Randal Meske

If you have employees who relish the performance management process, then you may want to refer them to your health plan provider and have them checked out. Performance management is a controversial topic these days. Some companies don’t believe they need it at all. Some businesses enforce processes so burdensome that they lose their effectiveness and become downright silly. However, performance management can have a powerful impact on your business if executed properly.

I propose that performance management systems are useful if they are:

1. effective in driving achievement of key corporate objectives,
2. simple,
3. consistently managed across the business,
4. supported by merit pay, and
5. adapted to your company’s culture.

1.  Drive Corporate Objectives

The whole purpose of managing performance is to get the right stuff done. It is about focusing limited resources on critical objectives.  All other outcomes are secondary. If your company’s performance doesn’t improve as a result of implementing your performance management system, then it isn’t worth doing.

2.  Simplicity

Most companies make performance management way too difficult. Keep it simple, and you vastly increase your odds of success. I’m a fan of 3-point rating systems. You either hung the moon (1), did your job (2), or failed (3). I once worked in an organization that had a 5-point rating system with 10-point decrements. That’s a 50-point system! Employees would literally spend hours and hours arguing that they were a 3.8 instead of a 3.6. Avoid these kinds of complications.

Encourage or mandate very regular performance discussions (I mandate 2 annually and encourage weekly or monthly status checks between a worker and their manager). Again, remember the goal is to get critical things done, not to bully employees. It’s a team effort between manager and worker, not a beat down. Limit reviews to 30 minutes or an hour. If regular performance conversations are taking place, then they shouldn’t take very long. There should never be surprises in a formal, annual review. Regular dialogue prevents surprises.

Only work on 3 objectives simultaneously adding new ones as old ones are completed. The official performance reviews are annual; the objectives are not. Who the heck knows what will matter a year from now?! Have everyone map each objective to the company’s core objectives to promote focus. Focus on strengths; ignore weaknesses…unless a weakness is getting in the way of a primary strength. (Reading suggestion:  Now, Discover Your Strengths by Marcus Buckingham. Some give Peter Drucker credit for first articulating a strengths-based management approach.) Adopting a strengths-based approach actually helped me almost enjoy performance reviews. Really.

3.  Consistency

Consistency in implementation is critical to successful performance management processes. If one department rates everyone as stellar, and another only gives out a stellar rating once every few years, it will be  impossible to get employees to take the process seriously. The head of the organization must have passion for the process and be involved in its implementation to drive consistency. Without attention from the top, everyone will implement the process differently or just go through the motions without fully leveraging the benefits of consistency. Some training needs to take place to get everyone on the same page, but it doesn’t need to involve rocket science or become a bureaucratic hell. Solid, team-oriented, open succession planning will align management and promote consistency as well. A consistent process will help increase your performance management system’s credibility and effectiveness. It gets easier and less intrusive with time.

4.  Merit Pay

Merit pay that rewards top performers is essential to the success of any performance management system. By rewarding the performance you want, you will clearly convey that you back your performance system with cash. Not everyone is equally motivated by money, but paying for top performance sends the quick, clear message that there are tangible outcomes for those who perform. Rewarding repeat top performers with advancement is also effective yet less immediate. When employees know that they are rewarded for superior performance, they will take the process seriously, and overall performance will increase. Will assessments always be perfect? No. Will paying for superior performance motivate driven employees? Yes! Companies who proactively manage performance perform better. It is as simple as that. (This Sibson Consulting study validates the effectiveness that systematic performance management can have.)

5.  Culture

Performance management systems must be tailored to your company’s culture. If your company is casual, you can have ultra casual performance reviews with super simple forms. Mandate that reviews be done offsite. Set the tradition that the manager treats for lunch for year-end reviews. Put some music on during the review if you are in your office. Get creative and make it interesting or fun in any way you can! Review your core values, and make sure your performance management system supports your principles. Include your values in your performance management system to encourage the culture you want. I include a simple second page to the core review that captures how a person reflects the values of the company and make it worth about 10% of the total review.

Performance management doesn’t have to be tedious. Everyone wants to win. Winning is the only truly effective morale enhancer. Managing performance is about getting the right things done to win and be successful. What would you add to the list? What have you done to make performance management more effective and less burdensome?