivated to have the same value system and leadership competencies.
I feel the biggest challenge in shifting to converting the "Performance Dialogue" into a "Growth Dialogue" will be enabling the managers with the skill set to do so. What we do not know well always scares us. Most of us were never trained to assess people and their competencies or to have structured feedback sessions and are rarely trained to have difficult conversations.
While organizations will be able to measure business outcomes well, assessing leadership competencies will be an extremely important part of the performance discussion. Organizations will thus need to invest in:
1. Knowing which leadership competencies they want to measure universally. This will call for well researched company specific competency frameworks being developed.
2. Knowing how to measure these competencies: Developing tool kits to measure each identified competency.
3. Training Managers (not just HR Managers, but also line managers) to use these tools. Thus they will be able to get into behavioral event based discussions and identify which competencies are strengths and which need help on development.
The Performance Dialogue is here to stay. Like any human process, it will keep evolving and challenging us. It will always excite us with its power to shape the behavior of the entire organisation and thus is too precious to be left to the HR team alone!