Building the Leadership Appraisal Model (Performance Reviews)
Why Link Performance Appraisals to Competencies
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:
Performance Management Map (Click for larger image)
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.
Although this guide was about implementing a leadership appraisal program, the same process can also be used for developing competency based appraisals throughout the organization.
Questions and Answers
Isn't giving performance appraisals uncomfortable because you are in the judge's seat?
It is not the judging of others that is uncomfortable, rather it is the judging of BAD performance that is uncomfortable. Eliminate bad performance in the first place, and appraisals become a lot more pleasant. Now of course you are not going to eliminate bad performances completely, however, with a little bit of planning it can be greatly reduced.
Performance has often been described as “purposeful work” — that is, a job exists to achieve specific and defined results. So what bad performers are really doing are performing “work activities” (busy work), rather than activities that contributes to effective performance. The first step in performance planning is to determine the results that you want the performer to achieve. After all, workers generally want to know what they need to do, how well you need them to do it, and how well they are actually doing it (feedback).
Are great organizations doing away with performance appraisals?
Part of the problem might be with its name -- Performance Appraisal, which kind of has a judgmental sound to it; Performance Planning and Review might be a better term for it.
WorkForce has a great article on Trader Joe's. Part-time employees are reviewed every three months, an unusually frequent rate of evaluation. In addition, the part-time employees of Trader Joe's are paid higher wages, as are the rest of their workers, than what you will find in other similar businesses.
What is interesting about all of this is that they have been bought three times (and NOT because they are losing money — they make more money per square foot of business than the average grocery store). And the new leadership teams have never said that they need to pay them what the rest of the industry pays and reduce the number of PAs. Why? Because they see the value in their workers! Rather than giving lip-service to “employees our are most valuable asset,” they actually walk-the-talk.
Yet one of the arguments against scrapping appraisals is that ALL workers' pay should be aligned with the labor market — they do not deserve annual pay raises as it inflates the wage and salary structure. I also worked in the food industry and our organization also pays its workers above the national scale. And we also turn higher profits. Thus, I find it kind of discouraging there is this belief that for an organization to become more profitable, it needs to pay its “most valuable asset” what every other organization is paying — make all the workers cogs in the machine. I wonder if it would also help with profits if we lock in all CEOs' pay and pay all stockholders the same -- that way, all organizations would make huge profits.
Are roles changing too fast in today's organizations to properly appraise them?
CLO Magazine has an article, Upgrading Performance and Targeting Learning, that relates to this.
The author relates behavior to “roles” and the target to “goals.” And of course the “result” would be the consequence. In his article, Buchen argues that traditionally, roles have remained the same while goals change. Yet, due to the rapid changes that occur on a day-to-day basis, the roles are actually changing, even though they might remained fixed on paper. The author notes that, “Most performance evaluations fail to factor in the changing relationships between morphing goals and morphing roles.” That is, our attention remains fixed on the goals while ignoring the roles.
This type of thinking shows up in a lot of industries as they view their workers' jobs as set roles, even though the world is rapidly changing. For example, the recent grocery strike in California forced many shoppers to look at alternatives, thus they wound up at Traders Joe's (who were not part of the strike). And many of these shoppers never went back to their regular stores (who see their employees playing traditional roles) because they enjoyed the experience they had at Trader Joe's. Yet Trader Joe's was not always like this — it started out more like a Seven-Eleven, but because of the competition it went in search of its niche and recognized along the way that its employee's roles also needed to change. So even though they still deal in the same commodity as the larger grocery stores, food, they not only changed the way they bought food (goal), but also in they way they deliver that food to the customer (role).
I do not think the real argument is about documenting or scrapping appraisals, but rather ensuring that once goals are set, how do we ensure that the roles are properly accounted for so that the target can indeed be met?
Are performance appraisals just for keeping worker's pay adjusted to the standard cost of living adjustments?
Some companies do use it for this purpose, however the better ones go beyond that. For example, some allow the worker to get a zero raise for poor performance; do it a second time and you are out of there. You can also surpass the standard of living. Why? Because a appraisals should not be based on keeping up with the standard of living. If that is all an organization is getting out of a appraisals then I agree, do away with it.
In addition, it should be more than just about the money. For example, it also helps to guide our development (learning) and growth within the company. It is more than doing just an appraisal, it is also doing the performance management part. The few studies I have seen assume organizations are going to save a ton of money by stopping performance appraisals because nothing is needed to replace them. In some cases this might be true. However, there are actually some good managers out there that are good because they recognize and gain from using a tool correctly. There are also not-so-good managers out there who would be much worse if not for the fact that the tool and processes that support it actually guides (forces?) them into making some half-way decent performance management decisions.
There are about a dozen differences between effective and ineffective reviews (Bacal, 2004, pp. 7-17). While they all look like valid means to differentiate the good from the bad, I believe two of them stand out:
- Clear Primary Purpose vs. Befuddled Purpose
- Process vs. Forms
That is, while there are several valid reasons for doing Performance Reviews, they should always have a clear purpose -- to improve performance; in addition, the review needs to be a process rather than just a yearly exercise in filling out a form.
Do employees want their pay tied to performance?
Richard Rudman (2004) notes that the research shows that employees are more satisfied with pay decisions that are directly linked with decisions about performance and development. The challenge is to make this a close relationship — in both time and cause — without employees taking an unrealistic or defensive view of their performance or of their training and development needs if they think this will affect their remuneration adversely. The reason that employees take a liking to this is that they believe that they are likely to benefit from such schemes (at least the good ones do).
However, despite its popularity among both employers and employees, the effectiveness of performance pay is still a subject for debate as many still see it as not being performed correctly. The trouble is, how do you replace it?
Should performance be tied to pay?
Tony Hope, a visiting professor at the French Business school INSEAD, spoke of rewards at the Institute of Personnel and Development's Compensation conference. He believes that we need to stop this practice as trust and commitment cannot be fostered while cost-control imperatives dominate organizational thinking. “Just as we have seen that knowledge workers don't respond to a regime of command and control in management style, so they won't perform according to pay systems that are individually based,” says Professor Hope, “Organizations must hang on to their best people and these people are exactly those that are least impressed by internal competition within tight budgets... new and powerful forces that are shaping organizations mean that people management professionals are going to have to find ways of collectively rewarding effort. It will be less pay for performance and more pay for participation.”
Bacal, R. (2004). Manager's Guide to Performance Reviews. New York: McGraw-Hill.
Rudman, R. (2004). Performance Planning and Review. Crows Nest, Australia: Allen & Unwin Academic.