How Performance Management Is Killing Performance—and What to Do About It

Rethink, Redesign, Reboot

M. Tamra Chandler

• Publisher: Berrett-Koehler Publishers
• Year: 2016
• ISBN:
  9781626566798
• Edition: 1
• Topic: Business
• Subtopic: Business Communication
• Index: Business

Rethink, Redesign, Reboot.Most people associate performance management with the annual review, which is universally dreaded by employees, management, and HR professionals alike. It's a cookie-cutter, fear-based, top-down approach that emphasizes negatives over positives and stifles healthy career conversations. It's never been shown to motivate anyone to do anything but try to avoid it, but nobody feels like they have any alternative. Tamra Chandler has one—and it works. Actually, Chandler doesn't offer a single alternative—she offers an infinite number of them. Each organization that uses her Performance Management Reboot is able to develop its own unique version since it doesn't make a lot of sense for organizations with different cultures, in different industries and sectors, to do things exactly the same way. Grounded in the latest scientific findings about motivation, it's a transparent, employee-driven process that values collaboration over competition and rewards people for acquiring new skills and increasing their contribution instead of hitting arbitrary benchmarks. Chandler lays out the general principles and then walks you through each step in creating a performance management process that employees will actually embrace rather than avoid and that will help you meet the three objectives of great performance management: developing your people, rewarding them equitably, and driving your organization's performance. It's the first comprehensive, step-by-step guide to creating a performance management solution that's tailored to your organization's needs and goals and that places the emphasis squarely on your greatest asset: your people.

Part I

RETHINK.

If you do not change direction, you may end up where you are heading.

—Lao Tzu

Chapter 1

WELCOME TO THE PM REBOOT

IT SEEMS LIKE A MILLION YEARS AGO. In reality, it was 1985.

That was the year I took my first real job as a newly minted engineer at the age of twenty-two, working at the Boeing plant in Everett, Washington, in support of the 747 and 767 programs. I carpooled to work with a group of guys, leaving Seattle at 6:30 each morning to be sure that we were in our seats by 7:15. We all sat in a row of identical metal desks facing our manager’s door. No one had a computer; all of our data was stored on enormous mainframes, and if you wanted a printout, there were only a few guys in the group who could run it for you. One of the few other women in my group was our dedicated secretary (yes, secretary, not assistant), who spent her days tapping away at an electric typewriter. Three older engineers sat in the row in front of me: one smoked cigarettes, another a pipe, and the third cigars. They had all the bases covered.

At lunchtime, we younger engineers headed to the cafeteria for our thirty-minute break, while the older guys played cards and ate sandwiches they’d brought from home. The workload was steady but never overwhelming, and our forty-hour week allowed us plenty of time to get everything done. (Like many Boeing employees of that era, we referred to the company as “the Lazy B.”)

We all had a set number of vacation days and sick days. My pay would incrementally increase each year, and I never saw a bonus. No one thought to ask for flextime beyond maybe a thirty-minute swing in arrival and departure times. We wouldn’t have dreamed of taking work home, much less taking any along on vacation.

Our meetings involved packing into a single conference room. To communicate across the company to other engineering or support teams, we drafted memos and had the secretary type them up. After a few rounds of editing, we’d send them off in interoffice mail envelopes, and then we’d wait a few days for a response to return in a similar envelope. Everyone followed the same procedures and processes, and most communications from leadership came via memo or the company newsletter.

At the time, I simply accepted the fact that this was the way things had always been done, and it never occurred to me that they wouldn’t continue to be done this way forever. After three years, I left Boeing to get my MBA and embarked on a quarter of a century as a leader and consultant in strategy, operational performance, human resources, and people solutions. Looking back, my days at the Lazy B seem like the Dark Ages; the metal desks, the secretary with her electric typewriter, the desktop ashtrays, and the forty-hour workweek survive only in my memories. We’ve seen five presidential administrations since then, ridden out a couple of cycles of economic boom and bust, and witnessed the dawn of the digital age and a new millennium.

Everything has changed. Everything, that is, except performance management.

Technology has altered the landscape dramatically; we’re always on and connected. Turnaround times have gone from days to minutes. We often have a diverse mix of generations and nationalities working for us under one global corporate umbrella, and the roles of women in the workplace have changed considerably from the days of all-male management at Boeing. Our modern culture of self-expression, particularly in today’s predominantly millennial workforce, has bred an unprecedented desire for creativity, autonomy, and fulfillment in the workplace. Many employees have an expectation of instant feedback, frequent recognition, and a strong say in their career paths. Teamwork, technology, and long hours collaborating in coffee shops have replaced working alone at a desk in a cubicle or office. For many of us, going to work has evolved into doing work.

Yet our approach to performance management remains stuck in the world of Rolodexes and two-martini lunches. The fundamentals of how we assess, develop, and motivate talent have changed little from the roots of the practice in the post–World War II industrial boom.¹ At that time, bureaucracies sought to align common thinking across the layers of their organizations and began working to drive behavior and performance standards across large companies. Then the late 1950s saw the emergence of management by objectives (MBOs), a review-based process designed to make sure that employees and management agree on what specific objectives the employee needs to achieve to support the organization. Thus, performance management largely became a scorecard of an individual’s accomplishments.

By the time I began my career at Boeing in the mid-1980s, MBOs had become the norm, and performance management as we know it today flourished. The roots of MBOs remain to this day a key element of most performance programs, and we continue to see its widespread use as a means to measure whether or not employees are meeting objectives. In fact, today we find usage rates of performance appraisals at 90 percent or higher worldwide, and more than 97 percent here in the United States.²

I’ve delved into the workings of many organizations throughout my career as a consultant, and their approaches to traditional performance management always look pretty much the same. They usually include an annual appraisal and review process, maybe with a midyear check-in. Most often, performance is managed in a standard way across all employees, or at least across employee classes. Employees are commonly asked to complete a self-assessment based on a set of goals they created the previous year. They may be given definitions of core or leadership competencies to consider or assess. It may lead to an individual development plan, and it almost always includes some form of manager rating. An increasing number of organizations now include some type of calibration event or talent review in which managers meet to compare notes on their teams. These meetings may be orchestrated to achieve a recommended distribution or forced rankings by group or team. When all is said and done, the outcome of the process drives compensation, promotion decisions, and other rewards—and, for the unlucky, performance improvement plans (PIPs).

I’m guessing that the description above sounds pretty familiar and fairly innocuous, right? So why is this process so hated? After all, the purpose is a noble one. According to the Society for Human Resource Management, performance management is meant to be an “organized method of monitoring results of work activities, collecting and evaluating performance to determine achievement of goals, and using performance information to make decisions, allocate resources, and communicate whether objectives are met.”³ There’s nothing wrong with that. Then where does it go so wrong? Why is a system that’s supposed to make us perform better and help our organizations excel something we see as a necessary evil at best? Why does this system evoke such universal negativity—more than any other corporate initiative short of mass layoffs? Why is performance management killing performance?

From a Murmur to a Roar

My quest to solve this paradox began several years ago when I received a call from the chief HR officer of a large family foundation just up the street from the PeopleFirm office here in Seattle, asking our firm to write a white paper on performance management. Their HR team was beginning a process to redesign the foundation’s performance management program, and they wanted to inform, educate, and challenge their leaders on the subject. Being a scientifically oriented group, they were looking for data based on solid research that proved a correlation between performance programs and organizational performance.

I jumped at the chance. My experience working with other companies and designing a performance solution from scratch during my days leading Hitachi Consulting’s people strategy had convinced me that it was time to take a fresh look. At the time, I was interested in dissecting the entire traditional process: from the intent and underlying assumptions to the tools, norms, and practices, and ultimately to the expected outcomes and resulting impacts. And so it began.

In those early days of my journey, many academics and thought leaders were already questioning the value of traditional performance management, but there were only quiet murmurs among the real practitioners—the people in the trenches of actual organizations. Since then, the challengers, the outspoken, the brave, and even now the bandwagon jumpers have escalated the conversation from a murmur to a roar. Our collective dissatisfaction has inspired countless newspaper and magazine articles, blog posts, webinars, and conversations at HR and management conferences. And as the volume has increased, more and more research has validated what many of us already suspected: the commonly practiced techniques and approaches for managing performance that have been used by most organizations around the world for decades simply aren’t working.

I don’t want to take too much of your time wading through the research that supports my views, but let me give you a few highlights. Sylvia Vorhauser summed it up well with the following damning points regarding traditional performance management:

• Everyone hates it—employees and managers alike.

• Nobody does it well—it’s a skill that seemingly fails to be acquired despite exhaustive training efforts.

• It doesn’t do what it was designed to do—i.e., increase performance.⁴

She’s hardly alone in her condemnation. In a recent Reuters poll, four out of five US workers said they were dissatisfied with their job performance reviews.⁵ In a survey of forty-eight thousand CEOs, managers, and employees, only 13 percent of managers and employees and a mere 6 percent of CEOs thought their year-end reviews were effective.⁶ The latest Performance Management Survey, which collected data from more than one thousand HR professionals, found that when respondents were asked if their performance management process was seen as contributing to individual performance, 47 percent—yes, nearly half of them—said they weren’t sure if their performance management processes made any contribution at all (those are my italics, but you can understand why).⁷ Finally, according to the Corporate Executive Board (CEB), a management research group, surveys have found that 95 percent of managers are dissatisfied with their PM systems, and 90 percent of HR heads believe they do not yield accurate information.⁸

There is plenty more research out there, but you get the gist. This leaves us with this question: if performance management isn’t performing as we all hope, what is it doing? Well, a recent Psychology Today article notes that at least 30 percent of performance reviews result in decreased employee performance.⁹ Take a moment to ponder that: it’s actually achieving the opposite of its original intent.

And yet we find that, despite all the talk and all the evidence that a change is needed, the majority of organizations have yet to substantially change their performance management approach. I’m talking about real action—what many might consider radical change. This doesn’t mean just tweaking your ratings model from a five-point to a six-point scale. Instead, it means sitting down with a clean sheet of paper and starting over. It means asking yourself, “What outcomes are we seeking? What do our people need now and for their futures? How do we deliver on those needs in a simple and effective manner?”

You may have heard about those who were the first movers toward rethinking performance management for their unique organizations: Adobe, Kelly Services, Oakley, and others. We owe thanks to these trailblazers, and while we can learn from their experiences, what works for them may not be the right answer for all. What’s important is that they actually did something to change the equation, and now we need to examine why we haven’t made the same leap. If we know it is time for change, then what more do we need to spur us to action? What will it take to get the rest of us, the hesitant majority, to reboot?

After poring over the research and discussing the issue extensively with a lot of teams from a lot of companies, I’ve found that the top barriers to rebooting performance management are clear:

1. We can’t get the executives there: there’s too much resistance to moving away from what they’ve always known.

2. Managers get a “no confidence” vote: executives and HR practitioners alike lack trust in their managers to lead the performance process, and they’re reluctant to give the managers authority on critical people-related decisions like pay and promotion.

3. Most are simply unsure how to fix it holistically, especially when you throw compensation into the mix. Too many are still asking, “What is the alternative? How do we get from where we are today to where we want to be?”

So my journey led me to the understanding that yes, there is a problem, and yes, we need to change, but the frustrating fact is that practical solutions have seemed to be out of reach of those looking for answers. Having spent a lifetime working with clients to translate research, know-how, and ideas into real, working business solutions, I took on the mission to solve the problem, to crack the code once and for all.

My goal for this book is to give you the tools to overcome the resistance of skeptical business leaders, as well as the insight and methods to help ready your managers and your people for when you hand them the keys to drive your organization and their own careers. Most important, my aim is also to arm you with a practical technique for successfully tackling this complicated problem, so that once you’re ready and you’re staring at that clean sheet of paper, you’ll have a solid approach to breaking away from the old and starting something completely new. I call it the PM Reboot.

On one level, the PM Reboot is a design process to guide you step-by-step as you navigate the complex terrain of delivering on the goals of performance management. But dig deeper and you’ll see that the PM Reboot is a philosophy—maybe even a revolution—that challenges common management beliefs and discards hackneyed and outdated techniques. The PM Reboot switches out musty assumptions that have led to narrow, standardized tactics for modern ideas that are rooted in sc...