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Are you trying to convince someone that performance management can make a difference? Trying to convince yourself that it matters?

Following are four approaches to selling the significance of the process:

Why do performance management? — Data from research findings on the impact of the process

The purposes performance management serves — Persuasive arguments concerning the need for and advantages of an effective process

What if you didn't manage performance? — A little reverse psychology: what would organizational life be without a good performance management process?

Some advantages of doing it well — From the employee's, supervisor's, and organization's perspectives, how each benefit from an effective process.

Why Do Performance Management?

Even if there were no human resources department to impose a performance management process on reluctant supervisors, the supervisors themselves would invent some form of performance management as a matter of survival. To ensure organizational success, employees must know what is expected of them and how they are performing.

What impact can performance management have? Some research findings hint at the potential power of effectively designed and implemented performance management. However, surveys show that most organizations are barely scratching the surface of this potential. It is a surprise that, while performance management systems have such potential, there still are huge opportunities for improvement in existing systems.

• Goal setting — In an analysis of dozens of research studies, it was found that companies that introduced systematic goal-setting programs enjoyed an average 39% increase in productivity. ¹ (Goal setting is the central pillar of performance management.) The size of the effect varied dramatically from company to company, with the differentiating factor being the amount of management support. In those companies where top management lent strong support to the goal-setting initiative, there was an average 57% increase in productivity, while in those companies where there was little top-management support the increase was only 6%. However, only 19% of US workers say they have clearly defined goals. ²

• Alignment — Numerous studies have found that employees are more engaged in their work when they understand how their work contributes to the organization's mission. So, in addition to having clearly set goals, understanding how achievement of those goals contributes to the "big picture" can increase an employees' sense of being involved in something important — in something larger than just getting their own work done. However, only 44% of US workers say they clearly understand their organization's most important goals and only 9% believe their work is strongly linked to their organization's top priorities. ³
• Execution — It is estimated that less than 10% of organizations that have well formulated strategies effectively execute them. ⁴ Execution — translating high-level strategy into coordinated actions that result in the achievement of strategic goals — requires that an effective performance management process be in place. This is true in both the private and the public sectors.
• Supervision — By improving the quality of a supervisors' interaction with employees (in setting clear expectations and informally discussing performance throughout the year), organizations could increase employee productivity by nearly 40%. ⁵ In addition to productivity, quality of supervision affects the retention of high-performing employees. Specifically, retention is most closely related to three things:
  1. having clear performance expectations
  2. having opportunities to learn and grow
  3. having a supervisor who cares
  All three factors are under the supervisor's control. ⁶ Despite the overwhelming evidence of the importance of quality interaction with the supervisor, only 12% of US workers report that their supervisors review their performance with them at least monthly. ⁷
• On-going management — Only 49% of US workers spend time on activities they believe are directly linked to their organization's key priorities. ⁸ They spend 32% of their time on activities that demand immediate attention but have little relevance to important organizational goals. Petty politics and bureaucracy fill 19% of their time. Effective on-going performance management can increase the percentage of time employees stay focused on the important things.
• Pay for performance — Studies of different motivational techniques conclude that paying employees based on their performance is the most effective way to increase productivity. On average, such techniques result in a 30% increase in productivity. Pay-for-performance methods generate results. Employees who choose not to meet expectations leave and supervisors fill vacancies with more productive workers. ⁹ State law (GS 126-7) recognizes the power of financial reward to motivate high levels of performance. The Comprehensive Compensation System provides for both merit increases and bonuses to be awarded to employees based on their performance. However, the system has generally not been funded.
• Agencies sometimes use other means to boost the base pay of certain employees (such as in-range adjustments), whether to account for them assuming increased responsibility or to recognize them for their outstanding performance. Even taking into account these other methods for rewarding top performers, there is virtually no relationship between employees' performance levels and changes in their base pay over any 12-month period. ¹⁰ Not surprisingly, in a survey conducted several years ago, only 3% of state employees said they believed that if they do a better job their pay will be adjusted accordingly. ¹¹

• Attracting talent — Challenging goals and pay for performance are most attractive to employees who are more highly educated, have greater achievement needs and are more self-confident. On the flip side, if there is little or no relationship between pay and performance, top performers are more likely to leave and low performers are more likely to stay. ¹² Achievement-oriented individuals — those who thrive on challenging assignments and the prospect of being rewarded according to their performance — are drawn to organizations that take a disciplined approach to performance management. So, an effective performance management process can have a positive effect on recruitment of talent. Conversely, if an organization manages to attract talented workers, but then places them in work environments where expectations are not clear and employees are rewarded the same regardless of how they perform, the talented employees will not stay for long.
• Retaining talent — According to the employment value proposition (a set of attributes that employees perceive as the value they gain through employment in an organization), among the most important factors contributing to employee retention are the utilization of their strengths (job-interest alignment), people management, future career opportunities and meritocracy (the extent to which the top performers receive the top rewards). ¹³

Purposes that Performance Management Serves

Why manage performance? There are at least six purposes that performance management serves:

1. Expectations — Performance management provides a mechanism for setting clear performance expectations for each employee. It answers the following questions:
• What am I supposed to do?
• How much is expected of me, by when, at what level of quality and under what restrictions?
• What are the results that I am accountable for producing?
2. Alignment — Alignment involves orchestrating the skills, talents, experience and energy of hundreds (or thousands) of employees toward achievement of the agency's mission. This is done through the setting of expectations in performance management so that each employee's results expectations either directly or indirectly support the achievement of higher-level goals. Alignment answers the following questions:
• Why am I doing this? What is the purpose of my job? Why have I been given these expectations?
• How does my job contribute to the achievement of my agency's mission?
• How does my work support my boss, my unit or my division?
• What are my customers' requirements and in what ways should my work satisfy those requirements?
• How does my work fit in to the bigger picture?
3. Feedback — A well-designed performance management process will ensure that employees get information about how they are doing. Employees then use this information to adjust their performance appropriately. The information may come from their supervisors or other observers in the form of feedback. Or it may come from the work itself through outcome measures or reports. Feedback answers the following questions:
• How am I doing?
• Is my performance meeting expectations?
• What do I need to do to perform better?
4. Reward — When a commitment is made to pay employees in part based on their performance, a well-designed performance management process, by clearly differentiating high and low performers, provides the basis for pay decisions. This has the effect of motivating high levels of performance among most, if not all, employees. Other personnel decisions may also be influenced by performance, as documented by the performance management system. The reward function of performance management answers the following questions:
• Who are the top performing employees?
• Which employees are contributing most to the success of the unit, division or agency?
5. Development — Development is about building employees' skills so that they can become exemplary performers in their current jobs, figuring out how to make better use of their strengths in their work or preparing them to take on new responsibilities or roles. From an employee's perspective, performance management gives these developmental tasks a boost by helping to answer the following questions:
• What specific skills or knowledge areas could I build in order to do a better job of meeting the expectations of my job?
• Are my strengths being put to the best use in my job? What can I do to put them to better use?
• Are my efforts to develop myself producing measurable results in my job performance?
6. Correction — When individual performance does not meet expectations, supervisors address these issues through performance management to correct problems and ensure success. Here the questions answered include:
• In what way am I not meeting performance expectations?
• What do I need to do differently to meet those expectations?

What If You Didn't Manage Performance?

Another way to assess the importance of performance management is to consider what would happen if the process were completely removed from your agency:

• Suppose no one in the organization had clear expectations about what they were supposed to achieve.
• Suppose employees meandered their way through the year without receiving any information about their performance, without anything in place to nudge them this way or that to keep them on track. In effect, imagine there is no "track" to stay on.
• Suppose there was no information employees could use to figure out how they could become better employees, how they could make themselves more valuable to their agency, or what they needed to do to advance in their careers.
• Suppose there was no annual appraisal that recapped their performance over the year. Suppose that salary increases, bonuses, promotions and other personnel decisions were all made in the complete absence of any information about how people performed.

In this nightmare scenario, your organization would not be in business for very long. It would quickly collapse because the right things would not be getting done at all, let alone well.

However, with a good performance management system in place, employees would have clear expectations, they would know how they are doing throughout the year, they would have good developmental information, and they would be rewarded based on their performance. Granted, in state government there are some issues around that last point. But thinking about what it would be like without performance management highlights the significant and central role performance management plays in enabling agencies to get their work done and get it done well.

Some Advantages of Doing It Well — From Three Perspectives

Consider who benefits from an effective performance management process. What does the employee get out of it? The supervisor? And how about the agency?

In an effectively designed and implemented performance management process:

Employees Have clear performance expectations See how their work contributes to the agency's success Know where they stand throughout the year Stay on track toward achievement of their goals Develop job-related skills Receive honest and accurate appraisals of their performance Obtain rewards and recognition consistent with their performance	Supervisors Orchestrate the talent in their work units toward achievement of the unit's goals Monitor progress toward achieving those goals Capitalize on employees' strengths and address their weaknesses Provide feedback Keep employees' efforts focused on accomplishing the work of the unit Accurately appraise individual performance Fairly distribute rewards and recognition
Agencies Get the work done — Achieve their missions through the collective efforts of their employees Grow talent — Cultivate a highly engaged and results-focused workforce Hold on to talent — Retain top performers

References

¹ See R. Rodgers and J. E. Hunter's classic meta-analysis, "Impact of Management by Objectives on Organizational Productivity," in Journal of Applied Psychology, 1991 (vol. 76), pp. 322-336.

² FranklinCovey survey reported in Chief Learning Officer Magazine, April 30, 2003.

³ FranklinCovey survey reported in Chief Learning Officer Magazine, April 30, 2003.

⁴ Reported in R Charan and G Colvin, "Why CEOs Fail," Fortune Magazine, June 1999.

⁵ Corporate Leadership Council, "Building the High-Performance Workforce: A Quantitative Analysis of the Effectiveness of Performance Management Strategies," 2002.

⁶ The Gallup Organization white paper, "Discoveries About Great Managers and Great Workplaces," Oct. 2000.

⁷ FranklinCovey white paper, "The Execution Quotient: The Measure of What Matters," 2003.

⁸ FranklinCovey white paper, "The Execution Quotient: The Measure of What Matters," 2003.

⁹ These findings are reported in SL Rynes, B Gerhart, and L Parks, "Performance Evaluation and Pay for Performance" (Annual Review of Psychology, 2005).

¹⁰ See the Office of State Personnel's "Performance Management Report No. 18 (2006)."

¹¹ State of North Carolina 1998-1999 Annual State Employee Survey. (http://www.osp.state.nc.us/reports/99surveyrept.pdf)

¹² SL Rynes, B Gerhart, and L Parks, Performance Evaluation and Pay for Performance (Annual Review of Psychology, 2005).

¹³ Corporate Leadership Council, "Attracting and Retaining Critical Talent Segments: Identifying Drivers of Attraction and Commitment in the global Labor Market," 2006.