Performance (Mis-) Management (Part 1)

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Possibly more than any other aspect of managing talent, performance management is deeply entwined with human nature. And, much like human nature, it’s full of pitfalls, and an oversimplified approach might impede, not incent an intended result. In other words, it’s easy to shoot yourself in the foot.

The good news is, if you have a say in talent strategy, you can protect your organization from bad performance management.  It’s about understanding the pitfalls, shifting your perspective and committing to the right strategy.

Consider the pitfalls.

Politics for a Bonus

Let’s look at this common scenario: a company employs engineers to create and evolve new products and solutions every day. At any given time, an engineer may be in demand for many different activities on a project. What will determine their actions and priorities? What will determine what email that employee answers first, or what activities she tackles next? Will the goals of the business determine that?  Well… not exactly. That employee will likely decide her next step at least in part based on the company’s performance management process.

That brings me to a conversation I once overheard in an elevator at a high tech company. At this company, management had implemented a calibration process for ranking and rating employees against their peers. Makes sense, right? After all, it’s fair to ensure that you’re using a common yardstick by calibrating employee performance across multiple managers.

So an employee asks her colleague, “Now that you’ve finished designing your part of our project on time, what’s the next step? Are you going to move to help the team that is furthest behind?”

Perf_Mis-Mgmt_Sidebar.png“No. I know they need me there, but I’m pitching to move to another part of the project.  It’s not as critical, but it’s cross-project. Much better visibility with other managers, which should improve my performance evaluation and my raise and bonus.” As a result of the organization’s well-intended review process, they suddenly found themselves rewarding the ability of employees to get noticed, rather than rewarding an employee who performs the most critical work.

Meeting the Quotas

Here’s another example: I know of a salesperson who joined a company with high expectations. He knew he could completely exceed every revenue goal set before him. He could bring in great business. He had the right connections, and he knew how to use them. When he started, he set about doing just that, and he succeeded by hitting 150% of his revenue target. As a result, he expected a glowing review from his manager and a great raise and bonus. Unfortunately, when the results were in, there was a surprise; his review and compensation adjustment were much less positive than expected, because he did not meet the set goal for making outbound calls each day. “Sorry,” he was told. “That’s the program. Take some time and concentrate on those calls each day. You can do that.”

No problem. Following that meeting, he created a new routine. To begin each day, he would call the help desk and hang up after the minimum amount of time required to track the call as an “outbound call.” This took about an hour of his time (and some of the help desk’s time) that could have been spent developing leads. He did it nearly every day. He managed to only meet (not exceed) his revenue target during this review cycle, but exceeded his outbound calls target. As a result, he received an outstanding review with a large raise and full bonus. By rewarding activity rather than just pure results, the performance management process was actually reducing both business performance and employee satisfaction.

Going “Above and Beyond”

In another example, consider an electricity provider that was facing the choice of moving its plants to accommodate a risky placement on an earthquake fault. After some consideration, leadership determined that the right course of action would be to move two plants to new, safer locations. Good choice. But in a classic case of “Goofus and Gallant,” one plant relocation team started at the outset to create detailed project plans, engage all involved workers and tightly manage the process. The other did not.

Predictably, the team with the tightly managed process achieved the transition with relatively few hiccups. There was no panic. No one had to work consecutive 80-hour weeks. It was, in all respects, a well-executed move, on-time and on-budget. The other team ran into problems early and often. With inadequate pre-planning, many activities turned into fire drills. Employees and supporting contractors worked long hours, and they collected tremendous amounts of overtime. In the end, the relocation was achieved, but late and over-budget, and the team was burned out.

Here’s the stinger: the company rewarded both the management and team members on the team that was late and over-budget with large bonuses because of their long hours (which were entirely due to the poor planning of that management team), and gave nothing to the team that came in on-time and on-budget.  The company wasn’t rewarding performance; it was rewarding heroic efforts.

Now that you've seen some examples that will help you recognize poor performance management, stay tuned for next week’s blog to find out three key questions you can ask to avoid these pitfalls.

Andy Rice

Andy has played an instrumental role in the success of his clients, working with Fortune 500 companies and other organizations on critical initiatives including integrated talent management strategy and planning, talent management transformation, change management, business process improvement, and technology selection and implementations.

Topics: Compensation, Talent Management, Performance Management