How top firms use performance management to their advantage

26 Feb How top firms use performance management to their advantage

By Claudine Kapel – hrreporter.com

A lot of organizations are down on performance management – with some questioning the value of the process overall.

A key mistake some organizations make is to consider performance management a generic process that unfolds in a cookie-cutter manner. That could lead some to miss out on organization-specific opportunities to make the process more valuable.

It’s true most performance management processes have similar elements, such as goal-setting and performance appraisals. But there can be a world of difference in how organizations apply performance management practices – and the outcomes they get as a result.

Consider the results of a new study by the Institute for Corporate Productivity (i4cp), which found high-performance organizations differentiate themselves from lower-performing organizations in the ways they address performance management.

Entitled Purpose-Driven Performance Management in High-Performance Organizations, the study notes high-performing organizations “are nearly twice as likely as lower performers to use performance management to support an enterprise-wide focus on high performance.”

The study offers a unique twist on performance management research in that it is based on research conducted in the United States, Brazil and Russia, with 1,427 respondents reflecting organizations with 1,000 or more employees.

In its report, i4cp suggests “it is inarguable that an organization’s very existence is dependent on consistent, positive, sustained performance that is generated from the collective activities of many individuals. Yet this is not apparent judging by the ways in which many companies execute – or fail to execute – their performance management processes.”

The study found five characteristics that differentiate the performance management practices of high-performance organizations (HPOs).

• HPOs leverage performance management to provide direction, focusing the entire organization on high performance. They are more likely than lower-performing organizations (LPOs) to tighten the “strategic alignment between skills and business goals” and use strategic workforce planning to “make a direct connection between business goals and the workforce skills needed to achieve them.”
• HPOs encourage dialogue by teaching, facilitating and promoting effective performance management communications. HPOs were more than twice as likely as LPOs to provide supervisors with training on giving and receiving feedback. Notes i4cp: “That training topic provided the largest differentiator between HPOs and LPOs of all the training topics surveyed.”
• HPOs promote inclusion by “applying performance management with a broad and inclusive brush.” This includes applying performance management practices across all layers of the enterprise. Notes i4cp: “More than two-thirds of HPOs apply performance management to executives – a practice that not only produced a differentiation between HPOs and LPOs, but also returned a high correlation to i4cp’s Market Performance Index.”
• HPOs ensure relevance by aligning and integrating performance management with other human capital processes. This includes integrating performance management with workforce planning, training and development, and compensation and rewards. The study found the integration with compensation and rewards was the second highest differentiator between HPOs and LPOs.
• HPOs tie performance management to the organization’s mission by having leaders champion and actively participate in performance management efforts. Nearly three-quarters (71 per cent) of the HPOs indicated their leaders “consider performance management as vital to organizational success” compared with 47 per cent of the LPOs.

It’s worth noting that the HPOs in the i4cp study were also more likely to report that performance management has a positive business impact and contributes to individual performance improvement.

Would you say the same about your organization’s approach to performance management? If not, perhaps the time has come to view the process through a more strategic lens.

Claudine Kapel is principal of Kapel and Associates Inc., a Toronto-based human resources and communications consulting firm specializing in the design and implementation of compensation and total rewards programs. For more information, visit www.kapelandassociates.com.