Welcome to this final edition of our newsletter for 2010. We are pleased to see the continuing recovery of global markets. However, the recent bailout of the Irish economy is a potent reminder that the impacts of the Global Financial Crisis are far from over. Another such impact is the U.S. National Commission for Fiscal Responsibility and Reform's proposed option to cut the Baldrige National Quality Program. This is the program that underlies the Malcolm Baldrige National Quality Award, the annual award that for over two decades has been recognizing organizations for performance excellence. Our hope is that if the program ceases to receive government funding, that for-profits will come to the rescue to keep this valuable award alive. By maintaining the Award's clear focus on delighting customers, organizations will continue to win and keep their competitive advantage.
The flip side of the coin to attending to customer needs is the focus on attracting, developing and retaining talent. This month, we review the latest global survey on the effectiveness of employee performance management systems. Given that organizations need to retain and enthuse their best talent to make the most of emerging business opportunities, this month's article makes for mandatory reading for everyone involved in managing and developing employees. We trust you will enjoy this edition of our newsletter!
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Performance Management Survey Votes Down Employee Appraisals
How effective are organizations at driving superior performance from their employees? If we are to believe human resources professionals, then the answer is that our performance management systems are failing to make the grade. This is the sobering conclusion from Sibson Consulting's worldwide survey.
In mid-2010, Sibson Consulting, in concert with the WorldatWork association, surveyed the association's members on the status and effectiveness of their organizations' performance management systems. Some 750 members responded in a variety of countries and industries and covered organizations of less than 100 employees to those employing more than 500,000.
Performance management systems, as set up and administered by HR functions, typically serve to rate the performance of individual employees and shape their behavior towards superior performance for the next rating period. Those employees not so fortunate may be moved out of the organization. Such systems are very pervasive in today's organizations, with 91% of respondents reporting that their organization has a formal performance management system in place. The results of this survey, therefore, have very wide application.
How do HR professionals rate their own performance management system? After over four decades of fine tuning the system, less than half of them saw their system as helping the organization achieve its strategic objectives. Let's tease out this disturbing result.
For a start, what are HR professionals hoping to achieve with their appraisal systems? Two thirds (66%) of survey respondents identified the distribution of rewards based on individual performance as a key objective. A little over one half (54%) selected greater individual accountability. Only 46% selected talent development as a key goal.
And what kinds of rewards are being distributed? Four in five respondents (80%) report that their organization is using performance evaluations to grant merit increases. One half of organizations (51%) link performance to short-term incentives, whilst only one-third (30%) link performance to long-term incentives. The upshot is that in 65% of organizations, low performers suffer with their pay packets and in 42% of organizations, high performers are rewarded with bigger pay checks.
What is surprising is the popularity of grading employees with the hope of increasing their motivation, given that differential monetary rewards have been found to work in but a limited number of scenarios. Daniel Pink, Jeffrey Pfeffer and Robert Sutton, for example, continue to highlight the poor research base behind the idea that paying for performance is generally effective in lifting employee productivity. Pay and bonus incentives, they demonstrate, do not work when the task is complex, requires judgment and relies on collaboration with others. And these are the types of jobs that predominate in organization's today. Perhaps this is a primary reason why performance management systems are failing to live up to the expectations of human resources staffs.
Many organizations are finding out the hard way how financial disparities based on perceived performance differences bring with it significant risks. For a start, employees are set in competition with each other when co-operation and teamwork are needed. In addition, overly simplistic performance criteria can drive dysfunctional behaviors. Salaries can also blow out and put enormous financial strain on the organization, especially during times of low economic activity and recession.
How are organizations implementing their employee appraisal systems? Only half of the respondents reported their organization using any kind of goal setting in their performance management process. And only half of those again use quantitative measures in their performance evaluation. With the low incidence of setting measurable goals at the start of the appraisal cycle, it is not surprising then that employees by and large rate the appraisal process subjective and capricious. Only one third of all employees, the survey respondents felt, had trust in the appraisal process.
In those cases in which employee goals are set, the alignment of the goals to the organization's objectives rapidly loosen as we slide down the organization's hierarchy. For senior managers, goals are completely or largely aligned in 70% of cases, sliding to 45% at middle manager level and bottoming at 17% for frontline employees. With such poor line of sight between individual goals and company strategy, it is not difficult to see how for the majority of workers the appraisal system is an irrelevant nuisance.
Read the full survey commentary
Give a Business Performance Gift
With the onset of the festive season, now is the time to start thinking about gifts. Did you know that you can easily buy any of our products as a gift for your friends, family and colleagues? Simply look for the Give as a gift? option on the second page of the online order form. You will be asked to enter the gift recipient information and a personal message. After you place the order, you will receive an order confirmation via email and your gift recipient will receive an email with instructions on how to receive the gift. What could be easier? If you are looking to reward your top performers in your workplace, why not reward them with an e-book or toolkit that will aid their professional development?
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If you or your managers are struggling with bringing about change in your organization, then check out our Managing Change in the Workplace. This acclaimed resource will guide you through every step of the change process with a wealth of worksheets, checklists and tools. Supplementing our hands on approach is our unique change process model that makes sense out of the seeming chaos. Download the free introductory chapter and start using Managing Change in the Workplace today!
"To date, Managing Change in the Workplace is the best resource I have found anywhere to help me do my work. I am more confident when I approach assignments now than I had ever been before. I would recommend the guide to anyone involved in change management without any reservations."
Cindy Emmanuel McLean, Change Management Consultant
Visit our web site at www.businessperform.com for lots of expert guidance and practical tools designed to help you get ahead of your competition. Also, be sure to pass this newsletter on to friends and colleagues who want to stay up with what's on. From all of us here on the Business Performance team, we wish you a safe and joyous festive season and look forward to communicating with you again in the New Year.
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