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Designing a performance management system


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Designing a performance management system

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Designing a performance management system

  1. 1. Designing a performance management systemDesigning and using a set of reliable and valid leadership competencies is critical fororganizations seeking to go from point A to point B. Leadership competencies are anideal profile specifying the types of skills, knowledge, and behavioral traits you wantyour leaders to possess, and therefore, exhibit. Leadership competencies can used as partof a broader talent management system and succession planning, for leadershipidentification and development purposes, and/or as part of a performance managementsystem - e.g., via a 360 degree feedback.Despite the prohibitive cost associated with its design and use - anywhere from say,$75,000 to $400,000, depending on the size and scope of the project - many organizationsfall short of the reliability and validity requirements set forth by such governing bodies asAPA (American Psychological Association) and SIOP (Society for Industrial-Organizational Psychologists). As a psychometrician and a consultant, I have found thefollowing five steps to be common mistakes in leadership competency design.1. Starting from the top - Many believe (HR/OD professionals and consultants alike) thatthere are specific leadership competencies that are fixed - meaning that if you find leaderspossessing certain qualities (critical thinking skills, strategic orientation, marketawareness etc.), you can bring him/her onboard and he/she will bring out the magic. Thisis simply not true. Given the large number (in the hundreds) and variations incompetencies purported to be important, it is highly unlikely that one set of competenciesapply to all organizations. As with Olympic athletes, while one generally needs to be"fit," this does not guarantee a gold medal in every event. In other words, like athletes,different organization need different sets of competencies in order to optimize theircompetitive edge. This means starting from the top. A solid set of competency, therefore,is modeled after what an organization needs; not something offered "off-the-shelf." Thisstep ensures that you identify precisely those skills you feel is "necessary" for yourorganization to be successful.2. Validating with existing leaders - Once you have a set of competencies deemedimportant, many organizations fail to validate the competencies against incumbents. It iscritical to check the competencies with existing leaders to obtain their thoughts on howimportant each competency (and related questions) is. This step is important for tworeasons: First, it legitimizes the competencies in the eyes of those who are being assessed- i.e., the leaders themselves; thus, getting them to buy-in on the idea. Second, it satisfiesthe "face validity" requirement set forth in the major governing bodies. In other words, ifI am design a test to select competent mechanics, I need to run the test by real mechanicsin order to be sure that the test is measuring what it is intending to measure.3. Validating against actual performance - Even if organizations are savvy enough tocomplete the first two steps, many skip over what is known as a "concurrent validation"
  2. 2. process - i.e., assessing existing leaders on the new competencies and comparing thosescores against their performance evaluations. The most objective was to do this is througha 360 degree assessment - i.e., obtaining judgments from subordinates, peers, andsupervisors. In this way, an objective scores on each of the competency is obtainedwithout the inflated scores often seen with self-rated assessments. After some reliabilitychecks and data cleaning, the aggregated scores are compared against the same leaderspast performance scores. If the set of competencies deemed important for an organizationare, in fact, what the organization values, then the correlation between those samecompetencies and performance ratings should be positive. This is called "concurrentvalidation."4. Validation against future performance - In addition to validating against currentperformance levels, the same competencies should be compared against performance atsome point in the future - e.g., 9 to 12 months. This technique, known as "predictivevalidation," further ensures that the set of competencies are, in fact, deemed importantand that leaders are being assessed - at least partially - on those competencies.Unfortunately, this step is rarely done in organizations. **Note: Although unlikely, it ispossible that performance management system is entirely different, and event, opposed tothe set of competencies being assessed. In such a case, the performance appraisal systemneeds to be refined to be aligned with the competencies.5. Setting competency cut-off scores or categories - Finally, once data have been obtainedon the competencies from each leader, there is a need classify individuals according totheir scores on each of the competencies. While it may be tempting to choose an arbitrarycategory, this may lead to classifying most, if not all, leaders as needing improvement.Thus, it is better to allow the data to choose the size of the difference that is meaningfulto the population being tested. This approach, known as the "data-driven" method, isdone by using the "standard deviation" (or average difference) of the competency scores.This approach ensures that the different score categories are based on the population athand (each organization will differ on what this deviation score is) and is a known"legally defensible" strategy.In sum, there are a number of common mistakes (mostly by omission) that occur in thedevelopment of leadership competencies. While the above steps may seem overlyrigorous, there are ways to incorporate them without making the process overly daunting.The result is a set of competencies that:(a) will be viewed by incumbents as legitimate,(b) demonstrates proof that it is measuring what it is supposed to be measuring, and(c) ultimately allow you to place complete confidence in the intervention stemming fromits use. : Over 200 ebooks, templates, forms forperformance appraisal.