What effective performance management entails

Organisations that get performance management right become formidable competitive machines. [iStockphoto]

Effective performance management is essential to businesses.

Through both formal and informal processes, it helps them align their employees, resources, and systems to meet their strategic objectives.

It works as a dashboard too, providing an early warning of potential problems and allowing managers to know when they must make adjustments to keep a business on track.

Organisations that get performance management right become formidable competitive machines.

Much of General Electric's (GE) successful transformation under former CEO Jack Welch, for instance, was attributed to his ability to get the company's 250,000 or so employees "pulling in the same direction"- and pulling to the best of their abilities.

As Henry Ford said, "Coming together is a beginning; keeping together is progress; working together is a success."

Yet in too many companies, the performance-management system is slow or broken. At best, these organisations aren't operating as efficiently or effectively as they could.

At worst, changes in technologies, markets, or competitive environments can leave them unable to respond.

Strong performance management rests on the simple principle that "what gets measured gets done."

In an ideal system, a business creates a cascade of metrics and targets, from its top-level strategic objectives down to the daily activities of its frontline employees.

Managers continually monitor those metrics and regularly engage with their teams to discuss progress in meeting the targets. Good performance is rewarded; under-performance triggers an action to address the problem.

Where do things go wrong? In the real world, the details of performance management systems are difficult to get right.

One of the biggest performance management tools is the performance metrics which are used to measure the behaviour, activities, and performance of individuals and their overall contribution to the growth of a company.

Performance metrics

The metrics that a company chooses must actually promote the performance it wants. Usually, it can achieve this only by incorporating several of them into a balanced scorecard - what we commonly refer to BSCs.

For most employees, performance measurement is viewed, at best, as a necessary evil.

Instead of helping employees evaluate their performance against targets and improve, most employees view measurement at work as a means through which management watch, time and appraises them.

It only takes a single snakebite to make someone afraid of snakes for the rest of their lives. Unfortunately, many people have been bitten more than once by measurement at work.

For measurement to deliver the hoped-for results and improvements, management should create an environment and provide structures that facilitate conversations around the topic. The performance environment has a greater influence on how employees perceive and respond emotionally to measurement.

If the environment does not empower or involve employees in the measurement of conversations and only measures people against goals imposed upon them, the result will be employee frustration and this negative use of measurement will deeply be ingrained in the organisation's culture.

Instead of being instrumental to the success of the organisation, negative measurement becomes the key to its downfall. To reduce employee frustration and drive performance improvements, managers must first identify the causes of these employee frustrations, evaluate the causes, monitor the causes, apply remedies and continuously improve.

The following are five reasons that explain why most organisational performance metrics fail.

Purpose of measurement

How performance measurement is used in the organisation will determine employee reaction to it. Measurement at work should provide managers with high-quality information to assist in learning and improvement.

Contrary, if measurement is used to justify, judge, control or reward and people are made accountable for hitting or missing targets, this creates less focus on learning and improving but more compliance because of the command-and-control orientation.

When rewards and threats of punishment are added to the measurement system and are too great, people will tend to do what it takes to obtain the reward or to avoid the punishment even if it means applying poor judgement and risk management.

Lack of empowerment

When employees are not empowered to succeed, perceive measurement as non-productive and are less confident about the importance of measurement because measurement data is not relevant, understood and timely; they become discouraged and will not seek any opportunities to keep score. They will very likely feel quite negative about measurement. Contrary, empowering employees in different change situations will make them feel positive about the measurement.

Lack of trust

Trust is essential for performance measurement to succeed. If leaders are trustworthy about measurement and not manipulating metrics, then employees will trust measurement. To win people's trust, leaders should avoid using measurement against them. When people lack trust and do not respect measures, they will not be afraid to manipulate measures. It is important to note measurement doesn't have to be perfect to be trusted. There must be honesty and integrity.

Lack of accountability

This arises when the measurement is used to force performance and punish non-performance. When employees are not prepared, lack support from senior management, organisational structures and systems or view measurement as threatening, they become naturally afraid to accept measurement accountability.

Resistance to measurement

People will resist if they feel that measurement will be used against them to find fault or blame them. Too often, measurement is used to determine who went wrong, rather than what went wrong; to find fault rather than to provide useful feedback or trigger positive improvements. This leads to employees feeling judged and humiliated hence their dislike for performance measurement.

In addition to the above, people resist measurement because they perceive it as too difficult, time-consuming and tedious and as someone else's job. Lack of data understanding, lack of resources, bad experiences, lack of data accuracy and lack of senior leadership involvement also lead to measurement resistance.

Most people think that, without measurement, there is no failure. The opposite holds. A lack of a good measurement approach, systems and structures will definitely lead to bad measurement.

To have positive attitudes towards measurement, the context must be right. People should feel that measurement is not being used against them, but rather, to learn, improve and grow.