How to Design and Use a Performance Management System that works

Why have a performance management system? Many managers have had bad experiences with formal performance management systems. This is understandable. Many systems are poorly designed and do more to demotivate than motivate employees. When these managers ask me why they should try another one, I explain that a well-designed system will give them the power to: · Retain their best employees, · Give these employees a reason to maintain their good performance, · Deal with poor performers appropriately, and, · Attract the type of employee that they need What is Performance Management Performance management describes the processes by which managers improve the performance of their employees by utilising their power to reward, develop or discipline as appropriate. A performance management system documents these processes as company policy and may form a legally binding contract between the company and one or more employees. It can be negotiated through individual contracts or by collective bargaining either directly with employees or with the involvement of a union. The essential components of a performance management system are: · A performance plan is negotiated between a manager and employee for a given period (usually one year). The employee agrees to achieve a specified level of performance in exchange for a reward or to avoid discipline. The plan also commits the manager to assist the employee improve his/her performance. · During the year the manager gives employees feedback on their performance and may suggest how it can be improved. · Performance is appraised at year-end and decisions are made to reward, discipline or develop employees. Performance is measured in terms of either goals or competencies. Goals are best reserved for professional or managers and competencies used for employees who are less skilled and/or have less control over their work environment. Performance pay or promotional opportunities are typical rewards. Discipline may include dismissal, suspension, loss of privileges or counselling and are usually applied only to wilful misbehaviour. · Employee development, (rather than discipline) is used to address incompetence. Employees who either cannot or will not successfully undertake this development are made redundant to their position and either redeployed to a position they can handle (if one is available) or given a redundancy package. · The cycle is completed with a new performance plan. Effective performance management A performance management system will only be effective if it: · Rewards behaviour that improves the employee’s performance, · Addresses behaviour or incompetence that results in poor performance by discipline, development or redundancy. · Is integrating into a cycle of planning and performance measurement that extends from corporate, through business unit planning down to individual performance agreements · Objectively measures performance. If it is not objective, it will not operate as a system but be continually challenged by employees or managers. Objectivity can be achieved by setting competency standards or goals for various levels of performance, explaining how each will be measured and committing to rewards or discipline for each standard during Performance Planning. Appraisal then becomes a simple and unemotional process based on objective criteria. · Is trusted to be fair. Employees need to be reassured that the system will be used equitably across their organisation. Achieve this by negotiating use of the system into an Enterprise Agreement or individual performance contracts and then making implementation of the system as transparent as possible. · Both managers and employees see that they have something to gain from using the system. Correct implementation sometimes requires managers to change the way they currently work. If they do not also see how it makes their job easier the system will quickly be seen as a bureaucratic chore and will not be implemented successfully. Good design will ensure ease of operation and managers should then be held accountable for using the system through their own performance contracts. · Employees naturally resist having their performance measured because they fear the consequences of it being found unsatisfactory. For most employees, this resistance evaporates very quickly if they can see it also provides real opportunities for superior performance to be rewarded. The best way to ensure that both management and employees are aware of “what’s in it for them” is to involve them in the design of the Performance Management System. A Process for Introducing a Performance Management System 1. Set up a consultative process that will facilitate the involvement of managers, employee and union representatives as necessary in the design of your system 2. Identify what you will measure and how you will measure it. 3. Commit your company to decisions to train, discipline, make redundant or reward according to the level of competency achieved 4. Document and design a system for writing performance plans, giving feedback and appraising performance 5. Negotiate this system into your Enterprise Agreement and/or Individual Performance Contracts and train employees and managers in its use. Train your Line Managers to use your system wisely For further assistance visit Change & Perform's Performance Management Services or contact the principal Kerry Feldman