Good to Great Management and the Performance Management Cycle

What is the level of employee engagement in your organization? I bet it is quite low. Why is that the case? Who is the culprit? Money, benefits, policies and procedures, company structure or something else? One manifestation of this lack of engagement is the fact that throughout my long experience as HR consultant and trainer I have never met an employee nor a manager who was looking forward to the annual appraisal meeting. Isn't that bewildering? The latest employee engagement study conducted by Gallup reported that only 29% of employees are highly engaged, 50% somewhat engaged and 21% are highly disengaged. Gallup estimates that the total cost of employee disengagement for the American economy is nearly half a trillion dollars.

My article argues that the main reason for the observed low engagement rates is the immediate manager (the culprit) who lacks the competency of professionally applying the six steps of the performance management cycle as elaborated below. Consequently, to become a great manager, all what a manager has to do is to take this cycle very seriously. The cycle is the backbone of a manager's role.

As a matter of fact a recent SHRM study reported that 72% of companies in the USA still conduct annual appraisals despite the fact that 87% of both employees and managers find them very ineffective! Even more alarming is the result of a recent Adope study that found 41% of employees would go as far as changing their jobs just to avoid this agonizing process.

The question at hand therefore is: why are annual appraisals or reviews not looked upon favorably, and why are they thought to be ineffective? What is the link between performance appraisals and great management?

Three Main Reasons for the Ineffectiveness of Performance Appraisals

1. Traditional annual appraisals require managers to 'rate' their employees. In other words, they attach a presumably 'objective' value to individual performance. But value and performance could be very subjective. Besides, employees are not numbers; they are simply humans who hate to be rated and labeled. That is why many companies have recently ditched the annual appraisal process in favor of frequent, candid, individualized and continuous feedback throughout the year.
2. Traditional annual appraisals require managers to: set SMART business objectives as well as desired behavioral standards for their employees at the beginning of the year, track their performance regularly, review individual performance monthly and quarterly, appraise overall performance at the end of the year based on set objectives and behavioral standards and finally rate their employees and report results to HR on time. Well, many managers dread this process and ask themselves where they are going to find the time to do it, how they can remember the mistakes and achievements of each one of their employees over the past full year, how they can deliver an 'uncomfortable' evaluation to a certain employee, and to make things worse, how they can 'comfortably' apply the forced ranking policy of their companies. Indeed, for most managers, the annual performance appraisal is a nightmare they wish to get rid of.
3. Consequently, annual appraisals end up being rushed, highly subjective and focusing on rates' reporting rather than being developmental.

Real Benefits of the Performance Management Process

To start with we need to highlight the fact that performance management is not performance appraisal. The latter is just the final step in an on-going year-round performance management process which, if conducted professionally, can be the primary tool to motivate and engage employees as well as differentiate between good and great managers. For this process to be beneficial to all parties, managers will have to follow six interrelated steps:

1. Explain the companywide goals and objectives for the coming period.
2. Help the individual set his/her personal SMART objectives that are aligned with organizational objectives.
3. Assist individuals to design their personal action plans to achieve individual objectives.
4. Track performance throughout the year weekly, monthly or quarterly.
5. Give passionate feedback and coaching to continuously improve performance, achieve set objectives and even exceed them by the end of the year.
6. Conduct the annual appraisal meeting as required by company policy. You have to remember that the main purpose of the appraisal meeting is not to determine the annual salary increment, it is rather exchanging thoughts about future performance. If the five previous steps are conducted properly, appraisal meetings will be smooth, comfortable and beneficial to the employee, the manager, the department and to the whole organization.

As can be discerned from the six-step process above, the performance management process is basically a process of on-going communication between the manager and the employee. This is how it should be: Communicating individual objectives aligned with company strategic goals, giving passionate feedback and exchanging thoughts about present and future performance. A recent Gallup study revealed that employees whose managers regularly communicate with are three times more engaged than those who do not communicate regularly. In other words, running the process professionally as described above is a primary tool for engaging and motivating people.

Other benefits of this process include:

1. Showing how much the employee is appreciated by highlighting the value he/she is bringing to the organization.
2. Giving the opportunity for each employee to voice his/her concerns or desires about their future and career path in the organization.
3. Coaching employees and giving them continuous feedback to facilitate individual development and organizational growth.
4. Being a method for objectively determining raises and bonuses.

The problem arises when managers omit the first five steps in the overall performance management process or do not conduct them properly. In those cases they will find themselves at the end of the year 'forced' to hold performance appraisal meetings and report ratings that are normally distributed (bell shaped rankings). A Pandora's box of trouble and malfunction is opened as a result.

Gallup's findings are a proof of the failure of the performance management process as presently conducted by most organizations where the managers' focus is on the last step of the process (appraisal meetings) only. Managers will have to realize that becoming a great manager boils down to playing the role of a results-based leader able to sustain organizational results through effectively managing individual performance. This can easily be accomplished by following the six steps of the performance management cycle.

Becoming a great manager implies administering the performance management cycle with the highest standards of managerial professionalism as well as sharpening your communication skills, listening to others, treating them fairly, giving passionate feedback, and developing an attitude of serving others. Isn't that the essence of true leadership?