This is Jack Welch’s question. He says usually 20% raise hands.
Performance management term first coined by Dr. Aubrey Daniels / late 1970s to describe a technology for managing both behavior and results . Aubrey C. Daniels , Ph.D. : American clinical psychologist, “the father of performance management”, as he was one of the first to make extensive use of the science of behavior analysis in business. More than thirty years ago, Daniels began pursuing and acting on his global mission: to help people and organizations apply the scientifically proven laws of human behavior to optimize performance. P erformance appraisal : P erformance appraisal sets standards and evaluates past performance based on such standards . REACTIVE P erformance management : P erformance management aims at managing performance real-time to ensure performance reaches the desired levels. PROACTIVE I ncreased competiti on and rapid changes in the external environment ha ve forced organizations to shift from performance appraisals to the performance management to improve organizational performance. Scope The basic difference between performance appraisal vs performance management lies in the SCOPE . Both performance appraisals and performance management > SET targets , SET guidelines for successful perf, REVIEW the achievement , CREATE ways to enable employees to meet targets , IDENTIFY obstacles . Performance appraisal : past performance, undertaken once or twice a year. N o direct intervention to the employee’s day-to-day work. Performance management is a CONTINUOUS and on-going proactive , on a real-time basis, without reviews or corrective actions at some point in the future. It remains ingrained in the employee’s day-to-day work . In some organizations performance appraisal becomes part of an overall performance management system. The appraisal takes place at periodic intervals and becomes the basis to make corrective actions and set further targets. Approach In performance management, the manager IS A COACH OR MENTOR. I n performance appraisal, the supervisor acts as a JUDGE . Methodology The performance appraisal tends to be more FORMAL and STRUCTURED . Performance management is a more CASUAL and FLEXIBLE method of evaluating an employee's performance. I t allows for considerable changes to such guidelines depending on the specific circumstances. Performance management remains customized for the individual employee’s actual work, whereas performance appraisal is usually standardized based on the employee's designation, or at best on the employee’s job description rather than on the employee’s actual work exigencies. PM: real-time monitoring and correcting of performance help improve employee performance much better compared to the traditional performance appraisal system. PM: allows for linkage of performance to both long-term and short-term corporate goals. For instance, if the organization has a short-term aim to increase margins during the season, such a linkage comes only in the next year’s performance appraisal, or the linkage might not come at all. Employees tend to receive favorable reviews and bonuses even when the organization fails to achieve such short-term goals. PM: focuses on actual performance instead of memories of past performance. As such it removes from the evaluation distortions that could have either helped with performing the job better or special circumstances impeding performance. PM: eliminates stress arising from the impending appraisals. PM: concentrates on the immediate and most relevant concerns, whereas performance appraisal forces looking into the past, which in many causes would remain irrelevant and force time away from pressing concerns.
Link of the performance management to the strategic HR management Link of the performance management to other HR functions
Performance appraisal: Thomas B Wilson: International authority in reward systems Books: Innovative Reward Systems for the Changing Workplace / Rewards That Drive High Performance
2002, the Corporate Executive Board’s L & Development Roundtable S urvey / 20,000 part.
90% of companies have a performance management system Ony 5% of the employees are satisfied with their performance management system. In 1992, 20% were satisfied. (Bricker survey: Are companies satisfied with their performance management systems?) In 1997, this decreased to 5%. (Survey by SHRM in US) 2009 > 4 OUT OF 5 employees are dissatisfied with their reviews and think that it doesnt reflect their real work.
Performance appraisals can be an effective tool if they are used in a constructive and motivating manner. S pecific areas of weakness and strength. It is important that an employee know s the areas where he is under-performing and where he is doing a good job . A performance appraisal should be a well-thought out instrument . When you do a good performance appraisal for an employee , it provides an opportunity for clarification of any performance gaps.
Link to reward management
I f the person running the appraisal isn't handling it efficiently, professionally and with a long-term focus, even the best procedures won't be effective . Performance appraisals are almost always a 1-2 times a year process. They usually become 'tick the box' exercises that cause a great deal of anxiety for everyone and once they're comp l eted , nobody takes a second look at them . Difficult feedback gets postponed or sugar-coated. A lot of managers don't want to write about a bad performance in order to avoid for being the reason why that person not getting a n increase or promotion. In turn, appraisals can also lack objectivity and, therefore, have more personal rather than professional views included. In addition, if everything is focused on the appraisal process : A nxiety and l ack of motivation and productivity.
Motivation 3.0 >> Autonomy – Mastery - Purpose Behavioral scientists often divide what we do on the job or learn in school in two categories: Algorithmic and heuristic. An algorithmic task is one in which you follow a set of established instructions down a single pathway to one conclusion. That is, there is an algorithm to solve it. A heuristic task is the opposite: Precisely because no algorithm exists for it, you have to experiment with possibilities and devise a novel solution. During the 20th century, most work was algorithmic. McKinsey&Co estimates that in the US, only 30% of job growth now comes from an algorithmic work, while 70% comes from heuristic work. That is, the jobs are fast becoming more of heuristic nature. A key reason: Routine work can be outsourced or automated; atristic, empathic nonroutine work generally cannot. End of carrots and sticks: The implications for motivation are vast. Researches (Theresa Amabile / Harvard) have found out that external rewards and punishments (carrots and sticks) can work well with algorithmic tasks. But they can be devastating for heuristic ones. Seven deadly flaws of carrots and sticks: They can extinguish intrinsic motivation They can diminish performance They can crush creativity They can crowd out good behaviour They can encourage cheating, shortcuts and unethical behavior. They can become addictive They can foster short term thinking One source of frustration in the workplace is the frequent mismatch between what people must do and what people can do. When what they must do exceeds their capabilities, the result is anxiety. When what the must do falls short of their capabilities, the result is boredom. When the match is just right, the result can be glamorous. Motivation 2.0 centered on profit maximization. Motivation 3.0 does not reject profits, but it places equal emphasis on purpose maximization
Every company has a different culture and has different values to promote. Also, the industry a company operates in affects its culture and the wat it is doing business. Your performance system has to be in line with your company culture, your values and the reality of your industry. Example: Banking (high security, accuracy, no creativity and risk taking) vs media (creativity, less formal, high speed) What do you want to promote when you set up a performance management system? What do you want to pass as message to your employees? Unless you get sincere participation and trust from all your employees, it will not be possible to make your system live. Share and be open to feedback and suggestions. Try to collect their feedback, listen to them. Check for the vulnerabilities of the system as well as how it is implemented regularly.
.... or does it just measure financial results? ... Or do people think it is a waste of time? ... Or not?
Performance management is a process that is linked to all other HR processes and functions. It is not possible to make it independent. This is one of the reasons people lose faith in the system. > Remember «nothing happens»? Where is the employee in the picture of performance management? Where is the link between him and the company strategy? Why do we do this afterall?
Not looking at previous appraisal reports of the employee. A truly good a ppraisal is actually an agreed summary of what has been happening on an on-going basis between appraisals. If it is left to review twice a year , all the opportunities to guide the employee to improve get missed. People need to be engaged in the idea that managing people i s continuous. A great appraisal needs to be fair, objective, two-way, realistic, clear, on-going and specific. Dont let your managers focus only on the appraisals.
People tend to overrate themselves. 360 degree feedback decreases the subjectivity of single evaluator. It functions as a sounding board for people. Increases trust in the system. But be careful about the confidentiality.
Non monetary rewards are even more powerful. A thank you note is sometimes more powerful than a bonus. .
But o nly 3 5% of employees agree that their managers co m municat e performance standards and provide fair and accurate feedback to help them do their jobs better . 2002, the Corporate Executive Board’s L & Development Roundtable S urvey / 20,000 part.
These goals, I can never reach! I have the meanest manager when it comes to rating! He told me I was not cooperative, but didnt give me any examples! Her phone didnt stop ringing during our performance appraisal! I got the best rating, but nothing happens! Performance mgt in our company is nothing but a myth!
When used in a constructive and motivating way... ...employees get to know what they do well and where they need to improve.
Does our system really measure our company values? ... 3 questions you need to ask yourself: Does our system get implemented with sincerity? Do people really learn what they must do to improve their performance?
If you say no to any of these, you can well do without your existing system Or you need to do something to improve it NOW
Performance appraisals Performance management system itself
The performance management system itself The misfit > Company culture and the system Low credibility > Losing people’s TRUST in the system No link to other HR functions > Leaving it ALONE and ISOLATED. SHALLOW > Only done via appraisals 1-2 times a year. No follow up. Forgetting that it’s all about HUMAN Failing to make it CLEAR and SIMPLE Failing to explain the employee the WHY and WHERE
No preparation for the appraisal interview Leaving it to the last minute, postponing it, cancelling it. Making it a monologue, not listening. Not recording, failing to create a performance history. Using old fashioned methods. Confusing future potential with current performance. Failing to provide examples. Criticisizing the person, not the job done/performance. Having hard time delivering difficult messages. The performance appraisal
Too kind > Overrating a bad performer. Taking a blaming attitude. Making it only about salary increase. Oscillating between the best and the worst ratings. OR > Rating everyone as «average». Surprises! Failing to agree upon the objectives. Comparing the employee with other employees. Forgetting the legal aspect. The performance appraisal
Jack Welch, Winning Make your system a rigorous, nonbureaucratic evaluation system. Very few companies have meaningful evaluation systems in place. That’s not just bad, it’s terrible!
Don’t focus on forms and procedures. Stay away from the mechanic of the system. Forget the traditional, focus on the essential.
But first and foremost.... Remember Motivation 3.0! Create a work environment where everyone feels the HUMAN element where the job is the REWARD itself where a good performance management system HELPS YOU BUILD THE FUTURE
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