1 1 Performance management defined 2 Performance management: five questions 3 The performance management cycle 4 The performance management sequence 5.

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1 Performance management defined2 Performance management: five questions3 The performance management cycle4 The performance management sequence5 What performance management is6 What performance management is not7 Performance management principles8 Developments in performance management9 Performance management activities10 Performance agreement11 Characteristics of good objectives12 Agreeing competency requirements13 Classification of performance measures14 Performance measures criteria15 Performance reviews: key features16 Preparing for the meeting: the manager’s role17 Preparing for the meeting: the individual’s role18 What to find out at a review meeting19 Conducting a review meeting20 Performance review questions

21 Listening22 Giving feedback23 Managing under-performers24 Performance management at Astra-Zeneca (1)25 Performance management at Astra-Zeneca (2)26 Performance management at Astra-Zeneca (3)27 Performance management at the Victoria &

Albert Museum28 Performance management at Halifax29 360-degree feedback: definition and rationale30 360-degree feedback model31 360-degree feedback methodology32 Example of 360-degree profile33 Balanced scorecard34 Introducing performance management35 Performance management: the big issues36 What’s it for?37 Do we have rating?38 How do we get buy-in from line managers?39 Performance management: key considerations

16 PERFORMANCE MANAGEMENT

Contents

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PERFORMANCE MANAGEMENT DEFINED

A strategic and integrated approach to delivering success to organizations by improving the performance of the people who work in them and by developing the capabilities of teams and

individual contributors.

3

PERFORMANCE MANAGEMENT:FIVE QUESTIONS

1. What do we mean by performance?

2. Can we identify good or poor performance?

3. Can we establish the cause of good or poor performance?

4. How can we motivate people to perform well?

5. Can we do all this fairly and consistently?

4

THE PERFORMANCE MANAGEMENT CYCLE

PERFORMANCE AND DEVELOPMENT AGREEMENT

Managing performance throughout the yearPerformance review

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Corporate StrategyBusiness PlansGoals & Targets

Company Competencies

Key Result Areas & Competencies

Performance and Development agreement

Structure Job description

Tasks & ResponsibilitiesJob Competencies

Information to compare Performance and KPI’s and

Competencies

Evaluation Performance against KPI’s & Competencies

Remuneration Consequences

Career & Development Plan

Rating & Potential AppraisalDevelopment Needs

Development Activities

Feedback on Performance

PERFORMANCE MANAGEMENT SEQUENCE

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WHAT PERFORMANCE MANAGEMENT IS: ITS FEATURES AND CONCERNS

• Aims – performance improvement and personal development.

• Strategic – concerned with how well the business functions in the longer term and with the creation of a culture of performance and continuous development.

• Integrated – aligns individual goals and values with corporate goals and values.

• Focus – on outcomes (results) and inputs (competencies).

• Management of expectations – helps individuals to understand their roles and what they are expected to achieve in terms of both outcomes and competency levels.

• Measurement, feedback and review – concerned with measuring performance (‘if you can’t measure it you can’t manage it’), feedback to individuals (self-generated or provided by their manager) and the review of outcomes as a basis for planning action.

• Dialogue – concerned with creating a climate in which a dialogue takes place between managers and individuals to define expectations, discuss outcomes, and agree development plans in order to achieve mutual understanding of what is to be achieved and developing people to ensure that it will be achieved.

• Continuous – performance management takes place throughout the year.

• Motivation – a powerful means of motivating people through feedback and recognition, and the identification of opportunities for growth (job enrichment), development (skills acquisition) and career progression.

• Role of line managers – performance management is owned and delivered by line managers.

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WHAT PERFORMANCE MANAGEMENT IS NOT

• The same as appraisal – performance management is about dialogue, agreement and mutual understanding. It is not a top-down system for judging the performance of people. It does not exist simply to produce a performance rating.

• A system – performance management is not a bureaucratic system that relies upon procedures and forms to generate outputs. It is a process that involves people (managers and individuals) working together continually to reach agreement on what needs to be done and how it should be done.

• A once-a-year event – the theme of an effective performance process is ‘managing performance all the year round’.

• Synonymous with performance-related pay – performance management may generate the information that informs performance-related pay decisions but can, and many people think should, be detached from the performance-related pay system so that the proper emphasis can be placed on its developmental purpose.

• Owned by the HR function – it is for line managers and their staff.

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• performance management is managing the business• a management tool which helps managers to manage• driven by corporate purpose and values• to obtain solutions that work• only interested in things you can do something about and get a

visible improvement• focus on changing behaviour rather than paperwork• it’s about how we manage people – it’s not a ‘system’.

PERFORMANCE MANAGEMENT PRINCIPLES

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• system• appraisal• outputs• performance-related pay• ratings common• top-down• monolithic• bureaucratic• owned by HR

• process• holistic• outputs/inputs• development• less rating• 360° feedback• adaptable• flexible• owned by users

DEVELOPMENTS IN PERFORMANCE MANAGEMENT

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• Performance agreement – an agreement between the manager and the individual on the latter’s objectives and the level of competency required (see slides 10–15).

• Performance review – a joint review of the performance of the individual by means of a dialogue between the individual and the manager (see slides 16–24).

• Personal development planning – an agreement on what the individual needs to do with the manager’s support to improve performance and develop skills (see slides in Section 18).

• Performance-related pay – may be associated with performance management through rating but many organizations believe that performance management is essentially a developmental activity and therefore uncouple performance pay decisions (see slides in Section 23).

PERFORMANCE MANAGEMENT ACTIVITIES

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PERFORMANCE AGREEMENT

The purpose of the performance agreement is to:

• agree objectives and competency level requirements

• agree on methods of measuring performance

• agree on plans for performance improvement and personal development

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CHARACTERISTICS OF GOOD OBJECTIVES

S = specific/testing – clear, unambiguous, understandable and challenging

M = measurable – in terms of quantity, quality, time or money

A = achievable – challenging but within the reach of a competent and committed person

R = relevant – to organizational objectives so that they and the individual’s goals are aligned

T = time-framed – to be completed within an agreed time scale.

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AGREEING COMPETENCY REQUIREMENTS

Ideally, a role profile should be available (and regularly updated), which sets out the competency levels required for the role and is aligned to the organization’s competency frameworks. The agreement and review of competencies can then be referenced to this profile.

If a profile does not exist, the agreement should be related to the competency framework for the organization or the relevant part of the organization.

In the absence of either a role profile or a relevant competency framework, the line manager and the individual have to discuss and agree competency levels for each of the main aspects of the role. The questions that needs to be answered for each aspect are:

• What knowledge and skills are required to carry out this task well?

• How will you know that it has been done well?

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CLASSIFICATION OF PERFORMANCE MEASURES

• Output – measurable data on results achieved.

• Outcome (impact) – attainment of defined standard (quality, level of service etc), changes in behaviour, completion of project or task, level of take up of service, successful innovation.

• Reaction – judgement by others: colleagues, internal or external clients or customers.

• Time – speed of response or turnaround, achievements compared with timetables, amount of backlog.

• Finance – income generated, added value, cost control.

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PERFORMANCE MEASURES CRITERIA

• related to organizational critical success factors• relevant to individual outcomes and competence requirements• cover all aspects of performance• focus on outputs and outcomes that can be clearly defined• verifiable – indicate the data or evidence that will be available

as the basis for measurement• provide basis for feedback and action.

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PERFORMANCE REVIEWS: KEY FEATURES

• forward looking – not a post-mortem • exchange of views (dialogue) • measurement• feedback• positive reinforcement• constructive• leads to an agreement.

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PREPARING FOR THE MEETING: THE MANAGER’S ROLE

• assess achievements – performance and development• decide on feedback• consider factors affecting performance• points for discussion• future directions and objectives.

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PREPARING FOR THE MEETING: THE INDIVIDUAL’S ROLE

• identify achievements• consider reasons for any shortcomings• development and training needs• areas where help or support would be useful• future hopes.

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WHAT TO FIND OUT AT A REVIEW MEETING

• what individuals have learned or need to learn• where they have got to• where they are going• how they are going to get there• what they believe they know and can do• what help or guidance they require.

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CONDUCTING A REVIEW MEETING

• encourage reviewee to do most of talking• listen actively• allow scope for reflection and analysis• analyse performance not personality• keep the whole period under review• no surprises• recognize achievement and reinforce strengths• end meeting positively with agreed action plan.

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PERFORMANCE REVIEW QUESTIONS

• Open – encourage the individual to talk.

• Closed – ask specific questions to elicit information.

• Probe – ask for further details or explanations of achievements or problems.

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LISTENING

• concentrate on the speaker• respond quickly• ask questions to clarify meaning• comment as necessary to show understanding.

23

GIVING FEEDBACK

• build feedback into the job• provide feedback on actual events• describe, do not judge• refer to specific instances• ask questions rather than make statements• get people to work things out for themselves• select key issues – focus on improvable areas• show understanding.

24

MANAGING UNDER-PERFORMERS

• identify and agree the problem• establish reason for shortfall• decide and agree on action required• resource the action• monitor and provide feedback.

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PERFORMANCE MANAGEMENT AT ASTRA-ZENECA (1)

Definition of performance management

A continuous cycle of discussions between the employee and the manager to plan and review work and development.

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PERFORMANCE MANAGEMENT AT ASTRA-ZENECA (2)

Stage 1

Business roles

Plan

Stage 2

Performance

planning

Evaluate Stage 4 Stage 3

Performance Performance

measurement development

Do

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PERFORMANCE MANAGEMENT AT ASTRA-ZENECA (3)

Four stages

1. Business role clarification – clear statement of role and objectives agreed.

2. Performance planning – agreement of targets to achieve the ‘plan-do-evaluate’ elements of managing performance.

3. Performance development – agree skills required and prepare individual development plan.

4. Performance measurement – provide ongoing feedback and an annual summary of an employee’s performance (no overall ratings).

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PERFORMANCE MANAGEMENT AT THE VICTORIA & ALBERT MUSEUM

Job description

(updated)

Evidence

(departmental)Evidence

(individual)

Corporate

planDepartmental

objectivesIndividual

objectives

Performance

standards

Attributes

Assessment

Countersigning officer review

Personal

development

plan

Ratings –

pay

decisions

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Performance planning

Personal development

planning

Balancedscorecard

Halifax development

framework

Individual performance

plan

Personal development

plan

Staff performance

Manager as coach

PERFORMANCE MANAGEMENT AT HALIFAX

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360-DEGREE FEEDBACK: DEFINITION AND RATIONALE

360-degree or multi-source feedback involves the assessment of an individual by a number of different people: managers, colleagues, subordinates and clients (external or internal customers) as illustrated on the next slide.

It recognizes that the performance of people is best seen from different viewpoints. The manager will only have a top-down and therefore partial impression while important characteristics, for example managing people, leadership and interpersonal relations with colleagues and clients, may not be measurable.

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360-DEGREE FEEDBACK MODEL

Individual

Manager

Direct reports

Customers/clientsColleagues

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360-DEGREE FEEDBACK METHODOLOGY

360-degree processes rely on questionnaires that ask for an evaluation such as ‘How well does … do …? The headings included in the performance management group’s orbit 360-degree questionnaire are:

• leadership

• team/player/manage people

• self-management

• communication

• vision

• organizational skills

• decision making

• expertise

• drive

• adaptability.

Feedback may be provided by a profile as illustrated in the next slide. It is usually anonymous and may be presented by an external consultant who is available to give advice and counselling.

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EXAMPLE OF 360-DEGREE PROFILE

Gives useful feedback

Establishes good working relationships

Open to new ideas

Values other’s opinions

Recognizes achievements

Scale 1 2 3 4 5

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BALANCED SCORECARDA method developed by Kaplan and Norton*, which is based on the philosophy that ‘what you measure is what you get’ and emphasizes that: ‘No single measure can provide a clear performance target or focus attention on the critical areas of the business.’ Managers want a balanced presentation of both financial and operational measures. The balanced score card consist of four elements as shown below (these elements are sometimes varied in individual applications while still retaining the principle of ‘balance’).

How do customers see us?

(customer perspective)

What must we excel at?

(internal perspective)

Can we continue to improve and create

value?

(innovation and learning perspective)

How do we look to shareholders?

(financial perspective)

* Source: Kaplan, R S and Norton, D P (1992) The balanced scorecard – measures that drive performance, Harvard Business Review, January–February

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INTRODUCING PERFORMANCE MANAGEMENT

• define purpose

• define approach

• involve line managers and staff in its development

• pilot test

• produce guidelines on the process

• inform all employees

• train managers and all other employees in the process and the skills required.

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PERFORMANCE MANAGEMENT: THE BIG ISSUES

What’s it for?

What’s it for?

Do we have rating?

Do we have rating?

How do we get management

buy-in?

How do we get management

buy-in?

How do we get fairness and consistency?

How do we get fairness and consistency?

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WHAT’S IT FOR?

Essential to be clear about its purpose, eg developmental, enhancing a performance culture, and to communicate that purpose to everyone.

38

DO WE HAVE RATING?

In many organizations ratings (eg A = excellent, performs well above expectations, B = performs above expectations, C = meets expectations and D = performs below expectations) are an essential part of performance management as a means of summing up judgements and providing the basis for performance-related pay.

However a growing number of organizations reject ratings because:

• they cannot convey the subtleties of the outcome of a thorough performance review

• they are judgemental and top-down – based on managerial opinion (which can be biased and inconsistent) and which is passed down to the individual

• if they are linked directly to performance-related they divert the attention of both parties away from the primary purpose of performance management, ie performance improvement and development, to limited considerations of the financial outcome of the process.

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HOW DO WE GET BUY-IN FROM LINE MANAGERS?

The biggest issue in performance management is getting line managers to do it well (or even to do it at all). Many line managers plead that they haven’t enough time and it’s a waste of time anyhow (they claim that they are doing it already which may or may not be true). To overcome this problem it is necessary to:

• obtain strong backing from the top – one of the core values of the organization, which they should promote, should be that performance management processes play an essential part in the effective management of the organization and managers will be expected to support this value

• involve line managers in the development of the process to achieve ‘ownership’

• provide training, guidance and encouragement to line management (this is the role of HR)

• enlist the support of enthusiastic and capable line managers to act as coaches and mentors for their colleagues

• include the management of performance as a key performance criterion for line managers

• review the performance of line managers in this respect and require performance improvements (the responsibility of the manager’s manager right up to the top).

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PERFORMANCE MANAGEMENT:KEY CONSIDERATIONS

• performance management is about running the business, it is what managers do – a natural process of management

• success depends on what the organization is and needs to be in its performance culture

• it is the process that is important not the system• focus on development, not pay• based on accepted principles but operates flexibly• effective communication, involvement and training essential.

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Your Experience

• As employee– Positive– Negative

• As manager– Positive– Negative

• Main Topics for Improvement ?

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Performance Management Practice

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Topics to discuss

• What is Performance Management

• What are methods

• What are procedures

• The use of Performance Management

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What is Performance ?

Performance = f ( A, M, O)

A = Abilities (Knowledge, Skills, Competencies)

M = Motivation (Personality, Motivation, Drive, Interest)

O = Opportunities

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Aims of Performance Management• Overall:

– Increase the performance of the employee and the team where he/she works, and by doing that, increase the performance of the organisation (remember the components of performance in the culture questionnaire)

• Specific 1:– Provide feedback to the employee about his/her performance

against the competencies of the job and the organisation• Specific 2:

– Improve knowledge, skills, competencies– Improve motivation, drive, interest and commitment– Provide employee with opportunities to grow and to develop

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Experience 1

• In many organisations completing the appraisal form is more important rather than the discussion with the employee about the performance

• Appraisal forms are mainly used for administrative purposes (checking if everybody is evaluated)

• The conclusions are used for remuneration purposes

• For many employees the process of performance management (or appraisal) is a ‘black box’

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Experience 2

• Providing feedback is most important in performance management

– Focus on the performance review meeting

– Use forms and procedures as a tool and not as objectives in itself

A blank sheet of paper with some comment could be more useful than a highly sophisticated form which is not discussed

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Experience 3• Most managers don’t like it

– Esp. providing feedback to the employees– It would take to much time for them

• Many HR managers / HR professionals see it as a necessary evil– Esp. chasing the managers to do it and to provide them

with the results– Dealing with complaints from employees

• However, most employees like it !– They are eager to get feedback and to develop (remember

the graph with satisfaction at work and at organisation)

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Performance Management Process

Rewarding Performance

Evaluating Performance

Developing Performance

Monitoring & Feedback

Planning & Goal

Setting

Managing Performance

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Roles and Responsibilities

HRM

• Communication

• Preparing System & Procedures

• Getting commitment of top management

• Providing forms

• Training managers

• Collecting forms after review meeting

• Administration

• Follow-up Activities

Employee

• Preparing review meeting

• (sometimes completing the form)

• Listening and commenting the feedback

• Making agreements for coming year

• Undertaking actions to improve performance

Manager

• Completing forms• Preparing meetings• Conducting review

meetings• Summarising results• Concluding marks• Communicating with HR• Monitoring improvement

activities employee

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Performance Review Meeting

• Agreed actions last appraisal meeting• Competencies with examples of behaviour, conclusion

and motivation• Conclusion for

– Remuneration – Training & Development activities

• Specific points to discuss• Agreements about performance improvement• Agenda for next year

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Topics to discuss

• Performance agreement

• Abilities (Knowledge, Skills, Competencies)

• Motivation, Satisfaction, Drive, Ambition

• Opportunities in and beyond work environment

• New performance agreement

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Conclusions in the Performance Review

• Rating on Performance

• Rating on Potential

• Use of Ratings

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Ratings on Performance 1

A Outstanding performance in all aspects

BSuperior performance, significantly above normal job requirements

CGood, all-round performance, which meets the normal requirements of the job

DPerformance not fully up to requirements. Clear weaknesses requiring improvement have been identified

E Unacceptable; performance of many aspects of the job is below an acceptable standard

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Comment

When a manager would conclude with a rating “E, unacceptable”, in an appraisal, he didn’t do the right job himself: when people fail in their job, action should be taken at the time. That action could be demotion, transfer to another job or discharge.

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Ratings on Performance 2

Very EffectiveExceeds all objectives and requirements. Achievements are notable and outstanding and are far beyond the expectations of the job

Effective Achieves required objectives and standards of performance and meets the normal expectations of the job

Developing

A contribution which is stronger in some aspects of the job than others; where most objectives are met but where performance improvements should still take place

Basic

A contribution which on the whole meets the basic standards required, although a number of objectives are not met and there is clearly room for improvement in several definable areas

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Performance & Potential

Performance appraisal or performance assessment is used to evaluate someone’s performance against the requirements and standards of the job or position filled at the moment

Key performance indicators (KPI’s), balance score cards (BSC) and performance interviews are useful and effective methods and tools to support performance assessment

Potential assessment is an assessment against higher level standards and requirements; it is about the ability and power to grow to higher levels in the organisation

Present Estimated Performance tool is an effective and efficient approach for potential management

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Performance and Potential

Questions:

• Is someone with superior performance promotable to a higher job ?

• What is the difference ?

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Ratings for Promotability

A Is promotable to a higher job on the short term (within 1 to 2 years)

B Is promotable to a higher job on the longer term (within 3 to 5 years)

C Is not promotable to a higher job, if needed a transfer to another job could be considered

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Combining Performance and Promotability

Not Promotable

Promotable on long term

Promotable on short term

Very effective

Effective

Developing

Basic

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Combining Performance and Promotability

Not Promotable

Promotable on long term

Promotable on short term

Very effective

Reward them in special way

Top stars(retention!)

Super stars (retention!)

Effective The mainstay of the business

Stars (retention!)

Top stars(retention!)

Developing Pay attention Pay attention Future Stars ?

Basic Extra attention

needed(up or out)

Question mark; investigate

Question marks; investigate

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PotentialPerformance

Objectives:

• Succession Planning

• Career Development

Measure : Growth of individual

Objectives:

• Improving performance

• Compensate for contribution

Measure : Present capabilities

Strategic Review on Performance Management

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Performance

Performance related Competencies are:

– Commercial Awareness

– Influencing and inspiring people

– Planning and Organising

– Analysing and Solving Problems

– Decision Making

– Delivering Results

– Directing and Supporting people

– Etc.

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Potential

Potential related Competencies are:

– Ambition

– Energy

– Abstract and Strategic thinking

– Creativity & Innovation

– Receptiveness to feedback

– Adapting and Leading Change

– Learning ability

– Coping with setbacks

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Link of Performance Management to other HR activities

• Feedback on Recruitment and Selection• Basis for remuneration and performance related pay• Basis for training & Development• Basis for staff- and succession planning• Source of information for retention-policy

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Exercises

• Make a performance management model adapted to your organisation

• Define aims, objectives and methods

• Describe how it works: procedures

• Make forms for performance appraisal

• Practice conducting performance interviews (3 role plays; as manager, employee and observer)

• Identify how to use performance appraisal results of the whole organisation

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The Do’s and Don’ts for Performance Management

Do’s• .• .• .• .• .• .

Don’ts • .• .• .• .• .• .