Back to basics approach to performance management

Written by
Changeboard Team

11 Jan 2010

11 Jan 2010 • by Changeboard Team

Performance management culture

The benign economic environment of the last ten years has done some notable things: it has seen the rise of China as a superpower, widespread increases in public spending on health and education, it has seen significant immigration from Eastern Europe and it has seen generally low levels of unemployment. However this paper argues that the Noughties also presided over poor management processes that had gone untested.

There is much media speculation about the psychology of the hype of the “boom” years – the assumption that growth was normal, or business as usual. Then came the economic slowdown. We now all know what the slow down feels like and we have some understanding about what may have caused it. It certainly looks like some of the lending to the housing market in the USA was based upon this assumption of eternal growth. 

However as these lending practices have come under scrutiny, so too has the performance management culture within these businesses. It seems that over time these and other businesses have become obsessed with Results – sales targets, profit targets and earnings ratios. While understandable, this form of quantitative measurement (“what”), when concentrated upon to the exclusion of the way these Results are achieved (“how”) is well known to result in counter productive behaviours.

The list of organisations that have done this in their own “good times” reads like a roll call of corporate bubbles that have gone wrong – Enron, Equitable Life and so on. However these organisations were single corporations. What has happened more recently is that a whole economy that has become fixated upon Results, and this is not good management.

Meaning of performance management?

Broadly speaking performance management is a continuous process to manage the tasks and skill development of all employees in order to fulfil organisational goals. It has to a large extent been driven by two movements:

Management by objectives – a top down, structured cascade of objectives down the organisation to achieve a business strategy.

Management by competencies – a parallel process that defines and measures the desirable behaviours that will turn a workforce into a strategic business asset that can differentiate it fro its competitors.

Both of these philosophies have been in existence for twenty years or more. However a docile economic environment, particularly in service businesses, has meant that these have been patchily implemented. Since the mid 1990’s organisations that have integrated these together badly have not been penalised. If an organisation has had good products and half decent people, it has not mattered of late how they managed them. This was true on Wall Street, but it was also true on Main Street.

Sales forces are a good example. In many sectors it is over 15 years since the last recession. This means that a sales person would need to be around 40 or more to have experienced this. It has been perfectly possible to make a living as a sales person without the behaviours needed to grow business in a true “hunter” fashion. 

We suspect that many people in this situation are about to be “found out”, or are going to have to learn these behaviours very quickly. Similarly sales managers have been protected from having to develop and coach their employees through these difficult patches, and these skills will have weakened over time. So the economic slowdown landed upon organisations that had lost track of the meaning of good performance management.

Re-evaluating performance management

Organisations will need to take an urgent look at the way they performance manage their people – they will truly need to look at both the “what” and the “how.” Together, in harmony. And use this data wisely. Those that currently say: “we tried using competencies and behaviours in the ‘90s…and it did not help” will have to re-evaluate the extent to which this is true in a harsh economic environment. 

The employees who have been conspicuously successful in the good economic times may not be the ones who show the right behaviours for the less good times. Their success may be not down to their own good employee behaviour, but down to good “customer behaviour” (buying and growing.) Note for example how the more conservative behaviours exemplified by Lloyds TSB and Santander are now being valued by the more adventurous retail banks. If you don’t measure it, it will not get done, and most industries will have similar parallels.

Organisations will need to look at the true level of people skills of their line managers as this role will remain crucial. It seems pretty certain that most organisations will be trying to do more work with less people. Employees may be experiencing “survivor syndrome” as they remain in organisations with whom their relationship has been damaged.

Engagement is likely to be key - and line managers will need to have individualised conversations with their employees to identify the motivating factors that can be delivered in the current climate. Some motivating factors may be in short supply: such as pay rises and job security. Whereas others may be more plentiful – such as the opportunity to cross skill, take on project work and get feedback on the commercial Results of their labours. These are conversations between line managers and their employees, and are all the better for being as individualised as possible. People, it is often said, buy people, and it was never more true than your direct line manager.

Likewise employees themselves will need to become better at understanding their own behaviour – gaining insight into their own unique drivers and hot buttons. Thus when their boss asks them what can be done to improve their engagement in one of these individual conversations, they will be able to provide insight, wisdom and thought for their boss to work with. Paradoxically, engagement will need to become facilitated by the organization, but individually owned. Some commentators are referring to this as “career mass customization.”

Back to basic performance management tools

So these tools of good performance management are not new:

Regular frank conversations about what is being achieved

Analytical review and feedback about how it is being achieved

Skilled, individualised conversations with a line manager about how they can improve and how this fits in with the needs of the individual and the organization.

And yet, if organisations can combine the three components of performance Results, positive behaviours and raised levels of engagement in these difficult times, they are likely to be well placed to capitalise on the new opportunities that present themselves when the economy improves.