Building the Leadership Appraisal Model (Performance Reviews)

To get beyond the “IF” (do the employees have the competencies to do the job), it often helps to have a clearer picture of what needs to take place: 

 

The above model shows that there are two parts to Performance Management (Bacal, 2004):

• Performance Development for helping to improve the performance
• A Performance appraisal or review for judging the performance

These are two different purposes and should be separated in the Performance Management process as they have a tendency to conflict with each other. Richard Rudman (2004), also agrees with this; as does my organization. That is, we first have our Performance Review and then make plans about a month or two later for actually improving the performance. It is quite interesting that a Canadian author, an Australian author, and an American organization (one of the best 100 companies to work for), all have similar views.

Creating a Performance Appraisal from the Competency List

Once you are satisfied with the competency list, a new Focus Team is formed to build the performance appraisal. Note that the old Focus Team may be used, however, there are a couple of pros and cons — using the old team allows them to feel a sense of competition and provides you with an experienced team, while a new team allows more people to get involved with the process and brings in fresh viewpoints.

Each behavioral indicator identified becomes a metric on an evaluation form. A metric is a standard measure to assess a performance in a particular area. So in this case, each competency becomes a performance standard. The performance appraisal will closely look like the leadership competency listing, except that it will have room for comments, goal setting, instructions, scoring, names, etc.

Once the evaluation has been built, it is time to validate it by field testing the instrument. Trial the appraisal process by having senior raters, subordinates, and peers perform a rating of the leaders they work with. Collect feedback on the validity of the rating factors, workloads impact on themselves as raters, and clarity of instructions for performing the appraisal. Data gathered during trial evaluation will not be placed in employee's files, it will be used solely for validating the concept.

Pay close attention to the workload impact. Leaders often put in 8 to 12 tightly packed hours a day at work. If it becomes too complicated and time consuming, then the effort required to perform the appraisal correctly will not put into it. It is better to precisely evaluate a few key competencies than to perform an incomplete rush job on a lot of competencies. Although you might have determined that a lot of competencies are required, it might be better to start off with a few key ones that the raters can comfortably perform. Once they have become adjusted to the rating scheme, then use their help in building on to the appraisal (baby steps).

Immediately following completion of the trial program, refine and retrial the appraisal process. Continue this process until the team is satisfied with the results of the leadership appraisal process.

The Leadership Performance Appraisal Process

Leaders need to be evaluated by their seniors, peers, and subordinates (360 degree feedback). While the leader's seniors determine if goals and objectives were met, only the leader's subordinates can determine if their senior is a leader. Determining if a person has leadership skills is based upon the willingness of people to follow that person. If I tell you to do something, that merely makes me your boss. My senior might think I am a leader because I am able to get things done, but having the authority to order people around does not qualify a person as a leader. On the other hand, if you accomplish something because you see the direction I am going and you want to be a part of that experience, then that establishes a follower/leader relationship. Peers are also part of the evaluation process because they often work together as teams.

Before anyone is allowed to rate someone, they must first understand what performance based appraisals are, and the common rater errors to avoid when doing appraisals:

• The potential of the employee is the key ingredient in a performance appraisal. For example, Bill Walsh, Tom Landry and Chuck Knoll each won several Super Bowls, but they also had the worst first-season records of any coach in the National Football League's history. Also, over half of the Fortune 500 CEOs had a C average in college, yet they went on to manage some of the best organizations in America. Fred Astaire failed his first screen test. It would have been a huge loss if the potential was not recognized in these great individuals.
• Goal setting should be done by the persons being rated (not the rater) as they need to feel a sense of ownership. Keep the goals focused on improving needed competencies. Development goals, such as for advancing in the organization, should be performed in other settings, preferably with a career counselor. Performance Appraisals and career or developmental planning are two separate subjects. . . do not tie them together.
• Performance is a dynamic process. Just as employees should be given feedback throughout the rating period, and not just on an annual or semi-annual basis, goals should also be discussed and reevaluated frequently.
• Evaluating a leader's team accomplishments is more important than evaluating individual accomplishments. Some of the best leaders are almost invisible because of the work they have performed in guiding their team on to excellence.
• There is a tendency to judge more favorably those we perceive as similar to ourselves (Just-Like-Me Effect). The more closely a person resembles our attitudes or background, the stronger our tendency to judge that individual favorably. Yet, diversity offers the most benefits.
• There is also a tendency to evaluate a person relative to other individuals rather than on the behavioral standards (Contrast Effect). A common belief is people of the same rank should be compared to one another. Each appraisal should be a reflection on how well a person met each criterion. Again, the key word is diversity.
• Performance should be based on the entire evaluation period, rather than on the most recent performance. It helps to keep a daily log to jog your memory.
• There is sometimes a tendency to rate a person as good or bad on all characteristics, based upon the inappropriate emphasis on a single characteristic (the Halo or Horns effect).
• Do not rate a person on or close to the midpoint of a scale when performance clearly warrants higher or lower marks. Rating in the middle of the scale is often used to avoid uncomfortable discussions for poor performance. While the failure to give high ratings is often the inability to compliment people for great performance or not wanting to give someone a higher rating than they, themselves, have received.
• Balance the ability to get things done (tasks) with keeping the team together (people). Seniors often give higher marks for task accomplishments while subordinates tend to give higher marks for good people skills. Tasks are important for the day-to-day survival of the organization, while developing people and teams are important for the long-range performance of the organization. Great leaders are both task and people orientated, while poor leaders become fixated on one or the other.
• Remember the term SMART (Specific, Measurable, Achievable, Relevant, and Timely) when performing appraisals and creating goals:
  • Specific - Base ratings on explicit performance and targeted to the area you are measuring. For example, if you measure a leader's ability to perform customer service, a good metric would be direct feedback from customers on how they feel about the employee. A poorer metric would be the number of returned products. When creating goals, ensure both you and the rater understand what the goal is.
  • Measurable - When the performance or goal is charted over the rated time period, which direction is good and which direction is bad must clearly be distinguishable so that action can be taken to reverse, maintain, or grow the rating.
  • Achievable - If prior goals were failed, were they achievable? Great companies treat failure as a learning opportunity. In the early 80's, when the manager of the failed IBM PC Jr. project was called onto the carpet, the first thing he asked was if he should clean out his desk. His senior replied that they had just spent several million dollars training him and that they wanted him learn from this experience. When setting performance goals, they must be easy to understand and can be accomplished by the majority of individuals if given the proper resources.
  • Relevant - Do not measure things that are not important. A common downfall is to try measure everything, this in turn produces many meaningless results and becomes very time consuming.
  • Timely - The individual knows the time period for which he or she is accountable for and knows when goals must be completed.

The Death of the Performance Appraisal – Redefining Performance Management

Over the last few years as we have studied the market for performance management systems, we have talked with dozens of HR executives and managers about their Performance Managementperformance management process.  In our discussions we find that organizations struggle mightily with the right way to craft the precise process which will best reflect their organization’s goals, culture, and desired management style.  Performance management systems, which support this process, often constrain or rush these decisions, forcing organizations to design a process around the system features and capabilities.

I believe the rapid growth of these systems is creating quite a stress on this market, and in fact we believe a major shift is taking place.  Performance management systems (you know the players) revolve around automating the seven core processes which companies use:  goal development, goal alignment, self-assessment, manager assessment, 360 assessment, competency development, and development planning.  But they don’t really help organizations decide how the process itself will work, which is ultimately the most important issue of all.

 

Consider what performance management is designed to do.  The principle of such a business process has three goals: 

1. Employee evaluation:  First, to create standardized and equitable ratings and rankings to facilitate compensation decisions, promotions, succession planning, and the ability to coach people out of the business.
2. Alignment:  Second, to create consistent goals which align employees with managers and business units and align these goals with the organization’s overall priorities.  These goals also help employees themselves stay focused.
3. Coaching and development:  Third, and perhaps most importantly (which our research supports), this process enables managers and other employees to provide coaching and development in a structured process which can be supported by the L&D organization, leadership development, and other processes in the organization.

Which of these is the most important and how do you design a process that works?  We all know that most performance appraisals do not work – our research shows that onlye 35% of organizations have such an enteprise-wide process and among these fewer than 40% of employees find the process valuable and fewer than 45% of HR managers find the process valuable.  I cannot remember more than one performance appraisal in my entire career (30+ years) which was valuable.

Well one important fact to consider:  our High Impact Talent Management® research found that in fact the business process with the highest overall business impact is coaching.  Consider the following findings from this research (more than 800 large organizations participated):

1. By far the highest-impact process in organizations is coaching.  Coaching generated a 150% greater return than performance assessment, for example, and almost a 200% greater return than “pay-for-performance” processes.  We will explain what this means below. 
2. Developing high-value, unique, and job-aligned competencies which are maintained regularly was the second ranked high-impact process in performance management.  This process of identifying critical competencies and using these competencies to assess and improve performance clearly has very high value.
3. Goal development and goal alignment formed the third highest impact process, supporting the need to gain agreement on work plans and align employees with organizational goals.
4. The fourth highest-impact process in performance management was development planning – creating clear and consistent development plans (this was almost tied with goal development in fact).
5. Performance assessment and linking compensation to performance ratings showed returns as well, but far below the other four above.

Unfortunately, most companies focus on the bottom of these – assessment and linkage to compensation.  Why?  Because this is a compliance-related issue and it is the “common wisdom.”  Well our research (and my opinion) shows that in fact the other four are far more important if you want the process to drive business impact.

Consider the following:  performance management is management.  It is not an annual process, it sets the stage for every management interaction which takes place in your organization.  Whatever process you design will reflect itself in the behaviors and activities of leaders, managers, and employees.

GE, for example, which popularized the concept of the 20/70/10 model, establishes strict rules to “fire the bottom 10%” in every workgroup.  This seems to work for GE, which is an enormous, highly decentralized conglomerate, but does it work for your company in your industry?  I would venture to say no.  What works for GE is likely not to work in your company, unless you are in a very similar business size, structure, and industry as GE.

Rather, our research clearly shows that there is new approach needed – rather than use the “competitive evaluation” model of performance management (where managers and employees are forced to rank and rate people), we find organizations are shifting to what we call the “coaching and development” model of performance management (where leaders and managers are trained to assess people against competencies, identify strengths and weaknesses, and take actions to improve performance).  We have written extensively about the concept of “manager as coach” – and I firmly believe this is by far the best model in nearly every organization I speak with.

How do you do this?  What does it mean?  Well we are developing an in-depth bulletin on this topic, but the main message now is that organizations should design a process which makes evaluation the “last” thing you do, not the “first.”

Fig 1:  The Two Models for Performance Management

 

A final point on this topic.  
 

Do not let the performance management system (whether it be Authoria, SuccessFactors, Halogen, or any other tool) drive your decisions about how you want managers to manage.  These systems are still in their early stages, and most of them were built to automate the forms and data entry part of performance management.  Only some of the newest systems (Taleo’s and Halogen’s show great promise in this regard) are able to facilitate and assist in the coaching and development process.