Performance management

What is performance management?

In simple terms, performance management is the achievement of performance targets through the effective management of people and the environment in which they operate. Performance management permeates the organization. It is integral part of every business process rather than being a separate process as it is activated wherever targets are set and resources allocated for their achievement. Performance management is both a strategic issue and a tactical issue.

At the strategic level it is concerned with setting achievable goals for the organization and developing the competence and capability to achieve these goals. For if the goals are not matched to the organization's capability, no amount of employee cajoling will achieve them.

At the tactical level it means creating an environment in which people are motivated to excel and exercise their talents. It involves managing relationships, monitoring and reviewing performance, taking action to improve it and finding better ways of getting the best out of people.

Managers have to be able to handle the tactical issues without taking their eye away from the strategic issues and vice versa. (More on this in the members pages.)

As declared by the CIPD at http://www.cipd.co.uk/subjects/perfmangmt/general/perfman.htm performance management is a process and not an event. Performance management is not another term for personal appraisal. It is a process that brings together and manages all the factors that affect performance, treating the individual as a vital component but not the only component in a multifaceted aspect of management.

What are the key elements of performance management?

As with any process the key elements are:

• the level of performance to be achieved
• the competences needed to achieve this level of performance
• the activities and resources needed to motivate and empower people
• the monitoring and review mechanisms that measure performance and compare results with targets
• the measures taken to improve performance and attain best practice
• the measures taken to ensure the planned targets and competences are the right ones for the organization and its stakeholders

What are the key characteristics of effective performance targets?

The level of performance

Performance itself is a variable. Performance can be poor, average, good, or excellent but these are subjective terms. We need to know what we mean by poor, average, good, or excellent especially if we intend comparing the performance of one individual, one group or one organization with another with a view to reward or penalty. The level of performance required is often referred to as a target.

A target is the criteria that will indicate whether performance is acceptable for a particular quality characteristic.

If a process objective is 'on-time delivery' the target might be '99% of all deliveries to be complete within 5 days of acceptance of order'. Likewise, if the objective is to grow the number of customers the target might be as simple as 'measurable growth in key account spending' (note that it is not simply the number of customers).

Distinguishing targets from aims, goals and objectives

Sometimes the terms target, aim, goal and objective are treated as though their meaning is identical. They are synonyms but in the context of management they have acquired distinguishing characteristics.

The term goal tends to be used to express an intended destination for an organization and may encompass its vision, mission and business objectives.

The term aim can be used to express a direction for something so whereas the goal is the destination, the aim signals the direction taken to get there but this is not always the case as evident here http://www.hm-treasury.gov.uk/strategic_objectives.htm

The aim of an organization may be an expression of its function or role or indeed its mission. Goals, objectives and targets can therefore have aims. They also have a purpose ie the reason why they have been established, set or defined.

The term objective can be used to express anything that is to be achieved at any level in an organization. It is therefore more of a generic term and can used in reference to a vision, mission, strategy, goal, target or indeed a task or activity although when used so haphazardly, it leads to confusion as to what is really required. We tend to label what an organization wishes to achieve as a goal, whereas we use the term objective for what an individual or process is required to achieve.

When we treat an activity or task as an objective, we can lose sight of its intent – the outcome the activity or task is supposed to produce. In the example here http://www.glam.lon.ac.uk/about/aims_objectives.shtml the objectives read more like a list of actions than outcomes. In the example from HM Treasury above, the objectives are expressed as outcomes.

The term target can be used to express what is aimed at.

Key factors in setting performance targets

Some of the key factors in setting performance targets are as follows:

• Targets should be expressed in a manner that establishes a clear focus for all actions and decisions
• Targets should be traceable to and consistent with organizational goals thus enabling the degree of achievement to be measured relative to stakeholder satisfaction.
• Targets should be agreed by those teams whose performance will be measured against them
• Targets should be set for process outputs rather than individual performance so as to encourage team effort and avoid isolating individuals
• Targets should always be focused on purpose rather than activity (as in the example above;. growth in number of customers is an activity-focused target whereas, growth in spending is a purpose-focused target)

Through the chain of measures from corporate objectives to component dimensions there should be a soundly based relationship between targets, measures, objectives and the purpose of the organization, process or product. (Hence the purpose of the organization would not be to have a large number of customers regardless of the revenue they bring in)

Setting targets

A realistic method for setting targets is to monitor what a process currently achieves, observe the variation, then set a target that on an 80:20 basis the process can deliver.

Each process has a capability that produces results somewhere in the range between 'all output fails to meet requirements' to 'all output meets requirements'. Once a process is under control, ie common cause variation has been removed, targets can be set. Setting a target does not change process capability, it merely serves to establish an acceptable level of performance that is attainable when the process runs as planned. There is clearly no point in setting a target well above current performance unless the managers are prepared to redesign the whole process.

Deming writes in Out of the Crisis on the 10th of his 14 points (or principles of transformation) that we should eliminate targets for the workforce that urge them to increase productivity. This is often paraphrased as simply 'eliminate targets' when that was not what Deming meant. He was only advocating the abolition of management by objectives in unstable systems. He was saying that before setting targets, make sure the process is capable of achieving the target. Targets imposed on workers in an unstable system are imposed on the wrong people. It is good practice to manage by objectives in a stable system as it avoids management interference and encourages empowerment.

An obsession with numbers tends to drive managers into setting targets for things that the individual is powerless to control. A manager may count the number of designs that an engineer completes over a period. The number is a fact, but to make a decision about that person's performance on the basis of this fact is foolish, the engineer has no control over the number of designs completed and even if she did, it tells us nothing about the quality of the designs. Each design is different so the time to complete each one varies.

Use of targets

Agreed targets should be used as a basis for reviewing results otherwise the review becomes subjective and emotional.

Targets don't motivate people to achieve them. You can raise the bar as high as an elephant's eye, but if the conditions aren't conducive to getting the best out of people, the staff won't be motivated to jump over the bar.

It is not uncommon for managers to command their staff to meet targets that have been set on the spot in an attempt to keep them working hard. The manager who tells an employee to get a report on his desk by 9:00am, then fails to arrive at work the following morning due to a previous appointment, is setting false targets.

Another example is the UK government imposing targets on waiting lists in the NHS in reaction to public pressure. This diverted resources with the result that the overall outcome was not improved. Waiting times for operations may well have been cut but the time the patient remained in the process was unacceptable even with operation waiting times reduced to zero. This is setting targets based on activities not on outcomes.

An interesting debate on performance measurement between Robert Kaplan (pioneer of the balanced scorecard) and Thomas Johnson professor of quality management at Portland State University in Oregon is reported by Art Kleiner at http://www.well.com/user/art/s%2Bb12002.html

Challenging the targets

Standards are targets to aim for but are also targets to change. If an organization had not managed to lower its product defect rate below 2% for many years, 2% defective becomes the norm and is built into budgets and estimates. Quality improvement takes place when the standard is challenged and a new level of performance achieved.

What is meant by competence?

The quality of process outputs is directly proportional to the competence of the people, including their behaviour, and is also directly proportional to the capability of the equipment used by these people. Therefore there is a dependency between competence and capability. Although it is often said that a poor workman blames his own tools, it is on the basis that the workman had freedom to choose the right tools for the job.

Competence is the demonstrated ability to achieve the desired results. Behaviours are embraced by the word 'ability' thus recognizing that two equally qualified individuals may have the same skills and knowledge but by the manner in which they behave towards their fellow man, they achieve quite different results.

In contrast ISO 9000 defines competence as 'the demonstrated ability to apply knowledge and skills'. However, the weakness with this definition is that the frame of reference is not present as there is no reference to the results required for the job.

A person may have the required knowledge and technical skill but remain not competent:

• due to exhibiting inappropriate behaviours (the expert who knows everything but whose interpersonal skills cause friction with staff to such an extent that it adversely affects team productivity)
• due to a temporary loss of physical or mental ability (the footballer who cannot play because of a leg injury; the musician who suffers epilepsy)

Unfortunately the terms competent and incompetent produce an emotional reaction unlike the terms qualified and unqualified. To be unqualified is generally not disparaging but the term incompetent tends to belittle anyone regardless of their true abilities. Consequently the term competence is not always used in its correct context. The following expressions serve to place the term competence in context so as to overcome differences in meaning and thus distinguish competence from other measures of ability.

A competent person demonstrates the skills, behaviours, attributes and qualifications to the level required for the job.

• Competence is more than a list of attributes. A person may claim to have certain ability but proof of competence is only demonstrated if the desired outcomes are achieved. Therefore competence is concerned with outcomes rather than attributed abilities
• Competence is an ability to meet standards that apply in the particular job, not just specific tasks and not in a classroom or examination but in the real working environment with all the associated variations, pressures, relationships and conflicts.
• Competence unlike qualification, is not a probability of success in the execution of one's job; it is a real and demonstrated capability. Therefore academically qualified personnel may not be able to deliver the desired results

How do terms like skilled, qualified, competence and performance differ?

Words like skilled, qualified and competent are often used to express a level of performance as though they each have the same meaning. But skilled and qualified, qualified and competent, and performance and competence are not the same.

When you undertake a course of study for a particular job, acquire the necessary knowledge and pass an examination at the end of the course, you may be considered qualified. However, only applying the knowledge gained in a classroom suggests you would not be skilled.

After applying the knowledge for some time you are able to produce useful outputs and can therefore be said to have acquired the skills needed to undertake a particular job. You can now design widgets, machine precision components, manage a team or play football. However, the level and quality of the output may be far less than required to be left unsupervised so performance may remain low to average.

After undertaking further coaching and development you reach a level of ability to achieve certain results. This we call competence. For as long as you are able to deliver the required results, you can be classed as being competent.

So there is a progression of ability starting with an inability to do something and ending with being competent to achieve expected results in doing something. Along the way we can express an individual's current achievement in terms of performance. Whatever the knowledge, qualifications, skills or competences of a person, we can judge their performance. Therefore knowledge, qualification, skill and competence are attributes an individual possesses whereas performance is what an individual currently achieves as a result of possessing such attributes. An example may help clarify the concepts.

Joe can play football. This is a skill he has acquired through education and training but it does not mean he is a qualified or competent footballer. He performs well in the local team. Joe's potential is spotted by a football scout who asks if he would like to be considered for selection to the City Team. He passes the trials and thus becomes a qualified footballer but has not yet demonstrated any particular competences.

Through effective coaching he develops a particular ability to score goals and becomes the team's top player and thus attains a specific competence in football. Other players possess different competences. If he scores many goals he delivers an excellent performance. If he scores few goals he delivers a poor performance but is still a competent footballer. On one occasion he injures his knee and cannot play for two months and thus is no longer competent. Joe is still a qualified and skilled footballer but temporarily cannot demonstrate his skills. If he scores no goals but make several attempts to score he is no longer competent but is still a skilled footballer.

What strategies can be used to develop competence?

When assigning responsibility to people we often expect that they will determine what is needed to produce a good result and perform the job right first time. We are often disappointed. Sometimes it is our fault because we did not adequately explain what we wanted or more likely, we failed to select a person that was competent to do the job.

We naturally assumed that because the person had a college degree, had been trained in the job and had spent the last 2 years in the post, that they would be competent. But we would be mistaken, primarily because we had not determined the necessary competence for the job and assessed whether the person had reached that level of competence.

Shirley Fletcher provides useful guidance in developing a suitable strategy by asking some pertinent questions:

• what must be achieved? ie the results or outcome required
• what must be done for this to be achieved? ie the units of competence
• how well must this be achieved? ie the performance criteria or standards to be achieved
• how should assessment be conducted? ie the assessment method
• what evidence should be collected? ie the evidence requirement
• what methods will be used to bridge the competence gap? ie the formal and informal training and development programmes
• how will we guide employees from the state of not yet competent to competent? ie the tutors, mentors and coaches

Two distinct competence-based systems have emerged. The British model focuses on standards of occupational performance and the US model focuses on competency development. In the UK the standards reflect the outcomes of workplace performance. In the US, the standards reflect the personal attributes of individuals who have been recognized as excellent performers, but what individuals achieved in the past is not necessarily an indication of what they will achieve in the future as their physical and mental abilities change.

Methods of setting standards of competence and their evaluation have only been developed over the last 15 years or so. It was believed that education, training and experience were enough, but the recent cases of malpractice particularly in the medical profession have caused the various health authorities to look again at clinical competence. Further information is also available here http://www.cipd.co.uk/subjects/perfmangmt/competnces/comptfrmwk.htm

Employee development and competence development is basically the same thing. Whatever education, training and coaching is given as part of an employee development programme it should be done for one purpose, that of producing a desired level of competence. Any education, training and coaching undertaken outside a formal competence development programme is futile and a waste of resources. If the action is not intended to improve the individual's ability to deliver the desired results, it serves no useful purpose. However, this does not rule out training or study in a subject outside the present role. This may be the first steps to developing a new competence that will be further developed later in a different role.

What strategies can be used to motivate and empower people?

Factors affecting human performance

Individual level

The performance of a task is almost always a function of three factors:

• environment
• ability
• motivation

To maximise the performance of a task, personnel need not only to have the necessary ability or competence to perform it but also need to be in the right surroundings and have the motivation to perform it. Motivation comes from within. A manager cannot alter employees at will despite what they may believe is possible. (For more info on motivation see Leadership, empowerment, motivation and teamworking).

Team level

At the team level, the factors affecting performance are similar to those affecting the individual. A poor environment can affect all team members equally and conditions may be such that the whole team become demotiovated. In fact demotivation can spread like a disease if the sensitive one complains a lot and convinces the others of the cause.

However, there is one additional factor for team performance and that is synergy. A team has the capacity to produce results that far exceed those of separate individuals if the members all get along together and complement each others skills and knowledge, and share their experiences. (More info on team building in Leadership, empowerment, motivation and teamworking).

Organizational level

At the organization level, the factors affecting performance are similar to those affecting the individual and a team but the influences and impact are much greater.

The environment in this case is not so much the surroundings within the organization but the external environment. The ability is not so much individual or team ability as the capability of the whole organization.

A shortage of key competences will be detrimental to performance perhaps resulting in staff working more hours or multi-tasking, consequently making mistakes and becoming demotivated. Motivation of the whole organization requires skilful leadership in setting goals, developing an effective strategy and acquiring the necessary resources to achieve those goals and the creation of an environment in which the whole workforce will be motivated to achieve these goals. (More info on team building in Leadership, empowerment, motivation and teamworking)

The importance of the front line manager/supervisor

Managers are often accused of ignoring the human factors of the workplace but such factors are not easily identified or managed. With physical factors you can measure the light level and adjust it if it's too bright or too dim. You can't measure ethics, culture, climate, occupational stress - all you see are its effects and the primary effect is employee motivation.

Motivation

Motivation comes from:

• understanding an individual's pattern of personal needs and expectations then satisfying them
• recognizing and appreciating the effort made by people and including them in discussions
• recognizing that results often arise from a team effort and rewarding that effort accordingly rather than specific individuals
• satisfying employees desire for psychological rewards from the work experience

Empowerment

Empowerment is said to motivate employees because it offers a way of obtaining higher level of performance without the use of strict supervision. However, it is more theory and rhetoric than a reality according to Rollinson and Edwards.

To empower employees, managers not only have to delegate authority but to release resources for employees to use as they see fit and to trust their employees to use the resources wisely. If you are going to empower your employees, remember that you must be willing to cede some of your authority but also as you remain responsible for their performance, you must ensure your employees are able to handle their new authority. (For more information on empowerment see Leadership, empowerment, motivation and teamworking).

What are the key factors in measuring performance?

For many years line managers treated the annual staff appraisals as a chore, conducted simply to satisfy the personnel department. They often took the form of a meeting between the manager and a member of his staff where there would be praise for jobs well done, reprimands for jobs not done or not done well and a possible future course outlined. This often resulted in the manager requiring some remedial action by the individual concerned with a plan to develop skills and knowledge for the individual to progress up the promotion ladder. After the appraisal, life continued as usual. The results were not supposed to be linked to pay but it was difficult to separate the two in the mind of the individual. The development plans were not always carried through, being abandoned as changing circumstances brought in higher priorities. Little account was taken of the environment in which the individual worked or any adverse influence the manager may have had. It was often one sided and therefore did not address the real factors that affected the ability of the organization to achieve performance targets or the factors that affected performance of the individual.

These defects led to a more rounded concept of performance management (see http://www.cipd.co.uk/subjects/perfmangmt/general/perfman.htm)

The integrity of the performance measurement depends on the method of measurement. If crude measurement methods are used such as gut feel, perceptions or hearsay evidence, the results will be suspect. Results need to be obtained using soundly based measurement methods that extract facts from the process. Some thought needs to go into:

• installing sensors at an appropriate point to measure the prescribed aspect of performance
• taking measurements at predetermined intervals
• collecting data pertinent to the aspect of performance measured
• transmitting the data to appropriate locations for analysis
• analysing data to reveal meaningful information
• presenting the results to the decision makers in a format that displays with the required accuracy and precision a true measure of performance relative to the desired results

These aspects are fundamental to all measurement and apply equally to measurements of individual performance. In additional, as with all measurement, there will be variation in measurement due to bias, repeatability, reproducibility, stability and linearity. (For more information see [Measurement, assessment, monitoring and control]).

In measuring individual performance there are some key factors that need to be taken into account:

• derivation of the measures
• alignment between the objectives of the individual and those of the team
• alignment between the priorities of the individual and those of the team
• awareness of key drivers, dependencies and barriers in delivering required results
• awareness of the adages, 'what gets measured gets managed' and 'you can't manage what you don't measure'
• stability – not changing the measures after commencing performance measurement
• awareness of the phenomena that you can't measure something without affecting in some way what you are measuring

More information can be found on the Cranfield University site.

What are the key factors in reviewing and improving performance?

There are several factors that influence the effectiveness of performance measurement, review and improvement:

• Discriminating between performance measurement and personal criticism, the former being about work done not about apportioning blame
• Separating review from control
• Separating development planning and performance review
• Separating personal objectives from organizational objectives
• Agreement on the objectives and measures of success before reviewing performance
• The efficacy of the approach and tools used to measure performance
• The validity of the criteria used to collect the evidence
• Bias between the reviewer and the subject
• Objectivity in the reporting mechanisms
• Openness in the review process
• Coaching for getting the best out of people www.mattsomers.com

How do individual goals relate to corporate goals?

The question whether targets are still valid is important, so we ask: 'How do we know this is the right thing to do?' New targets have to be planned targets as exceeding targets sporadically is a symptom of out-of-control situations. Targets need to be derived from the organization's goals but as these change the targets may become disconnected. Targets that were once suitable become obsolete and we need to ask: 'Are these targets still relevant to the stakeholder needs?'

Related articles

References

Managing Performance Management in Action Michael Armstrong and Angela Baron

Competence Based Assessment Shirley Fletcher

Work and Motivation VH Vroom

Organizational Behaviour and Analysis D Rollinson and D Edwards

Performance Management and Appraisal Terry Gillen http://www.cipd.co.uk/Bookstore/_catalogue/HRPractice/184398170X.htm

The performance prism Andy Neely and Chris Adams http://www.som.cranfield.ac.uk/som/research/centres/cbp/products/prism.asp

Effects of an Organizational Control System on Managerial Satisfaction and Performance John C. Anderson Charles A. O'Reilly, III 1981 the Tavistock Institute

http://hum.sagepub.com/cgi/content/abstract/34/6/491