The Failings of Performance Management

BY JOHN M. BERNARD

PART TWO OF A FOUR-PART SERIES ON APPROACHES TO EMPLOYEE ENGAGEMENT

In the world of management, employee engagement is the Holy Grail. Extensive research shows a compelling positive correlation between the level of engagement and customer satisfaction, product quality and profitability. In fact, organizations in the top quartile of employee engagement out earn their competitive peers by 22-28 percent.

In my last blog I wrote about attempts at workforce engagement through exhortation (words, talks, campaigns, encouragement, and rewards). The fatal flaw in that approach is that enthusiasm doesn’t solve underlying problems, and believing that if we just “pump” people up we’ll get sustainable improvement is naive.

A very popular and common approach to engagement is performance management, often the modern-day equivalent of management by objective. It’s underlying assumption is that if management organizes the work, and everyone is accountable for his or her part, the organization will achieve extraordinary results. Underneath this approach is a belief that it is all about individual accountability – and if we write it down and hold people to their piece of the puzzle, the business is bound to succeed. And sometimes they do succeed although it is usually only with small incremental improvements that do not move the needle forward enough.

Performance management isn’t a bad notion, but it has some fundamental flaws. First of all it holds people accountable for things they usually only have some control over. Also, in the absence of relevant concrete measures it often has many “measures” that are based on opinion rather than fact. Second, a performance management goal measured only by a task due date, and does not include a measure for the quality of the completed task because it is viewed as too subjective, is a very weak goal.

Third, if employees are not solving problems using data-driven root cause analysis, no amount of performance management mechanics will improve the customer experience or achieve financial goals.
And the reality is if performance management is used as a hammer, then everyone ends up scrambling to meet their targets even if doing so has an unintended negative consequence to the team or the organization. In the real world things change and sometimes walking away from certain objectives becomes clearly the right thing to do. But changing plans can have a consequence during that dreaded annual performance review.

Performance management can easily lead to an every-man/woman for himself/herself environment. That annual review must go well.

There are exceptions to every rule, but most performance management systems have the hollow ring of an empty metal barrel.

Dr. W. Edwards Deming, one of the most influential management thinkers of the past century, called performance reviews one of the “7 Deadly Sins” of western management. He said that the system people work within and its impact on co-worker and customer interactions determines 90 to 95 percent of performance – not the individual.

Deming and others (me included) believe that performance management does far more to engender individualism, self-protection and fear than it does to serve the need every organization has for innovation.

Learn more by reading Business at the Speed of Now.