Common Problems in Performance Management

July 2011

Dear clients,

Effective Performance Management is one of the cornerstones of Talent
Management. Without Performance Management it is difficult to categorise the
different contributions of employees and to identify areas for development
and improvement. Performance Management is however often problematic. Most
HR people will tell you that there is nothing wrong with the system - it is
just the way that it is being implemented. That is why many organisations
are now concentrating on facilitating performance dialogue and development,
rather than emphasising the performance appraisal element.

LeMaSa supports this philosophy of coaching and development where we want
the "right people" with the "right behaviour" in our organisation, instead
of just focusing on "high performers". In this edition of the LeMaSa
Chronicle we discuss some of the common problems in Performance Management
and focus on the importance of organisation design.

As the icy weather continues we trust that you have a cozy

corner and excellent company to keep you warm!

Regards

Sandra Schlebusch

Common Problems in Performance Management

Bersin (2008) found the following concerns with regards to performance
management:

§ 32% of managers do not clearly understand the link between pay and
performance in their organizations

§ 85% of organizations do not have clearly defined competencies which
define success

§ 35% of managers and employees do not feel the process is implemented
consistently

§ Only 14% of organizations use any form of peer-assessment

§ Only 21% of organizations have training tied to development goals

§ Only 29% of organizations create goals which are aligned to the
organization

§ Only 13% of organizations have coaching programs tied to their
performance management process

§ Only 36% of organizations feel they adequately tie compensation to the
performance management process

Bersin (2008) further found that managers and employees dislike performance
management for the following reasons:

§ Most organizations focus primarily on the appraisal step

§ Feedback is often negative, not positive

§ Employees feel "failure" rather than "opportunity"

§ Process focuses around "focal review" and compensation

§ Managers are not often given the criteria for success

§ Managers frequently fail to give the "bad news" well

· Managers are often not trained in coaching and development

SHRM (2009) also identified the following problems with regards to
performance management:

· Lack of Top Management Support;

· Perception of the Process as "Time-Consuming Busywork";

· Failure to Complete on Time. One of the most common problems is the
failure of managers to return the completed forms at the stated deadline,
resulting in a great deal of wasted time by the HR team in follow-up;

· Failure to Communicate Clear and Specific Goals and Expectations.
The clarity of a manager's specific expectations is important for an
employee to be able to implement an agreed-upon goal;

· Failure to Communicate Changed Goals. Managers must hold a meeting
or send a communication to all affected employees notifying them about
changes in goals or expectations.

· Lack of Consistency. In most organizations, some managers are
perceived as "tough" and others are perceived as "easy." Therefore, it is
important for HR to train managers about how to use the rating system so
that inconsistencies do not occur;

· Common Performance Rating Errors.

Sources: SHRM (Society for Human Resources Development). 2009. Managing
Employee Performance Toolkit. www.shrm.org.

BERSIN, P. 2008. The Modern Approach to Performance Management: A Handbook
for HR Managers and Executives. Bersin & Associates Research Report.

The importance of Organisation Design
According to Lowell, Bryan and Joyce (2007) executives invest enormous energy in product designs and long-range strategic plans, though many of these initiatives become obsolete as markets and competitors adapt, social norms and regulations evolve, and technologies advance. Yet most corporate leaders overlook a golden opportunity to create a durable competitive advantage and generate high returns for less money and with less risk: making organisational design the heart of strategy. It's time for executives to recognize the strategic need to develop organisational capabilities that help organisations thrive no matter what conditions they meet. "Modern corporations are massive, complex, dynamic ecosystems. In many of them, organizational inertia is considerable. Organizational-design work is hard and time consuming, and any meaningful change usually involves difficult personality issues and corporate politics. No surprise, then, that rather than tackle internal organizational issues to boost the performance of organizations, many CEOs typically opt for the ad hoc structural change, the big acquisition, or a focus on where and how to compete" (Bryan and Joyce, 2007). According to Lowell, Bryan and Joyce (2007) business leaders would be better off focusing on organisational design. Their research convinced them that in the digital age, there is no better use of a business leader's time and energy than making organisations work better. "Most organisations were designed for the industrial age of the past century, when capital was the scarce resource, interaction costs were high and hierarchical authority and vertically integrated structures were the keys to efficient operation. Today superior performance flows from the ability to fit these structures into the present century's very different sources of wealth creation. By remaking the organization to mobilize the mind power of the workforce and tap into its underutilized talents, knowledge, relationships, and skills, organizations can both help their people to undertake more rewarding, productive work and create sources of significant new wealth at relatively low risk" (Bryan and Joyce, 2007). "Corporate leaders can consciously design and build organizational interventions to achieve these goals, but to do so they must think holistically about designs incorporating market mechanisms that nurture talent and knowledge, governance structures that undo unproductive complexity, and new performance metrics-notably profit per employee-that are suited to a business environment where talent, not capital, is the scarce resource. Organizations that are large, complex, and talent driven are typically the best candidates, but our thinking on organizational design also applies to smaller organizations and to poorly managed as well as well-run ones" (Bryan and Joyce, 2007). Doing organisation design effectively, requires an awareness of the steps and tools that can be used to implement this process. "Organization design is the deliberate process of configuring structures, processes, reward systems and people practices to create an effective organization capable of achieving the business strategy" (Galbraith, Downey, Kates, 2002). These elements are depicted as a star model in the following picture: http://upload.wikimedia.org/wikipedia/en/thumb/2/28/Galbright_star_model.png /300px-Galbright_star_model.png When these elements are not in sync, various symptoms in the organization will indicate the misalignment. The symptoms and reasons for misalignment can be indicated as follows (Galbraith, Downey and Kates, 2002): cid:image018.png@01CC5111.4E842A00 References: 1. GALBRAITH, J. DOWNEY, D. KATES, A. 2002. Designing Dynamic Organizations. Amacom. New York. 2. BRYAN, L.L. JOYCE, C.I. 2007. Better strategy through organizational design: Redesigning an organization to take advantage of today's sources of wealth creation isn't easy, but there can be no better use of a CEO's time. The McKinsey Quarterly, May 2007. If you need any assistance with your Organisation Design, especially the People Practices, do not hesitate to contact us