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Performance Management System Design Checklist

Submitted by  on February 4th, 2011

We all want to improve the performance of our people in our organizations. Now that many businesses are recovering from the Global Financial Crisis, some are looking to implement a Performance Management System (PMS) in their organization for the first time. Judging by the questions I see, some executives and HR managers seem to think that one size fits all; that there is one best design of a Performance Management System. Nothing could be further from the truth. Every organization is different in its culture, history, capabilities, budget and resource constraints.

My approach is to encourage the human resources people to sit down with the executive team and ask and answer each of the following questions. The questions below form a checklist of factors to consider when designing a new system. Only then will you be in a position to decide how the Performance Management System should look in your organization.

  1. What is the purpose of the performance management system? What is the executive trying to achieve?
  2. How will you know that you have achieved your purpose? What tangible evidence will count as indicators of success?
  3. Is the organization primarily focused on improving results or instilling the right values and behaviors? Should the new system evaluate achievement of goals or demonstration of behaviors, or both?
  4. How should the new system appraise performance? By manager appraisal, multi-rater feedback, objective measures, manager staffing reviews, or a combination?
  5. How should the organization reward good performance/exceptional performance? What combination of financial and non-financial rewards should be used?
  6. How will the organization fund rewards? Should they be funded from a fixed budget or should funding be mediated by a set of gates?
  7. How will the new system manage disagreements between appraiser and employee? Should there be a dispute resolution process or will authority determine the outcome?
  8. What should be the duration of the appraisal cycle? Should it be based on the business cycle or employee anniversary date?
  9. What level of employee input into the appraisal rating should the new system accept? Should the manager’s evaluation dominate and should the employee rate their manager?
  10. To what extent do business results depend on collaborative behaviors through people working in teams? What emphasis should be placed on encouraging co-operation as distinct from individual achievement?
  11. To what extent should the new system be automated and online? How will the new system integrate with existing information systems?

To help you and your executive team answer these questions, I suggest you consider these factors in your current organizational state:

  • your current management capability
    (How skilled are your managers in setting measurable goals, giving and receiving feedback, etc?)
  • size of your workforce
    (Is your workforce large enough to justify an automated, online process?)
  • geographical dispersion of your workforce
    (Is your workforce sufficiently dispersed to either favor a centralized online system or a paper-based and decentralized system?)
  • types of jobs
    (Are your workers’ jobs sufficiently rote-learned to benefit from simple financial rewards? How many jobs require collaborative work practices and that could benefit from team evaluations and rewards?)
  • information systems capability
    (Is your systems infrastructure so small that it will only support a paper-based or hosted system?)
  • current business measurement systems
    (Are your current goal setting, data gathering and analysis systems sufficiently robust to allow accurate devolution of goals?)
  • current organizational culture
    (Are your levels of manager and employee trust sufficient to encourage open and honest feedback on performance? Are your people predominantly focused on results and processes or on personalities and politics?)
  • current rewards and remuneration system
    (What changes will you need to make to your current pay and rewards system to ensure consistency and mutual support of the new system? How will employees react to any changes?)
  • current performance management system
    (Are your current organizational unit and employee appraisal systems congruent with your proposed system? How will you transition from your current system to the new system?)
  • current organizational strategy and goals
    (How will your proposed new system assist the organization gain a competitive advantage and meet its internal human resource and process objectives?)
  • budget and resource availability
    (How much financial and people resources are available for the design, development and implementation of the new system? What ongoing maintenance costs will be required?)
  • level of executive and manager support
    (To what extent do the current executive and management team support the need for change? Are they willing to devote considerable resources and time to the effort?)

There are many factors that go into the design of a Performance Management System that is right for your organization. My list above captures the most important considerations for you and the executive team. Consider each question carefully as you map out how the new system could look. Most importantly, keep the executive on board and get input from your employees. Whatever system you choose should be a system that you are comfortable with and that has the support of the management team and your employees.

If you can think of any other key factors that should go on the above list, let us know in your response below. I will add your suggestions to the list. I’m looking forward to receiving your insights.

Check out our PMS articles to find out more about designing and implementing an effective performance management system.

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Posted in Change, Performance, Processes, Talent | Comments (0)

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