By Russel Horwitz

 The acid test of a good performance management system is the answer to the question: are employees are performing at their best?

You may be surprised to hear that studies show performance management techniques for effective and less effective organizations are not very different. What makes all the difference is what leaders do to support the process.

A recent major study by WorldatWork and Sibson that surveyed over 1000 HR professionals found that there are nine key practices. Here is how to achieve each one:

1. Include developmental plans for the future 

This may not come naturally for managers, many of whom are more accustomed to providing feedback on the past during an evaluation versus focusing on the future.

The development planning process can be institutionalized by doing two things:

• Ensure that your process and forms incorporate this step.
• Ensure that managers are adequately trained to hold coaching conversations.

2. Provide training to managers on how to conduct a performance evaluation
This training must go beyond how to follow the company process, and should focus on the following key skills, all of which can be learned through training:

• Goal setting
• Giving feedback
• Listening & conflict resolution skills
• Coaching skills
• Career management skills
• Holding performance appraisals

3. Measure the quality of performance appraisal.
There are several ways to measure this:

• Include coaching as a core competency for managers in the performance review process itself.
• Use 360 feedback to gather input from employees on how managers conduct appraisals.
• Measure overall quality of appraisals via your employee engagement survey.

4. Have a system to address and resolve poor performance
The best weapon to resolving poor performance is ensuring that managers provide regular and constructive feedback, and hold conversations about goals and careers.

However, when this fails disciplinary procedures are often the answer. It is surprising to find how many managers don’t understand the disciplinary procedures in both union and non-union environments. Ensure that managers are trained on how to do this, and that it is documented in simple terms.

5. Get beyond the judgment of managers
The “judgement” of the manager in evaluating performance is very often the reason for the negativity surrounding the appraisal process, and can be mitigated by:

• Ensuring that performance targets are measurable and well worded.
• Ensuring that when managers evaluate employees, that they first hold informal discussions with people that he/she works with.
•  Using 360-feedback to gather formal, objective feedback.
• Using a talent review process to calibrate employees.

6. Make it consistent across the organization
Consistency matters and it can be enhanced by:

• Starting at the top. The CEO must model the way with his/her direct reports.
• Consider not using a rating scale in the manager-employee conversation – they are seldom applied fairly and consistently – we find that a short written explanation is a good alternative.

7. Ensure that feedback happens regularly
This can be done by:

•  Institutionalizing quarterly or mid-year reviews, using a simple abbreviated procedure, for example Marshall Goldsmith’s Six Question Process.
• Holding managers accountable for coaching regularly through the performance management system, 360 feedback, and providing them with adequate training.

8. Use 360 reviews to support the process
360-feedback adds a powerful element of objectivity to the process that makes employees better understand their strengths and blind spots. Please see white paper 360-Feedback Best Practices.

9. Include ongoing goal review and feedback
Too many performance management systems make the incorrect assumption that relevant goals can be set once a year and measured 12 months later. The reality is that the business environment is more fluid than that. Institutionalize quarterly or mid-year reviews, making sure that they include goal review.

Linking Performance to Compensation 

Paying for performance is an excellent idea in general. However, you should avoid linking performance ratings directly to pay, as this will dominate the appraisal process and sabotage the essential coaching that should be taking place.

Compensation can be determined by a number of factors instead, including the performance evaluation,  cultural fit, risk to lose, future potential, market conditions with respect to pay for a given role, and overall company performance. While this may appear to be partly subjective, keep in mind that any evaluations are partly subjective too.

Russel Horwitz is a Principal with Kwela Leadership and Talent Management. His focus areas include: leadership development, training and professional coaching. Russel holds a coaching certification from the International Coaching Federation (ICF), and a Masters degree in Engineering from the University of Cape Town, South Africa.