Submitting to the "Tragedy" May Bring Darth Vader - and Forced Rankings - to Your Door!

We're gonna take our "Tragedy of the Commons" story and give it one last shake, all.

Kris Dunn, editor and team lead at Fistful of Talent, shares his take on the tragedy ... and its potential consequences here.  Not willing to force - or accept - accountability for honest performance assessment?  Then you may have an ugly outcome headed your way.

Check it out.  And if you aren't already subscribed to Fistful, with its diverse group of bloggers covering all things Talent, get it done.

More on The Tragedy of the Commons: Holding Managers Accountable for Good Stewardship

In yesterday's post, I shared a comparison between the challenge of making merit pay work and the classic dilemma The Tragedy of the Commons.  The tragedy is played out - and the prospect of performance based pay ultimately doomed - when individual managers put their short-term interests and those of their employees (i.e., everyone gets the maximum increase available) ahead of the longer-term interests of the overall group (the organization).  Addressing this particular version of the tragedy, I maintained, requires holding managers accountable for being good stewards of the organization's resources.

Andres Acosta, a reader and HR blogger in his own right posed some great questions in the comments to that post.  If I may paraphrase Andres:

1. How do we do it - hold managers accountable for their roles as stewards?
2. What are some processes, tools and practices that can help motivate managers to put company long-term success before the immediate compensation pressures of their team?

I know my readers will have some great thoughts on these questions.  Here are a couple of mine just to get the ball rolling:

1. I hold that accountability starts with consequences.  If, as a result of putting his/her immediate interests ahead of those of the organization, a manager encounters only positive consequences (I am a hero to my team!) and no negative ones, I would say that nobody is holding that manager accountable for doing otherwise.  Alternatively, if that manager's superior were to challenge and express concern about the action or if the manager were called to defend his/her action by/to a forum of peers or if the manager's performance were assessed as "needing improvement" directly as a result of the short-sighted and self-serving nature of the action, these negative consequences might cause the manager to rethink his/her approach.
2. One practice that I would suggest considering is incentives based on group performance (I'm a compensation consultant - what did you expect?).  Seriously, I wish I had a nickel for every senior management team (or even middle management team) I have encountered who are incented largely or entirely on individual performance, but whose CEO (or Board or HR Manager/Director) complains loudly about silos and a lack of cooperation.  Want them to act like organizational stewards?  Then pay them like organizational stewards - not individual contributors!

Let's hear what you think! 

Please Strike the Word "Poor" from All Performance Management Materials

I still run into performance management forms that use the word "poor" to describe a level of employee performance.

Words like "poor" that imply a value judgment on the person, rather than an objective assessment of their work, present enormous obstacles to helpful conversations about performance.  "Poor" is an obvious example, but there are others as well, including "fair" and "good".

Better are words or phrases that focus on work accomplishment.  "Consistently meets (or does not meet) stated performance expectations" for example. 

Recent research (WorldatWork) suggests that the biggest obstacle to effective performance management is managers' ability and willingness to have difficult conversations with employees about their performance.  As we all know, these conversations are hard enough under the best conditions.  Why would we make them even more difficult (and way less effective) by forcing managers to use words that imply a judgment on the worth or quality of the person?

Update:  Please make sure and read through the comments for this post, where Dick Grote shares the results of some interesting research he has conducted on best and worst appraisal ratings.  Thanks, Dick, for making this available to us!

Forced Performance Distribution: A Failure of Leadership

I am often asked for my thoughts on using a forced distribution (which typically involves requiring managers to identify a certain percentage of their reporting employees as performing poorly, a certain percentage who are performing exceptionally, etc.) for performance appraisal.  This practice gained particular fame and popularity based on the endorsement of Jack Welch, who used it extensively during his tenure at GE. 

I think it's a really bad idea, for a host of reasons, but I have never been able to articulate my objections as well as Ed Lawler, who shares the following thoughts on this approach in his book Treat People Right:

I believe that the forced distribution approach is a bureaucratic solution to a serious leadership failure.  It ignores the reality that in some work groups there are no poor performers and in others there are no good performers.  It causes managers to disown the appraisal event and to essentially say, "I was just following the rules."  Finally, it leads to a kind of unfair and unreasonable treatment of employees that moves the organization signifcantly away from a virtuous spiral environment toward one that fosters survival of the most political or luckiest.  It also can lead to lawsuits because it can be considered unfair to whomever ends up in the lowest-rated group.  After lawsuits were brought against Ford and Goodyear on this charge, both companies abandoned their forced distribution systems.

Given these problems, why do companies use the forced distribution approach?  The answer is simple but not particularly flattering to many managers.  It represents an easy answer to solving a classic problem:  rating inflation.  Just as in universities where professors tend to give high grades to everyone, many managers find it easier to be generous with high ratings, and as a result, many organizations suffer from top-heavy performance appraisal scores.

Because it is a leadership problem, the best solution rests in creating effective leadership rather than the top-down bureaucratic mandate of a forced distribution system.  Mandating a certain distribution is a second leadership failure that just compounds the problem.

Here, here!

Getting Performance Management to Perform Requires a Clear, Concise and Known Business Strategy

One of the reasons that performance management fails to produce tangible business results is that the process is not connected with overall business strategy and objectives.  One of the oh-too-common reasons that the process isn't connected to strategy is that people in the organization - including its leaders - can't tell you in a clear and concise way what the strategy is.

As the April Harvard Review Article "Can You Say What Your Strategy Is?" tells us:

It’s a dirty little secret: Most executives cannot articulate the objective, scope, and advantage of their business in a simple statement. If they can’t, neither can anyone else.

I particularly enjoyed the following analogy provided by the authors:

Think of a major business as a mound of 10,000 iron filings, each one representing an employee. If you scoop up that many filings and drop them onto a piece of paper, they’ll be pointing in every direction. It will be a big mess: 10,000 smart people working hard and making what they think are the right decisions for the company—but with the net result of confusion. Engineers in the R&D department are creating a product with “must have” features for which (as the marketing group could have told them) customers will not pay; the sales force is selling customers on quick turnaround times and customized offerings even though the manufacturing group has just invested in equipment designed for long production runs; and so on.

If you pass a magnet over those filings, what happens? They line up. Similarly, a well-understood statement of strategy aligns behavior within the business. It allows everyone in the organization to make individual choices that reinforce one another, rendering those 10,000 employees exponentially more effective.

Without the clear connection to strategy, performance management can no longer be a business improvement tool, but rather risks demotion to the land of trivial, administrative exercises.  Which is a shame.

Hat tip to Wally Bock of Three Star Leadership for pointing out this great article and reminding us of the reasons to check out the resources that the Harvard Business Review makes available on a complementary basis.

Cultivating a Sense of Accomplishment in the Information Age

In his Wall Street Journal column today, Cubicle Culture author Jared Sandberg writes of A Modern Conundrum: When Work's Invisible, So Are Its Satisfactions (subscription required).  In it, he contrasts the immediate sense of accomplishment people could get in traditional, more tangible types of work ("a chair made or a ball bearing produced") with the greater difficulty many of us face today, trying to "find gratification from work that is largely invisible, or from delivering goods that are often metaphorical."

"Not only is work harder to measure but it's also harder to define success," says Homa Bahrami, a senior lecturer in Organizational Behavior and Industrial Relations at UC Berkeley's Haas School of Business.  "The work is intangible or invisible, and a lot of work gets done in teams so it's difficult to pinpoint individual productivity."

She says information-age employees measure their accomplishments in net worth, company reputation, networks of relationships, and the products and services they're associated with - elements that are more perceived and subjective than that field of corn, which either is or isn't plowed.

No wonder performance management is increasingly difficult to do effectively.  And yet this article makes the point, I believe, that measuring and recognizing work done well is as important as ever - not only for today's organizations, but also for the people who work in them.  As workers, we want to know that our efforts make a positive difference.  Employers, at a macro level, and individual managers, at the micro level, who can help employees see and appreciate the impact of their work - through coaching, feedback and appropriate goal-setting - will have an advantage in the competition to attract and retain knowledge workers.  Not to mention an advantage in accomplishing the knowledge work itself.

Bored Employees: A Squandered Asset

Bored employees, employees who report having "too little work", are more disgruntled and lead to more negative consequences (for themselves and their employers) than overworked employees, those reporting "too much work."  This is the conclusion of new research released by Sirota Survey Intelligence.

While overwork is an undeniable issue for both employees and organizations, Sirota's findings suggest that the bored employees - encompassing 14% of the more than 1 million employees surveyed - create the more serious business challenge. 

Following are a few outtakes from the research.  While none of these findings are particularly surprising,  combined they begin to drive home the significance of the "boredom at work" problem.

• Bored employees are less satisfied with their jobs.  Only 50% of employees with "too little work" report being satisfied with their jobs compared to 81% of employees with “about the right amount of work”.
• Bored employees don't get a sense of accomplishment from their jobs.  Only 38% of employees with "too little work" get a personal feeling of accomplishment from their jobs, compared to 73% of employees with “about the right amount of work”.
• Bored employees are not as proud of where they work.  51% of employees with "too little work" report being proud of their employers, compared to 76% of employees with "about the right amount of work".
• Bored employees feel less encouraged to be innovative.  Only 43% of those with "too little work" feel that they are encouraged to be innovative at work, compared to 65% of employees with "about the right amount of work".

Interestingly, Sirota notes that employees reporting "too much work" are almost as favorable on the above dimensions as those reporting "about the right amount of work".

With all the furor and debate about employee engagement these days, this seems to me to be a more fundamental and critical problem.  How can we expect all of our employees to be "engaged "(whatever that means - and don't worry, I'm not even going to go there ...) when more than 10% are not even given enough work to keep them challenged and occupied?  We should not underestimate the potential negative impact of being under-challenged and under-occupied on an employee's morale.  Does an employee in these circumstances feel valued and respected?  And isn't feeling valued and respected a pre-requisite to any level of engagement in the workplace?

To some extent, this is a workdesign problem.  It is also a performance management problem and potentially an employee development problem as well.  But, at its core, it is a problem of squandering part of an organization's most important assets - its human capital.  While there may be good and defendable reasons for the under-utilization of some of these employees, I would be willing to bet that the majority of these 140,000 individuals represent talent, knowledge, skills and relationships that their employers have simply left untapped.

And it's a shame.

 

The Trifecta of Effective Performance Management

Making performance management work.  This is a significant and critical challenge for any organization I've ever worked with.  So I was interested to hear what key lessons Sibson gleaned from the recently released State of Performance Management Study conducted in partnership with WorldatWork. 

Study results suggest that effective performance management is achieved through a balanced focus on three things:  leadership support, program design, and execution by managers (see figure below, source: Sibson Consulting).

This model certainly fits my experience.  Performance management failures take a variety of shapes, but a common pattern I've noted is the well-designed program that fails due to lack of leadership support or manager execution - or both.

Sibson also notes some key success criteria in each of these areas, based on observations from top performing organizations, that provide good food for thought.

Leadership support

Leaders in top performing companies are more likely to:

• Set the expectation that performance management will be done and performance ratings will be differentiated.
• Audit to make sure that performance management is tied to the overall performance of the company.
• Act as a role model for effective performance management.
• Connect performance management to business goals and people decisions.

Program design

While many of the tweaks and changes we make to the design of our performance systems do not have significant impact, there appear to be a few things that make a real difference:

• Increasing objectivity with defined accountabilities, behavioral competencies and quantifiable metrics that get employees focused on the right things.
• Making the tools convenient to access and easy to use.
• Picking a rating scale and sticking with it.

Managerial execution

So often the weak link in performance management.  The study notes two behavioral characteristics of managers that appear to be linked to success, in performance management as well as overall company performance:

• Managers coach and give regular performance feedback to improve performance
• Managers complete assessments thoroughly and on time.

In this last area, Sibson also notes another activity - heightened visibility of performance management practices and results across managers - that seems to have a positive impact on execution:

One technique that is helpful for improving the quality of execution is to increase the visibility of performance ratings, messages and actions through performance calibration across managers or through audits that publish distributions of ratings for each organizational unit.  This makes it less likely that managers will "game" the system or rate everyone high or in the middle.  When managers know that their ratings will be visible to other managers, they tend to do a better job getting their assessments done and are more objective in their assessments.

Active Performance Management Versus Management By Mental Telepathy

I often run into resistance to the idea of active performance management from a certain group of leaders who just can't believe it's really necessary to do things like communicate goals and expectations or provide ongoing feedback.  They honestly believe that people should just know; know exactly what is expected of them, know whether or not they are focusing on the right things -- and approaching them the right way.

I found a great description of this characteristic in an article on leadership titled Avoid Leadership Disaster: The Five Deadly Sins of Managers by Joan Lloyd in this past week's Minneapolis-St. Paul Business Journal.  She calls this particular brand of management sin "managing by mental telepathy":

Some leaders think everyone can hear what they are thinking.  Rather than cascade a decision down through the team, they dole out cryptic directions and everyone is supposed to piece the puzzle together.  Usually, these leaders are analytical and spend a lot of time turning things around in their heads, so by the time they roll out the action plan, they figure everyone must have arrived at the same conclusion.  Unfortunately, when they do communicate, they tend to skip over how to gain acceptance.  Because they see the conclusion so logically, they don't anticipate others may resist it.

I feel certain that many of you have happened upon this characteristic among your organization's leadership.  It isn't that they are intentionally trying to undermine your performance management program; it's just that they sincerely can't appreciate why such steps would be needed.  Any success stories or advice on how to best address this leadership flaw?

Rewarding Steady Performers Versus Stars

In his article Does Your Company Need More Ditch Diggers or Stars?, Kris Dunn of the HR Capitalist calls our attention to the often overlooked and underappreciated employees who turn in solid, even if unspectacular, performance day-in and day-out for their employers.  Kris dubs this group the "Ditch Diggers" and highlights the important role they play in his and other organizations:

My take is that most of us in the talent sector understand the value of the ditch digger, which I define as a steady, unspectacular performer.  We don't talk about them enough, though.  The need for ditch diggers at all levels is never more apparent to me than when I have a big block of vacancies for a specific job.

In the past year, my company has worked to fill classes of 12 to 15 new hires for two specific professional roles in our organization.  Filling a big job order puts me in compare-and-contrast mode, and in those circumstances I always appreciate the steady candidate who may not be a star.  Invariably, I find that the hiring manager for a block of professional-grade vacancies is thinking the same thing.

His point is an important one, particularly with respect to pay programs.  In our haste to recognize and reward the top performers, we may miss the opportunity to reinforce the "Steady Eddies" who show up and meet the expectations of their job on an ongoing basis.

The challenge is to develop and implement performance and compensation programs which thoughtfully capitalize on what all performers bring to the table - the stars as well as the ditch diggers. And that means determining and spelling out our intent with respect to how they are treated by the different elements of the total reward program; base salaries, incentive compensation, recognition, etc. 

The truth is, as Kris wisely points out, that our organizations depend on both groups for their success.