Thought Leadership

REPRINT: Dallas ASTD On-Line Newsletter 2/02 (www.dallasastd.org)

Managing Employee Performance is Managing Business Performance
An integrated performance management system is one of the most effective means of managing business performance

by Rosanne D. Ren*

A global telecommunications company was hemorrhaging talent from its R&D department. This company was highly effective in attracting young engineering talent, largely by advertising generous training and career development opportunities. Yet exit interviews revealed that the primary reason most of the young engineers had left was the company's failure to deliver on that promise. Delving into the cause of this failure revealed that the R&D Manager had been consistently postponing or declining approval for her team members to attend company-sponsored training. The reason she'd given for withholding approval was the potential disruption of R&D project schedules.

The company's senior executives were appalled to learn that their strategic objective of attracting, developing and retaining top engineering talent was being thwarted by their R&D manager. In reality, however, the R&D manager herself was not fully to blame; the main culprit in this situation was the inconsistent direction she'd received from company leadership, her boss, her job description and her compensation. The problem was multifaceted. First, the R&D manager was an achievement-driven individual whose first priority tended to be meeting or beating project deadlines. Second, her job description focused far more on R&D output than on team development. Third, her boss had ignored nearly everything but successful project completion in his feedback to her, giving her consistently high performance ratings that resulted in substantial raises and bonuses. It was not until high turnover among the R&D team began to significantly impair the department's performance, and cost the company both in productivity and reputation, that senior management intervened.

Ask employees from the executive suite to the production line of any company to list aspects of their organization that are in greatest need of improvement, and "communication" will invariably make the top three. Not the lack of it, but the quality of it. In fact, corporate life is a veritable cacophony of communication…that needs instead to become a symphony.

Consider how many forms of internal communication are used in business. First, there are the relatively direct forms: written, verbal and non-verbal messages from senior executives, one's boss and colleagues at all levels, as well as from central service departments like Accounting and HR. Then there are the indirect, yet highly impactful messages communicated by the company's HR management systems, processes and infrastructure, such as compensation or training and development. Unless all of these forms of communication are sending a consistent signal, "corporate cacophony" can result. "Corporate cacophony" breeds confusion, and confusion can derail employee motivation and performance .

How do "corporate cacophony" and confusion arise, and how can they be avoided? One answer lies in what we call "Dynamic Performance Management. " Dynamic Performance Management means two things: first, fully integrating core HRM systems into one, annually updated Performance Management System, and second, calibrating that system at least yearly for alignment to "Strategic Intent" (business vision, mission, strategy and values).

In reality, most companies manage recruiting, training and development, job definition, performance management and reward all as separate streams. "Worst case" outcomes from this fragmented approach to people management include:

• Recruiting inducements that become broken promises
• "One-size-fits-all" training and development programs that only partially meet individual and organizational needs
• Static, outdated job descriptions that are not linked to current organizational goals
• Subjective, "after the fact" performance reviews that lack strategic context
• Compensation based more on subjective performance ratings and market trends than contribution to the business

Cacophony!

Turning cacophony and confusion into harmony and clarity of purpose can be achieved by following the Dynamic Performance Management process steps:

1. Calibrating Strategic Intent: A concerted effort among leadership, line management and HR is needed to update and calibrate their understanding of strategic business objectives on an annual basis, then cascade those objectives down to department and individual performance objectives.

2. Performance & Development Planning: Collaboration among line managers, employees who report to them and HR is then required to update job definitions, set individual performance targets, and formulate competency development plans. Collaboration among all three ensures that all three share ownership of performance goals, and that development plans are designed to support near-term performance enhancement as well as long-term career goals.

3. Performance Coaching: Managers must be trained and supported to coach employees on an ongoing basis, to provide timely feedback that keeps them energized and focused on achieving performance goals.

4. Performance Review: If performance planning and coaching have been effectively conducted, performance reviews should cease to be a dreaded annual chore. Instead, they become an opportunity to jointly celebrate progress achieved, identify developmental work still needed and launch the planning process for the following year. With data on performance and developmental progress having been gathered and charted throughout the year, the "skew factors" of subjectivity and recent experience are minimized.

5. Reward: The Dynamic Performance Management process culminates in basing bonuses and salary adjustments primarily on the successful achievement of performance and development objectives linked to Strategic Intent. In this way, compensation, the most tangible form of feedback, consolidates the message that the preceding steps in the process have already communicated. At the same time, it is important to remember that "reward" extends beyond compensation to other forms of recognition, and that reward in this broader definition be customized according to what most effectively motivates individual employees and not limited to an annual exercise.

The talent hemorrhage at the telecommunications company was resolved when the R&D manager was coached, supported and rewarded to balance her focus on project completion and team development. This incident inspired the company's leadership to become more proactive in aligning HR management to Strategic Intent and fostering a positive company culture.

Having a Dynamic Performance Management system that aligns all HR management systems with Strategic Intent will help turn cacophony into harmony and create a high performance culture. That culture can be further strengthened through a systematic alignment of other components of organizational "architecture," such as operational systems, procedures, processes and infrastructure, with Strategic Intent.

* Rosanne Ren is an Organizational Development consultant and former western regional head of the leadership development and organizational effectiveness practice for the Hay Group. She is a co-founder and principal of Sea Change Partners, LLC.

1. Research by the leading IO psychologists of this past century, starting with Litwin and Stringer and further validated by McClelland, has demonstrated that clarity of purpose and consistently enforced performance standards are the two primary drivers of employee motivation. They are also the hallmarks of high performance cultures.