Is performance management the answer – again?

I can hear you yawning from here! Performance Management seems so 90s, or was it 80s, and 70s as well? In fact performance management under different labels has been around forever yet very rarely is it done well.

And it’s been confused with performance-related pay and what with the bankers and all that doesn’t sit well with most managers in the real world.

But Octavius Black, CEO of Mind Gym, is adamant that what he calls “dynamic performance management” can increase productivity by 15%, achieve sales targets 29% better and increase customer loyalty by 18%. But he concedes, in an opinion piece in the Times Business section (3/1/11) that few organisations would adopt such a solution even though it’s straightforward enough.

He says managers need to have a performance conversation which has 5 ingredients: setting suitably stretching goals, giving frequent feedback, differentiating consistently, providing commercially acute coaching, re-shaping jobs to play to people’s strengths, and passing responsibility for success to the person being managed.

When 100 business leaders were asked to score their organisations against these criteria only four gave their companies more than half marks. Black claims that CEOs are frightened of looking stupid so the last thing they want to embrace is the latest fad from HR, an area which they least understand. Well Octavius I’m not sure about it being the latest fad, as I said at the start, and shame on CEOs who aren’t interested in their “greatest resource” even though it’s hard to find one who came up through HR.

Sadly all too often HR departments are involved in transactional activities and more interested in driving processes than changing behaviour. Black quotes one HR director who was delighted because he had almost 80% of performance goals submitted on time. I’m pleased to report however that Black believes that HR people with psychology backgrounds are more likely to apply real scientific insight to the challenge of maximising human performance!

He says that in the USA there is a growth in HR analysts who research and evaluate what actually makes the difference. On the whole however it appears that managers are still left to work it out for themselves. Some are naturally good at people management but others, and often those who have come up through technical routes, less so. And even the good ones will shy away from those “difficult conversations” about poor performance or missed promotions.

Giving constructive feedback is not something that comes naturally to most managers, and not just here in the UK – we have come across the same problem in the Baltics. Even having to explain that someone is “below average” is tough – especially as three-quarters of us believe we are above average (think about it or ask a statistician). Hence his reference to differentiation. If everyone is rated the same then high performers feel aggrieved. Managers (most of them)  are only human and everyone likes to be liked but giving what they see as bad news is stressful and many would rather be seen as a “nice guy” (See “It doesn’t pay to be too nice“)

Not long ago I helped a pharma company  to communicate to their staff why the performance ratings had to be re-calibrated. Everyone had been getting ratings in the higher bands for years and the distribution curve was so skewed that staff just expected the highest ratings as a right. Breaking the news wasn’t easy and caused a lot of anger among staff. Black cites Unilever as a company which has done something similar. Their CEO says; “there is now a higher degree of differentiation with a higher upside and a lower downside”. Unilever has just been voted “Britain’s most admired company”.

Black believes the answer lies with middle managers (of course there may not be too many left after all the years of de-layering) who will change their role from allocation of resources and quality control to one where they have “courageous conversations, establish boundaries, unearth motivations, give hope, manage mood, listen beyond words, and give praise and counsel wherever it’s due.” He believes a psychology qualification might be more useful than an MBA.

Black believes his idea of “dynamic performance management” is the magic bullet most appropriate for an era when managing talent is the key to survival and success. So you can put away your books on business renewal and BPR and start studying psychology!

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