Dealing with poor performers

Many people believe performance ratings are needed to deal with poor performers. However, managing poor performance usually invokes a separate process (called a performance improvement plan or opportunity period) that puts employees on notice that their performance is below expectations. Documentation separate from the PM system is prepared to formalize the areas in which improvements are needed and the expected timeframes. Performance is then monitored and managed against these requirements. These performance improvement plans are used to manage poor performers because the primary PM system often does not contain sufficiently differentiated rating information or sufficient documentation to provide a basis for employee actions that can result from an opportunity period, such as separation.

Developmental feedback

One use of ratings is to diagnose areas for development. Unfortunately, to the extent that ratings are used for decision making, there can be decrements in both their accuracy and quality that undermine their effectiveness for development. This has prompted the use of separate processes that are strictly for development; one example is a 360 assessment that only the employee sees. Research has shown that development-only evaluations are both more accurate and more differentiated than ratings from the PM system. Of note is that the higher quality information these tools provide can erode quickly, if their purpose changes from development to decision making or if even small, seemingly innocuous changes are made (e.g., making 360 assessments available to the employee's managers rather than the employee alone).

Promotion

Some think performance ratings are an important input to promotion decisions. However, movement into other jobs often requires different competencies or proficiency levels that evaluations of current performance do not address best. For this reason, promotion decisions often rely on, and are better served by, assessments that better forecast an employee's ability to successfully perform the new role requirements.

Merit pay increases

Ratings are often viewed as the critical driver of merit pay increases. However, a good number of managers have reported that instead of using the rating processes, they retrofit their ratings to align with the pay increases they want or need to give employees. This occurs as a practical matter. Managers often have small raise pools. Pay increases in any given year are affected by factors outside employee performance, such as (a) what the risk of attrition is, (b) what the internal or external equity is, (c) where employees sit on their pay lines, and even (d) whose turn it is to get a larger increase this year—a phenomenon that results from small raise pools. To the extent that there is alignment between ratings and pay increases, it can be the latter driving the former. However, sometimes there is also a lack of alignment that can be difficult to both explain and defend.

Bonuses and stock options

These often result in more highly differentiated rewards than merit pay, and it is in situations with high variable compensation that we tend to find the most overengineered and complex rating systems, perhaps to give an illusion of precision and due process because more is at stake. However, manager calibration sessions or second-tier reviews are often used to ensure fairness in high stakes rewards. During these, initial ratings can be realigned; thus, it is often the discussion and not the ratings themselves that drives decisions.

Both research and practice have shown that more complex rating processes do not improve rating quality or outcomes (e.g., Landy & Farr, Reference Landy and Farr1980). Thus, it is prudent to simplify performance ratings to the greatest feasible extent while still addressing the organization's PM needs (e.g., a rating of record or input into decision making). In some cases, wholesale elimination of ratings may be the answer; in others, it will not be the answer. The key is determining the most effective solution on a case-by-case basis, based on what the organization's goals are and how PM fits into its larger talent management framework.

Replacing numerical ratings with broader categories is worth examining, especially as we consider what is gained by communicating a numerical rating to employees. It pins a number on the person that will only be satisfying if it is the highest number available. Neuroscience research shows that evaluations activate a flight or fight response, in which communicating less than top standing can decrease subsequent performance (Rock, Reference Rock2008). Given that managers do not gain anything by unnecessarily disenfranchising employees, it is no wonder that formal PM ratings show little differentiation. It is thus reasonable to consider the value of ratings from a motivational perspective, especially in light of the disengaging impact they can have on employees.

We have successfully streamlined goal setting, formal reviews, documentation, and ratings, with accompanying increases in manager and employee satisfaction. Sample results from Cargill appear in Table 2. Along with this, we are advocating increased focus on the ongoing PM behaviors that matter most for driving performance. However, this leaves open the important questions of whether there should be any formal PM process or tools and what these might be. In streamlining current systems, it is important to be mindful of fairness, legal defensibility concerns, and the need for due process in decision making. It is not advisable to eliminate PM activities that are important for fairness or defensibility, such as assessing performance against job-relevant criteria and proper documentation of decisions. Below, we discuss some tools and more episodic PM activities that we have found to be useful, either because they provide information that facilitates the key PM behaviors (discussed in detail in the next section) or because they add value beyond these. The items we suggest below all reinforce evidence-based practices for driving fairness and high performance, without adding a low-value process or significant burden.

Table 2

Cargill Example Results

Establish role descriptions

Role descriptions that define the major duties and responsibilities of a position are a valuable resource for both managers and employees. Done right, these provide employees with an understanding of what the essential functions of their roles are and how their roles contribute to the organization's success. In addition, good role descriptions help anchor conversations about priorities, challenges, and actions that managers can take to either adjust responsibilities or remove barriers. The key is to create succinct role descriptions that capture the major responsibilities for each major job type and level. These are not only useful for establishing consistent baseline expectations for similar roles but they also help employees understand what the distinctions between levels are and what it takes to move forward in their careers.

Identify meaningful performance measures

Although ratings add little to decision making and can actually detract from performance by activating defense mechanisms, knowledge of results and effectiveness is essential for directing work effort. This requires an ongoing assessment of performance against a standard to identify gaps and make course corrections as needed. For example, a salesperson needs to know how close she is to her quarterly goal on an ongoing basis to know whether a change in her sales pitch is needed. An engineer producing a new design needs to know whether the design is acceptable or whether revisions are needed. Rather than having an elaborate year-end performance rating process, managers need to identify job-relevant methods for gaining information about one's performance in real time (e.g., process for gathering customer feedback, peer reviews of products). Identifying performance effectiveness indicators is especially important in knowledge or creative work, in which objective indicators of success do not exist, and employees may have varied opinions about what constitutes success. Once established, methods for assessing performance usually do not change frequently, but they should be examined periodically to ensure their meaning and relevance.

Conduct career conversations

The yearly review that provides backward-looking feedback is not only ineffective but also potentially damaging. Much like the performance rating, backward-looking feedback is threatening to one's self-image and can cause people to shut down because it is too late to make corrections. More useful and empowering is a forward-looking discussion of an individual's goals, the new skills or experiences that are needed to achieve these goals, and ideas for acquiring these skills or experiences. Although ongoing feedback conversations and in-work development are critical, there is also value in pulling up once or twice a year to discuss larger career aspirations and opportunities within the organization.

Inspire: Link each individual's work to the organization's mission and its success

An important function of PM is to align the activities of employees with the organization's mission and objectives. The best way to achieve this is through routine conversations with managers and others from which employees come to understand the organization's mission, environment, and factors that affect their daily work. Understanding what the big picture is and how the organization gets things done equips employees to make decisions and course correct in alignment with the organization's goals and realities. This not only empowers employees to perform more effectively but also provides meaningful connections between individual work and the organization's greater purpose.

Because organizational mission statements can be lofty and hard to translate into everyday work, managers need to help employees make connections between what the organization's mission is and what the employees do. What is important here is for managers to make sure each and every employee feels valued by helping employees understand where they fit, how their work is important, and why they matter, irrespective of how geographically distant they may be from the central business or how peripheral their work may be to core operations. This instills in employees a sense of purpose and is foundational for trust, open communication, engagement, and high performance. Managers also need to be able to describe in straightforward terms how the business operates, what keeps the lights on, and what the organization's unique approaches to sustaining operations are. They need to help employees identify opportunities for broader impact and contextualize decisions to help employees navigate increasingly complex roles. Finally, managers need to keep staff informed of factors inside and outside the organization that affect their work.

Employees are responsible for proactively seeking to understand the organization's business and the way their work fits in it. Employees should be able to describe how they contribute to the larger organization's mission and ask questions if needed to clarify this. Employees need to be proactive in identifying when their work is not aligned with the mission and work with their managers and network to reprioritize activities.

Adapt: Set shorter term goals and expectations that flex with changing situations

Communicating expectations is a core tenet of effective PM. Many organizations have overengineered this process to the point that it requires a significant investment but yields few actionable outcomes. Setting SMART objectives annually, for example, ignores the dynamic and ever-changing nature of work (Cascio, Reference Cascio1998; Pulakos, Mueller Hanson, & O’Leary, Reference Pulakos, Mueller Hanson, O’Leary, Varam, Budhwar and DeNisi2008; Pulakos & O’Leary, Reference Pulakos, O’Leary, Farr and Tippins2010). Rather than set goals once per year, research has shown that it is more effective to set ongoing expectations as needed and link feedback to these (Locke & Latham, Reference Locke and Latham1990). This benefits managers because it helps to ensure employees have a better grasp of what to do, making it more likely that work will be done right the first time and require less rework. It benefits employees because it helps them understand what they need to do and how their success will be measured. Different types of expectations may be set that focus on project or task results, behavioral expectations, or bottom-line results. The type(s) of expectations that make the most sense will vary by circumstance and type of work (Pulakos et al., Reference Pulakos, Mueller Hanson, O’Leary and Meyrowitz2012). Examples are shown in Table 3.

Table 3

What Types of Expectations Work Best When

Align: Provide and receive regular, informal feedback to praise and course correct in real time

Closely aligned to clear expectations is receiving clear and direct feedback in real time rather than once or twice a year in formal review sessions. Years of research studies have shown that feedback immediately following a performance event has the most impact on performance. Done right, it accomplishes three things (Gregory, Levy, & Jeffers, Reference Gregory, Levy and Jeffers2008; Kirkland & Manoogian, Reference Kirkland and Manoogian2007; Murphy & Cleveland, Reference Murphy and Cleveland1995):

• • strengthens the relationship between the recipient and the feedback provider,

• • maximizes a positive outcome, and

• • develops the recipient.

What does feedback done right mean? First and foremost, praise and recognition are underutilized. Managers are often taught the situation–action–impact model, in which they are trained to convey exactly what the person did (behaviorally) and what its impact was. This model may be useful for formal, constructive conversations to address consistently poor performance. However, the vast majority of constructive feedback opportunities are “teachable moments” when a misunderstanding occurs, something did not go as planned, or there is a problem to solve. These are naturally occurring feedback opportunities that are inherent in work and that can result in such things as edits to documents, problem-solving sessions, or postmortems on what could be done differently next time. This type of informal feedback is sometimes not even recognized as feedback, but it is usually the most meaningful feedback one gets in a work context.

There has been less attention devoted to informal than formal feedback; hence, there are fewer informal feedback models. However, recent research provides some important insights for how informal feedback should be provided and raises questions about the efficacy of formal feedback models. Pink (Reference Pink2009), for example, argued that people engage by getting there on their own, through trial and error experiences. This suggests that feedback focused on “telling” people exactly what they did wrong and need to do better will not be as effective as helping them discover this on their own. Coaching behaviors that ask the right questions and model behaviors employees can replicate are likely to be more productive than traditional “tell me” feedback approaches. Also supporting these notions is neuroscience research that shows people shut down in response to negative feedback (Rock, Reference Rock2008). However, they react very differently to more positive coaching behaviors on both a cognitive and emotional level. Guiding and challenging employees’ performance and growth stimulates different parts of the nervous system than discussing what they did wrong and need to fix.

Providing informal feedback benefits managers by improving employee skills and enabling employees to produce higher quality work with less input from the manager. Emphasizing employee strengths and giving praise creates positive emotion and performance increases that result from recognition and appreciation. Feedback benefits employees by giving them a clear sense of what they do well and should continue to do as well as helping them see what they can do differently in the future. Employees who are more capable can operate more autonomously, which is the key to motivation and job satisfaction. Employees also have important responsibilities in informal feedback processes. They need to seek out feedback, receive it well, and view it as important for learning and performance. Employees need to ensure they understand the feedback and the action that is needed. Finally, employees benefit from providing feedback to others. Increasingly, some of the most significant feedback challenges are handling feedback conveyed from peer to peer and in virtual environments. Employees also benefit by letting managers and other colleagues know whether adjustments are needed in the feedback they are providing (e.g., more examples or specific suggestions).

Grow: Develop as part of daily work by leveraging work experiences and others’ expertise

Employee growth is the shared responsibility of every employee and manager. Managers need to demonstrate a credible commitment to employee development and understand each employee's capabilities and career aspirations. An important behavior that was shown to drive performance in both Google and CEB Corporate Leadership Council research was managers taking a genuine interest in their direct reports and helping them advance in their careers. This responsibility goes beyond ensuring that employees have time for training. More important is agreeing on what capabilities the employee needs for the future and providing developmental experiences to enhance these capabilities on the job, where most development occurs. A credible commitment to development also includes things like making suggestions that help employees leverage others for learning and expand their networks inside and outside the organization. Employee responsibilities in the growth process include honestly evaluating their own capabilities, initiating conversations with their managers and others about their career aspirations, and looking for opportunities to take on new experiences and responsibilities. Key here is the employee's willingness to take on tough assignments to stretch and develop. Developing employees through experience serves managers because employees become more capable and become able to take on more responsibility, freeing up the manager's time. Development serves employees because it strengthens their mastery and accomplishment, helping to position them for future opportunities.

The specific process to motivate change needs to be customized to each organization's environment, maturity, and needs. However, this process typically entails a series of meetings, briefings, webinars, or other communications that (a) lay the foundation for change, (b) introduce the four behaviors that matter most, and (c) prime learning by showing how the change will benefit managers and employees. For example, organizational members can be shown what the existing levels of target PM behaviors are, what change is needed, and what impact that change will have. Done right, these activities drive anticipation and motivation for change, heightening attention and directing the focus that is needed for learning. It is important to establish across the organization a group of champions who will help develop and communicate the vision, help eliminate barriers, and help model the new mindset in their own business units. Cargill leveraged two such groups: the Talent Advisory Board and a PM Implementation Champion Group. The first consisted of senior business and HR leaders that helped shape the vision and make design choices; they also helped communicate and advocate the new mindset. The second group, composed of HR leaders, focused on educating, communicating, and influencing others to positively embrace and adopt the Everyday PM mindset while addressing cultural and business differences. The specific mindset Cargill drove is shown in Table 4.

Table 4

A New Performance Management (PM) Mindset and Process: Cargill's Everyday PM