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April 2010 Newsletter

Performance Management 101:

How To Get The Most Of Out Of Your

Performance Appraisal Process

Everyone wants their workforce to perform at the highest possible level.  The two primary factors influencing employees’ performance are their ability and motivation. Managing performance is all about identifying where the cause lies and focus on remedies that either improve the ability to do the job and/or  increase the effort being expended to meet performance objectives.

An analysis of Best-In-Class vs. Worst-In-Class organizations shows large differences on some key aspects of performance management. Best-In-Class organizations are those that have significantly higher morale, employee performance and retention than Worst-In-Class organizations.

The chart below shows the percent of organizations in each class performing these critical aspects of good performance management programs. Clearly, good performance management makes a big difference in organizational performance.

The Structural Foundation

This is the simple part of performance management.  Decades of research and practice have shown that regardless of the job, employees will perform better when they have clear, achievable, and measurable goals, especially if they participate in setting those goals. In cases where goals are less objective than such measures as achieving financial or sales objectives, managers are left with creating surrogate objective measures, usually in the form of job specific performance rating forms.

Even in jobs where quantitative objective measures are found, managers are likely to evaluate their direct reports on “performance factors”, or those qualities that help employees achieve these end results. For example, how much does a salesperson realize her sales objectives through teamwork, customer analysis, persuasion, persistence, etc.

But when rating forms are used all types of errors occur.  Asking managers to rate their direct reports on a 5-point rating scale creates inaccuracy. Some managers are harsher graders than others, some are biased by comparing their subordinates to themselves and how they operate, and some take into account how much they personally like the employee.

Two major solutions are used to reduce the amount of error and bias managers make in the rating process.  First, is to train managers on what type of rating errors they are prone to make and to keep these in mind when doing the evaluation.  This has a minor effect over time.  Managers generally get this training once and often forget or ignore these in the rush to complete their appraisal forms. Moreover, just knowing that these biases exist does not necessarily translate into managers being aware that they are exhibiting them in their performance ratings.

Secondly, performance measurement experts have worked diligently to create better types of ratings scales.  The logic here is that given theses rater biases exist and that they are hard to change in managers, let’s give managers forms and processes that aid them in providing more accurate ratings.  This has resulted in performance appraisal forms that provide more information than simply rating employees on a 5-point (low-high) rating scale.  Using behavioral anchors (examples of behaviors that reflect each rating point) on the scale’s continuum does help to guide managers in making more accurate ratings. 

So does receiving input from others.  The popularity of 360 surveys which allow managers to receive ratings from the target employee’s subordinates, customers, coworkers helps managers receive a more stable estimate of their employees' performance.

All of these move the needle of managing performance a little bit higher, but the real key is the communication of this to the employee.

The Process Makes The Difference

One of the biggest differences seen between best and worst-in-class organizations is the quality of the performance evaluation process itself.  This is not just limited to the formal performance review session, but also the day-to-day interactions between managers and their direct reports.   

Why is it so hard for managers to provide frequent and honest performance feedback? This is not limited to the inexperienced first line supervisor, it happens in the executive suite, as well. It is also not limited to just providing negative feedback, supervisors are notorious for being silent about providing positive feedback.  For example, early in his first term President Obama asked VP Joe Biden about Hillary Clinton: “Does she know what a good job I think she is doing?” and Mr. Biden replied, “Just tell her.”

The key to unraveling such events is the understanding of why teams are dysfunctional.  If one considers a team being two people--the supervisor and subordinate, this becomes quite evident. The breakthrough work by Patrick Lencioni provides an excellent framework to understand this phenomenon. For a team to be considered high functioning, five hurdles need to be overcome. These are represented in the figure below:

Applying this to one-on-one performance appraisal discussions require:

1.     Creating an environment where vulnerability and openness are the norm.

2.     Engaging in unfiltered discussions about the performance and its causes.

3.     Create clear, unambiguous decisions to gain buy-in from both parties.

4.     Holding both accountable for achieving the high performance standards.  

5.     Results (and their consequences) are shared between both parties.


Typical dysfunctional performance management communications have supervisors focusing on the top of the pyramid, while subordinates focus on the lower order factors.  These bad situations are generally one way communications (downward). The supervisor communicates what results need to be achieved. Tells the subordinate what she is accountable for (while not taking shared responsibility) and only wants to hear that the employee is committed to achieving those goals.


The subordinate, on the other hand, is wanting to focus on having a trusting relationship with the boss and can be honest enough to say things like “ I just don’t have the know-how to accomplish this”, or “I need your help because I can’t do this on my own”.  If that trusting relationship is not there, silent acquiescence usually follows.  If there isn’t trust between the two parties, then there is little chance that any formal or informal performance discussion will create the environment to resolve mutually any outstanding issues.

On the flip side, an effective performance management communication process is one that is based on trust, where both the boss and subordinate can discuss their perceptions, assumptions and biases in how they view the goals and the work. Each party is willing to listen to the other and recognize when his initial position may be less correct. Whatever comes out of these discussions is agreed upon by both parties and they are committed as a team to create performance success.  Bosses need to create the environment in which employees can succeed, not create the barriers that cause their failure. Employees need to recognize they are required to create real, impactful results, and not equate activity (e.g., working long hours, expending high levels of effort) with effectiveness (e.g., generating improved processes, high levels of customer satisfaction, or revenue).

Building trust and allowing for positive conflict to emerge is that hardest part of the process. It may take more than supervisors doping this on their own. Help may take many forms—training and practicing these new behaviors, having a third party facilitate these initial discussions, or having a sideline coach help the supervisor and/or subordinate though the process.