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  • Mark Shaw

Why Do We Waste Time, Effort and Money on Performance Management?

The evidence is clear that the process of performance management is costly in terms of time and effort and adds little, if any value. Let’s consider why this is the case.

Conventional performance management is considered as a cycle, often over 12 months and includes:-

  1. Performance planning where goals and objectives are established

  2. Performance coaching where a manager intervenes to give feedback and adjust performance

  3. Performance appraisal where individual performance is formally documented and feedback delivered

This model has three problems:

  1. It is not dynamic or responsive enough to reflect the speed of a modern business environment.  The research on this model is clear: 95% of line managers say under this model, appraisals are a total waste of time and deliver zero value. 90% of HR Practitioners say appraisals do not give them the data they need for issues such as developing training plans, conducting remuneration reviews and managing poor performance; and about 50% of employees appraisals are demotivating, often because when they miss pre-set goals because they are responding to real-time changes, their efforts are not adequately recognised and/or often criticised.

  2. It ignores the problem of poor performance where the research is equally clear: Over 80% of line managers avoid ‘the difficult conversation’ , over 80% of Performance Improvement Plans fail to deliver improved performance and appeals against unfair dismissal claims continue to be successful because ‘reasonable management action was not taken or not taken in a reasonable way’ to manage the performance issue.

  3. It is expensive and delivers little if any return.  Most organisations spend about 8% of their salary budget on their performance management processes and I am yet to find an organisation that can demonstrate value for that expenditure.

For some time, many writers including Di Armbrust, Tim Baker, Sam Culbert, Roger Ferguson, Nick Holley, Ted Mouradian, Dan Pink, Ricardo Semler, Professor Paul Thompson and Graham Winter have been suggesting alternatives and I’d like to add the following for your consideration.

The solution I advocate lies in understanding a new model is required; one based on managing risk rather than following a business cycle. 

I advocate that:

  • Continue to encourage informal and regular day-to-day conversations.

  • Managers and employees replace their current formal process with just one of two conversations;

  • When performance is acceptable or better use a conversation based on discussing and planning the future

  • When performance is not going well* use a conversation based on identifying and resolving the subsequent management problem

  • HR is responsible for pre-scripting both conversations and then facilitating the conversation if necessary.

  • Either conversation should happen when it’s needed rather than in accordance with a calendar

  • HR must always be ready to assist. 

Our evidence over the past 17 years is clear and consistent.  From coal mines to kindergartens; from teachers to technicians:-

  • 95% of line managers say this delivers real and measurable value

  • 90% of HR Practitioners say this gives them the data they need for issues such as training needs, remuneration reviews and managing poor performance 

  • About 80% of employees say it is motivating, because their efforts are recognised when they respond to real-time changes.

  • Over 80% of line managers now proactively want to conduct ‘the difficult conversation’ and resolve their problems

  • Over 65% of ‘difficult conversations’ result in the employee returning to acceptable levels of performance 

  • 100% of appeals against unfair dismissal claims are successfully defended because the courts always deem ‘reasonable management action was taken in a reasonable way’ when managing the poor performance issue.

Why waste time, effort and money on a process that is costly and does not add value?  Why not implement a process that is cost and time effective and does add value?  

The evidence is ours; the choice is yours.

*This include issues such as under performance, poor performance, bullying, harassment, sexual harassment, deviance, corruption, absenteeism, drug and alcohol abuse, plagiarism, employee theft of time, misuse of company resources in the pursuit of a private venture and use of organisational information technology to transmit pornographic images which can all be successfully resolved using the same conversation.

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