Performance management is a hot issue as well as a topic of lasting interest. Most companies care about it, yet few of them can claim confidently to have genuinely effective performance management. Many employers complain about the huge gap between the performance of their employees and the expectations of the company. They tend to attribute the gap to the lack of an effective performance management system. The idea itself is correct, but the interpretation of a "good performance management system might be incorrect. It is the misunderstandings that lead to an increase, instead of a decrease, of the employers' grumbling.

SOME MISCONCEPTIONS OF PERFORMANCE MANAGEMENT:

First let us have a look at what we get wrong:

Misconception 1

Performance management equals performance appraisal. This can be counted as the gravest misunderstanding about performance management. They are very different definitions in that performance management means to control, check and feed back the process of performance realisation ? it is an ongoing process. Performance evaluation, however, is an assessment of the performance outcome ? it is done at a specific point of the time. Therefore, if the management believes that the measurement criteria can automatically put pressure on the employees to bring out the best performance, the real performance is very likely to be less satisfying than expected. There are two main reasons: First, it is far from enough for the employees to be in fear of the appraisal; they also need guidance and help in the working process to achieve the best performance. Second, the evaluation is done after the performance is realised and it is too late to transform the outcome. Hence, effective performance management must focus on the overall process of realising the best performance instead of mere evaluations.

Misconception 2

Performance management is the job of the HR department. This is a somewhat intriguing phenomenon. The management of many companies tends to assume that the HR department should take full responsibility for performance management. The HR department seems always busy with issuing all kinds of forms, making measurement criteria, calculating the rating scores and pushing progress, whereas other departments are content with doing jobs as required by HR department. Who in the last analysis should be responsible for performance management? The answer is that it is the most significant part of the daily job for every staff member of the management team. It is simply because their job is to produce the best performance. The outcome of any performance reflects the professional capability of the management, and the role of the HR department is more on the side of consulting: they provide a methodology for performance management, coordinate and organise the process of performance management within the organisation. They are not expected to be held accountable for the performance outcome, neither are they able to do it.

Misconception 3

Comprehensive and complicated measurement criteria ensure an effective evaluation. The design of measurement criteria is the starting point of performance management, and also a potential trap. Generally speaking, there are a few typical mistakes likely to result in unsuccessful performance management: 1) There are too many measurement criteria. Some organisations set many evaluation indicators for every position, in the hope of getting a comprehensive view as much as possible. Though aiming at something positive, the approach is problematic in that the real focus will be easily lost in the overwhelming criteria. When the employees cannot concentrate on the most important aspects of the organisation, the actual performance will fail to be maximised. 2) The criteria are over-complicated. Some organisations design complex calculation formulas to ensure equality in evaluations, but end up spending a great deal of effort on collecting data and calculating ratings. Gradually, both the employees and the management lose enthusiasm and treat it merely as a ritual. Thus the previous efforts all become "sunk cost. As a matter of fact, one hundred percent equality does not exist. If simpler and more focused criteria can be found, the employees will be more ready to accept them and consequently the management will have an easier job. 3) Business performance is given too much attention while organisational skills too little. Although the former is indeed essential in performance management, the latter should be regarded as the same fundamental. Performance will not be improved if the employees' organisational skills remain the same despite the increase of their business abilities.Therefore, in designing reasonable measurement criteria, capacity building (including both personal and organisational skills) must be given the same emphasis as business performance. Only by this means, can a breakthrough be made in long-term performance.

ADVICE ON CARRYING OUT EFFECTIVE PERFORMANCE MANAGEMENT:

We previously discussed what should be avoided in performance management. But to realise effective performance management, the management should pay attention to the following four aspects.

First of all, the performance indicators and targets must be in line with the corporate strategy and goal. This overall strategy and goal should be implemented by each department, who needs to set the performance objectives of each position in accordance with that of the whole department. Only in this way, will each and every individual's performance outcome be aligned with, and contribute to, the realisation of organisational performance goals. Also, this approach addresses the aforesaid problem of excessive indicators. Real performance criteria should be distinct and succinct, defined by the overall strategy of the organisation. For example, if a company sets the strategy in one year as opening up more retail channels, then the number of newly developed retail networks would have to be a key area of the performance management for the sales department. The following year, when the previous work basically meets the target and the management of retailers becomes the priority, the sales department may adjust the evaluation criteria by deleting the number of newly opened channels while adding in the quantity and quality of retailers. All other departments may work out their own goals in the same way.

Second, the work process of employees has to be duly controlled. It means the management must frequently follow up and give guidance instead of setting objectives in the beginning of the year and leaving the rest to the employees. Performance guidance and feedback could be done in two ways. One is called constant guidance in the form of informal one-to-one job reviews between the manager and his subordinates where suggestions and encouragements are regularly given on the latter's performance. This enables the manager to check the work progress of his subordinates at any time, to learn more accurately about the problems in the process of realising performance and to offer timely help. The other approach is to hold formal performance meetings periodically, for instance, quarterly. On this occasion, the manager and his team members have a formal review according to each objective of the annual performance plan, then ratings can be done and advice given. The HR department could offer suggestions on this and accordingly develop a system within the organisation for the management personnel to implement in each department.

Third, steps must be taken to insure all management personnel understand that performance management is an essential part of their jobs ? not extra workload. The success key of performance management is the awareness of management team: Only if it is perceived as an indispensable part of their work, as well as an effective management tool in daily operations, will the value of performance management be realised. To achieve this, general manager and key managers of every department must set role models. They should create an environment to encourage the development of this awareness. They must persistently conduct performance feedback and guidance with their subordinates so as to forge a real mind-set in the organisation.

Fourth, there must be balanced performance management. Recently, the method of the balanced scorecard has become widely applied in practice, on which no more discussion will need to be given here. In simple words, balanced performance management means an integration of short-term objectives with long-term goals. In practice, it requires that performance evaluation criteria include not only job-related indicators but also indicators regarding the improvement of organisational skills. The latter is the foundation of an organisation's sustainable development. The company that makes organisational skills a key area of performance management will keep growing.

Though its principle appears very simple, the implementation process of performance management is quite complicated, for it not only involves forms and formulas, but also depends on the quality of all management personnel. There is no perfect performance management system for any general manager. What counts the most is "taking action right now, starting from the simple approach with simple evaluation indicators and learning to improve ? it will prove profitable in the end.

 

The author is CEIBS EMBA06 Participant and now is Partner of HBC Consulting.