The Hindu Business Line : How effective is your performance management system?

The Performance Management System has been recognised as a significant tool for employee development. Organisations worldwide are leveraging this tool to create a high-performance culture.

As with other organisational systems, it is important to measure the effectiveness of the appraisal management system too. Traditionally, appraisal systems have been measured against percentage completion and timeliness. However, such a measurement is incomplete and does not bring out the best from this powerful people development tool.

Efficiency & Effectiveness

There are two sides to measurement. Measuring efficiency is the most commonly practised. While recruitment efficiency has been measured against time-to-hire and hiring cost, training efficiency is based on the man-days of training conducted, reaction-level evaluation, schedule integrity and employee attendance. The efficiency of the performance appraisal system has been frequently measured against its adherence to timelines for goal-setting and review/rating, the employees covered for completion, and the like.

The primary motivation for efficiency measurement has been the ease of measuring these parameters. The real challenge lies in measuring the not-so-easy effectiveness of HR systems. The measurement of effectiveness can have an impact on enhancing the human capital of the organisation. Effectiveness dimensions provide qualitative insights essential for making fruitful decisions on the part of the stakeholders.

Stakeholder advantage

While efficiency-focused measurements of the performance management system may benefit the HR function or department, key stakeholders like the employees themselves and their managers do not stand to gain anything from this level of measurement. To that extent, efficiency-oriented measurements become “pseudo measurements” that do not deliver any value.

I propose a more complete ‘assessment model’ for assessing an organisation’s performance management system. While there can be many other frameworks, I describe the one that we at Symphony Services follow. This has helped us get the maximum benefit for all the stakeholders involved, in leveraging the developmental tool of the appraisal system.

The Staircase approach

The staircase model combines both the efficiency and effectiveness required of a good appraisal system, ensuring that the system delivers the intended benefit. The approach covers the holistic perspective for measurement.

Level 1 – Process compliance: Most organisations measure the effectiveness of their performance management systems at this level. Process compliance refers to satisfying a check-list of parameters relating to system implementation. This check-list includes, amongst others, adherence to timelines while goal-setting; quarterly, mid-year or annual reviews; and signatures of employees appraiser and reviewing managers and HR as the system may warrant.

Level 2 – Content completeness: In some organisations, the HR function takes the measurement to the next level by either randomly or entirely checking the appraisal documents. This ensures that the employee, appraiser and the reviewing managers have filled out the form in detail. If a manager has not done a good job, HR sends the appraisal document back. The manager is also invited to go through a refresher module so that the nuances and seriousness of doing a comprehensive appraisal is understood for the future.

Level 3 – Vitality curve analysis: Mature organisations go beyond levels 1 and 2. They also do a detailed analysis of the employee distribution in terms of their rating category and draw up a “vitality curve” or what is popularly known as the “bell curve.” The vitality curve and accompanying analysis helps organisations segment talent, which is the first step towards creating a high-performance culture besides identifying a slate of high-potential candidates when viewed along with a robust potential identification process. Talent segmentation is also necessary to tailor specific development actions.

Level 4 – Employee experience: At this level, HR partners the different business units within an organisation to measure the employee’s experience with the appraisal review process. This involves choosing randomly 12 to 15 per cent of the employees and asking them questions on their experience with the performance management cycle. The focus is on the quality of the appraisal review session, the quality of the dialogue, the manager’s willingness to receive feedback and the nature of the discussions around developmental actions and the like.

While levels 1 and 2 represent the efficiency focus, levels 3 and 4 make up the effectiveness focus of the measurement of the performance management system. Interestingly, the higher levels of measurement in the staircase model do not call for sophisticated tools. Well-trained HR partners and those responsible for HR analytics can do this with ease.

Value creation

I am reminded of a bill-board advertisement of a popular brand of two-wheeler some 20 years ago. It read: “Fill it, Shut it and Forget it!” This was to communicate how easy it was to handle the bike.

Looking at the way in which some organisations handle performance management, one is reminded of a similar approach. Organisations are more concerned with filling it, closing it and filing it away without much thought being given to the action that should follow a good appraisal session.

The appraisal process conducted along the staircase model promises clear value creation. Until then, McGregor taking an uneasy look at appraisals is well justified!

(The writer is Executive Vice-President & Chief People Officer with Symphony Services Corporation.)

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How effective is your performance management system?