Performance management – the ”soul-sucking monster” of HR
The way we currently do performance management, to me, is one of the most destructive things HR has ever created. [It’s a way] to reduce employee engagement and really piss off all your managers.
Nick Holley, co-director of the Centre for HR Excellence at the UK’s Henley Business School, certainly doesn’t sit on the fence when it comes to performance management.
But it’s an opinion he has arrived at after extensive research, talking to a series of major global companies.
Despite his invective lobbied at performance management, Holley is not advocating scrapping performance management.
Nor is he hawking some new prescriptive new performance management tool that will magically solve the problem:
What I’ve learned from talking to a huge number of organizations is that there actually isn’t a right way of doing it. It’s not about whether you do use ratings or you don’t use ratings.
Holley adds that following best practice is “irrelevant” without context: it’s about organizations individually coming up with a process that works for them not blindly following the latest management group-think.
During his research, however, Holley did begin to discern similar approaches and attitudes among companies with successful performance management approaches. He has distilled their experiences into eight key pieces of advice:
All of the organizations with successful performance management approaches were fascinated by the latest research coming out of neuroscience and its theories about what motivates people.
In particular, there were three experts that people kept mentioning. The first of these was Daniel Pink and his book Drive: The Surprising Truth About What Motivates Us, which shows how the traditional carrot-and-stick style approach to motivating staff doesn’t work.
The second major influence was David Rock’s SCARFmodel, which basically pinpoints five areas – Status, Certainty, Autonomy, Relatedness and Fairness- which trigger the reward or threat circuitry in our brains.
The third is the idea of encouraging the growth mindset, outlined in the work of Carol Dweck, Lewis and Virginia Eaton Professor of Psychology at Stanford University.
How that is being translated into the workplace, says Holley, is the idea that performance management should move from being a historical process, looking at past achievements, to how things can be done better in the future. It also means changing it from a negative process of what people have done well (or failed at), to how people can do better in the future.
What’s also important is that performance management moves from away its obsession with individual goals and targets, when what’s important is the overall team or organization performing better. As Holley notes:
We are the most collaborative species in the world and yet what this does is force us to stop collaborating and to compete.
Own practice, not best practice
Instead of researching best practice, these successful organizations researched their own internal practice. Holley expands:
What they wanted to find out was: what is the impact on our organization? Not measuring process completion but measuring the unintended consequences of the process.
One person gave me this great quote: the problem with performance management is that it’s become the Swiss Army knife of talent. What he meant by that was the core concept was good, but all the different people in HR have all added their own little bits.
As a result, organizations end up with, what Holley colorfully describes as:
A soul-sucking monster that’s attached to the business, which sucks the life out of people.
Ratings systems are a clear example of “soul sucking” at work. According to Holley, anyone who receives a ‘3’ rating, no matter how it is dressed up with positive language, will hear the word ‘average’.
It’s no better for the high performers. Those with high ratings won’t be motivated to work harder – why should they when they are already scoring highly?
Rating systems only generate resentment and short-termism. Worse still, as a rating is given a number, it’s seen as an objective fact. This is simply “rubbish” contends Holley, and it says more about the person doing the rating than the person rated.
So organizations need to be honest about how much time they are wasting internally on performance management procedures that don’t contribute to the business and simultaneously wreck motivation of staff.
Think business, not HR
When these organizations design their performance management systems, this is not an HR-driven process. According to Holley:
The CEOs I interviewed all said this is the single most critical tool in delivering our strategy.
If they focus too narrowly on HR concerns, then there’s a danger the “Swiss Army knife of HR” will rear its ugly head.
Instead, what they successful organizations do is identify the area of performance that is most going to make a difference to their business and that fits in with their company culture. Microsoft, for example, identified that it is collaboration that is the key quality that drove business success, so it sets up a performance management approach that values and encourages collaboration.
The organizations focused on one or two key things rather than try and take on too much. The emphasis was on the quality of the conversation between manager and employee, not the process.
This could involve scrapping ratings. No matter how they are dressed up, ratings are basically used as a tool to decide compensation, but there is actually a far simpler solution: managers can decide for themselves. One EMEA executive summed up the absurdity of the system, pointing out to Holley:
I have the power to make multi-billion dollar Capex decisions, but I couldn’t decide percentage pay increases for my immediate reports.
Far from creating mayhem and massive pay increases, in practice is that managers will simply talk to their compensation and benefits expert about the current market situation and make their decision accordingly. And he or she will take that decision far more seriously, because they cannot hide behind a rating.
According to Holley, the successful organizations involved key stakeholders in the design:
Didn’t go away into some darkened bat cave in the middle of HR and create something and then think how they’ll sell this to the business.
Instead, they worked with the business from the get-go, taking longer on the process if necessary, to ensure they had the full backing of all relevant people.
This could also involve talking to people outside the organization. Companies with European Works Councils or those closely monitored by regulators will need to talk to them and include them in the process.
Most of the organizations piloted their new system rather than design in one go, because, says Holley, no matter how much a design is modified, unexpected things can happen:
Have the self- confidence to admit when you’re wrong. Whatever you do, it won’t work the way you expect and if you try and defend that you’ll undermine your credibility.
These successful organizations built in an expectation that they may get it wrong at first. This flexibility extended not just to the design process but how it was rolled out to employees.
The organizations were all rigorous about what they measured. But measurement does not equate to ratings and doesn’t mean putting a specific number to success. Holley explains:
Measure but never forget what is meaningful is rarely measurable and what is measurable is rarely meaningful. It’s not just about producing numbers. How do you measure if they are the right goals? You have conversations with people and it’s subjective. You can measure that, but you just don’t put a number against it.
Quality of dialogue.
All of the firms recognized that the real issue was not the performance management process itself, but the quality of the dialogue. So they focused on providing training, not just for the managers, but the employees being appraised as well. Holley adds:
They also made training mandatory, because otherwise, guess what, the people who’d go on the training were the ones who’d be good at it anyway.
To emphasize how important performance management was to managers, it was made quite clear that there would be consequences for people who did not go on the training.
According to Holley, these eight stages:
Are actually how we should think about HR in general. To me, good HR people are curious; we are fascinated by the art and science and heart of HR and by the way, we are actually fascinated by our business, by understanding what a particle accelerator actually does or whatever business you’re in.
Holley acknowledges that changing entrenched approaches to performance management involves a lot of risk and takes an “awful lot of courage” to step into the unknown.
But then, if the alternative is to carry on living with a “soul sucking monster”, this doesn’t sound such a terrifying step.
Holley’s take on what has become the whipping boy for all HR’s ills is enticing, but it is by no means an easy fix. It’s not simply a question of following the latest methodology and shoehorning it into your organization.
What Holley’s proposing is a more individual approach than a one-size-fits-all. And one of the key messages, writ loud and clear, is that ratings systems in their current form do not work.