Multiple studies in recent past, including Mercer’s 2013 Global Performance Management Survey have proved that almost all organizations (88 percent) have a performance management strategy, yet most (71 percent) rate their performance management as ineffective.
A 2013 survey by the Society for Human Resource Management asked HR professionals about the quality of their own Performance Management systems in which only 23 percent said their company was above average in the way it conducted them. Other studies uncovered even more disdain. According to the Corporate Executive Board (CEB), a management research group, surveys have found that 95 percent of managers are dissatisfied with their Performance Management systems, and 90 percent of HR heads believe they do not yield accurate information.
Performance & Rewards management is the most critical process for ensuring strategy execution and a strong organizational culture. No other people process directly touches everyone at all levels of an organization. The philosophy, approach & metrics of performance management vary by company, but there has clearly been a lot of reflection in business and HR function on performance management. Companies are increasingly realizing that performance is more than just a number. It is a reflection of behaviors prevalent and encouraged in the organization.
Performance management in a bell curve environment is often the most grievance-causing process by managers and employees alike, since it is seen to promote political behaviors and unhealthy competition. These misgivings prevent it from adding value to the overall performance management process and the intent of performance management process driving positive behaviors.
Several companies have shifted away from the bell curve in sectors such as IT (Microsoft, Adobe, Sapient, Juniper Networks, Wipro, TCS, Accenture), Consulting (KPMG) and Conglomerates (GE). As these companies moved to a rating-less, curveless system of performance management, here are few learnings that some of them had in this journey.
1. There are no silver bullets. There is no panacea to all ills
All of us realize that there are no silver bullets or perfect systems that will solve all problems. Every system, process or practice has pros and cons. The Performance management systems that 'succeed' are the ones that are best aligned to the industry and market realities, business strategy, culture, values and vision that the organization intends to build. The traditional performance management systems worked on the belief that rack-and-stack got employees to compete among one another and in this attempt to outperform one another, the so called “Stretched Performance” would be achieved by one and all.
Increasingly companies are realizing that with the changing business demands and workforce demographics, greater collaboration, constant feedback and agility in performance is the need of the hour. Hence a more agile and flexible approach to Performance Management works better in certain businesses. However, change for change’s sake when it isn’t tied to business and workforce realities unlikely to land successfully.
Performance is more than just a number — it is a reflection of behaviors prevalent and encouraged in the organization
2. Leveraging business leaders as change champions
Leaders at all levels, from seniors to the front-line ones need to share responsibility and accountability for making performance management successful. In particular, having a champion or process owner at the senior-most level is critical. This person helps to drive the system at the senior levels for using the process, initiates communication to the organization about use of the process, and encourages everyone in the organization to use it effectively.
Senior-level champions convey the importance and value of performance management as a business tool. Ongoing communication and use of the process by senior leaders reinforces the belief that performance management is integral to business operations and achieving desired results. It also sends a strong message throughout the organization that performance management is a process owned by the business rather than an HR system.
Senior leaders are watched all the time and their actions speak louder than their words. By using performance management at the top, senior leaders set a positive model that permeates throughout the organization. Nothing is as powerful as that!
3. Moving to a “No bell curve” environment is not a one-time process; it is a journey
Transitioning from a Bell curve environment to a curveless system is a mammoth task of changing mindsets and behaviors at every level. Organizations that have moved to a curveless system are realizing that the journey doesn’t end there.
Organizational systems and processes require constant attention & development. Performance management is no different — especially as it affects everyone on an individual, group, and organizational level. A successfully implemented performance management process is the foundation for other programs, policies, procedures, and continuous improvement initiatives. Since performance management feeds into other organizational systems and has such widespread impact, it is important to make sure that it is given time to get absorbed for it to do its job.
Due to these interlinkages, it takes a lot of time and effort to get performance management processes and practices fully embraced within an organization. And once they are fully adopted, people get comfortable which makes the environment ripe for complacency to set in. Periodic monitoring is a key to assessing whether the process is performing to its desired effectiveness and efficiency. Tools such as performance audits quickly determine what is working and what isn’t, allowing organizations to make ongoing adjustments and continuous improvements rather than one-time major overhauls. And, more importantly, this keeps the performance management system agile and in line with the employee perception.
Tools such as performance audits quickly determine what is working and what isn’t, allowing organizations to make ongoing adjustments and continuous improvements
4. Leaders require skill enhancement in order to conduct high-quality performance discussions
Throughout any performance cycle, a series of discussions must occur — setting realistic goals, conducting coaching discussions, developing others, reinforcing effective performance, providing feedback, handling performance problems, and reviewing performance — all of which can be challenging conversations. They aren’t easy. This is why both will and skill are required in making performance conversations count.
In a curveless performance management system, there is often a lot of focus on constant feedback, coaching and communication by leaders and managers. Leaders are expected to be coaches and facilitators who maximize the potential of people by developing their skills and talents. Yet, coaching is an advanced level skill and all leaders may not be proficient in this. To be an effective coach requires leaders to have the confidence and competence to conduct meaningful, relevant and forward-looking performance discussions.
5. Performance metrics shape behavior
It is perceived that moving away from bell curve will create problems on how to measure performance and rewarding people at the end of the cycle. However, no bell curve doesn’t mean that there will be no metrics to measure performance. When an organization hires people, it does so with an expectation from the new hire and it is important to measure how the employee performs against that role and expectations. With no bell curve, it gives an opportunity for organizations to not just understand and measure the goals but also incorporate new metrics like culture, values and competency across titles based on behaviors that the organization wishes to propagate.
While many organizations have moved away from the bell curve, they still do a rating system at the back end. The idea is to be more transparent and open to the employees on how are they performing and what behaviors are expected out of them. Feedback should be a start point and should be directed towards creating an action plan for an employee to move forward and create an impact.
On the other side, with no ratings, while there is definitely an increased role of a leader and the supervisor vis-a- vis a system, it also gives a huge empowerment to the individual to drive and own his/her growth by having frequent career conversations from the superior.
6. No bell curve doesn’t mean no differentiation in performance or reward distribution
Abolishing bell curve doesn’t mean that the organization doing so doesn’t value high performers. The idea is to understand superior performance and at the same time also identify low performers. Ongoing conversations help the supervisor and individual to understand the gaps and provide opportunity to work on it. It also helps employers to identify low performers throughout the year than only end of the year which can result in huge cost saving for the business. Many employees feel that with no bell curve, there is more focus on performance than only one-time conversation at year end.
How to reward people still remains a hot debate in a no bell curve environment and the biggest concern employees have regarding moving away from bell curve is that they feel this will create more biasness. This is because they feel dependency on their supervisors will increase and the “working relationship” they share with them will decide a lot. Employees want the comfort that a group of people discussed and decided their final rating and that there was a process which conveyed what transpired in the discussion. In bell curve method, all the top performers are distributed equal percentage of increments, however, a no bell curve environment provides the flexibility to be able to distribute higher increase and differential increase to top performers. Leaders can now take into account the industry benchmarking, peer group comparison and potential of the individual apart from performance to the top performers by redistributing the budget vis-a-vis low performers.
The idea behind abolishing bell curve is to understand superior performance while identifying low performers
7. Role of HR in new Performance Management
HR role has been evolving over the years and with the new performance management, the major shift that we see is to move from being the only process owners to be partners with business to drive the process in a meaningful manner. HR needs to move from a policing role of monitoring completion status to be the anchors that help keep everyone connected and facilitates free flow of constructive feedback. Their focus needs to be on coaching the future leaders and help them drive the conversations. While doing so, the checks and balances to ensure fairness and transparency need to be maintained. HR plays a vital role in ensuring that they facilitate the conversations with the leaders to ensure right set of behaviors are encouraged and there is no biasness in the entire process. It is also important to listen to and understand the people’s voice on the ground and keep feeding the learnings as iterative changes to the process.
The big question that arises with this is who owns the people, their performance and their growth. It is the supervisors and leaders who need to own these for their people. Supervisors play a crucial role in this entire journey to be successful. They need to be someone who not just assess performance but also work as coach and guide the team members. This also calls out for specific skills & competencies that supervisor should now be assessed on to become an effective people manager. Leaders need to drive the process by being the change champion in the entire journey and encourage team leaders to enable their people to grow.
Changing performance management is not a one-time activity and huge focus and investment is required on communication, coaching the leaders and upskilling people. This is a journey which needs to be iterative and should keep on evolving with time.