Performance Management: A Leadership Must
Joe Condon, Plante & Moran, PLLC
Many process improvements can be discovered, designed, engineered and implemented with
investments ranging from almost nothing to millions of dollars and yielding returns that take from days to years. If, however, you’re in a leadership role, the most impactful process improvement you can make is in your performance management system. Effectively managing the performance of other people has a multiplier effect and, therefore, is often the most effective process improvement to immediately affect organizational results. There are myriad complex employee appraisal systems and tools, but a simple and—hopefully familiar—“plan, do, check, act” (PDCA) approach can produce extraordinary results.
Performance planning is the process where goals and objectives are established. Beginning with the strategic plan, a contribution analysis must be performed on each job, group or function. The purpose of the analysis is to determine how each job contributes to a specific strategy or key objective. Establishing clear performance drivers of each strategic objective and linking those key drivers to job-specific performance expectations is at the core of an effective performance-planning process.
The task of a comprehensive contribution analysis can seem daunting, but the application of some common process improvement tools can help. Consider applying a failure mode and effect analysis methodology to a specific job. In doing so, we begin to understand and can quantify via risk priority number the relationship between the job tasks and the strategy or key objective. A classic “five whys” approach to a key objective may help to identify and clarify the critical drivers deep into the organization. A brief value-stream map of a specific job also may point to the key performance indicators (KPIs) of that job. Building a KPI hierarchy model can clarify the relationships that need to be established and understood.
Once performance expectations are established, the next step is to communicate them to the individuals doing the work. This can be accomplished through job descriptions, employee performance plans, posted performance metrics, etc. The key here is to communicate expectations clearly and often. Best practices often have a high degree of collaboration and even negotiation between manager and subordinate in building the contribution analysis and in setting specific performance targets. This approach can build trust, establish a sense of partnership, and encourage ownership and buy in, all resulting in consistently higher levels of performance as time goes on. Given the opportunity to participate in goal setting, it’s not unusual for employees or work groups to commit to a higher level of achievement than what the manager would have set once they understand how their performance affects broader organizational goals.
Employee involvement and engagement is required for any level of sustained performance. Traditional process reengineering requires a high degree of employee involvement, including principles such as organizing work around desired outcomes and delegating decision-making authority to the lowest appropriate level. All successful Lean manufacturing leaders advocate consensus-based decision-making, and a cornerstone of the Toyota production system is employee development training. Involving your staff in your performance management process is critical.
Effective performance management boils down to commitment, discipline and regiment. Timely, meaningful and constructive performance appraisals are the most common shortfall of all performance
KPI hierarchy models visually link organizational objectives to key performance drivers.
management systems and/or people managers. These discussions are the time to acknowledge and celebrate successes and to establish accountability and ownership for performance shortcomings. The most effective systems include frequent, specific, fact-based face-to-face performance feedback sessions. This is not the right time for e-mails, voice mails or memoranda. Keeping the discussion focused on the quantifiable performance achieved alleviates the destructive feelings of a personal attack. Developing the habit of providing frequent and conversational coaching, guidance and troubleshooting will instill a culture of celebration, partnering, accountability, ownership of results, performance orientation and continuous improvement.
Many organizational behavior studies have concluded that high-performing individuals and work groups have strong relationships with their leaders. These relationships typically are based on trust, professional respect and mutual commitment. Frequent and meaningful coaching discussions can fertilize such relationships. The resulting benefits include consistent and dependable levels of performance, a results-oriented culture, and a high level of employee retention.
With time, all things change. Effective performance management is not a one-time or annual event arbitrarily tied to the calendar. When things go well and objectives are achieved, managers need to act. Acknowledge achievements, celebrate accomplishments, and positively reinforce that success is possible and will be rewarded. When things do not go well and goals are missed, managers also need to act. Troubleshooting should begin with an assessment of the goal, the allocated resources (people, skills, time, funding, etc), and the execution plan. More often than not, objectives are missed because of good people in a bad process. The best performance management systems troubleshoot processes, not people.
Achieving performance is active versus passive in nature. The best performance management processes are stable enough not to feel like a “flavor of the month” program, but flexible enough to be responsive to changing organizational priorities and opportunities. A formal and structured review of goals and objectives should be done at least quarterly and as significant organizational changes warrant.
Simplify and Clarify
Taking a PDCA approach to your performance management process can simplify and clarify what can quickly become an unmanageable and meaningless set of disjointed performance metrics. There is no magic in the performance metrics of the most successful organizations or work groups, but there is magic in the management of these performance management systems. Process improvement can begin today, can be implemented with familiar tools and can leverage the multiplier effect to provide immediate results across any organization. What a great way to start the new year.
Joe Condon is management consulting leader for the Life Sciences Group of Plante & Moran, PLLC, an accounting and business advisory firm. Previous experience includes work as vice president of operations and executive plant manager for Stryker Orthopaedics.