There's Got to Be a Better Way

Experts agree performance management has become over-engineered and over-documented. How can it be fixed?

Monday, July 16, 2012
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Three years ago, when Matt Schuyler joined Hilton Worldwide as its executive vice president and chief human resource officer, he found himself with the mission of creating, from scratch, a comprehensive-performance management system for the entire 100,000-employee hospitality company. Performance appraisals at the time tended to vary, if they existed at all, across different areas of the vast organization. The CEO wanted a consistent process for ensuring Hilton's people got better.

In creating a new system, Schuyler kept in mind all the lessons learned from his past experience with the often-despised process.

"There is a tendency in HR to over-engineer these processes and products, to try to make them the end-all and be-all," says Schuyler, who previously served as the chief HR officer at financial-services giant Capital One. "But there's no substitute for a good conversation on how you're doing, as a performer and a team member."

Today, McLean, Va.-based Hilton has a performance-management process that both Schuyler and the organization's managers are pleased with.

Getting to this point wasn't easy, however. In fact, nothing about the PM process at many companies -- large and small -- appears easy. Instead, it's often needlessly complex, has a passing-at-best connection to actual business goals and is actively loathed by managers and employees alike.

How did it come to this? After all, the fundamentals of performance management are supposed to be quite simple: Employees agree to a set of goals at the beginning of a cycle, their supervisors assess the employees' progress against those goals at the end of the cycle, and the employees are rewarded based on whether or not they met those goals.

Yet, there's the typical example of the large companies that consultant Marc Effron works with, in which the performance-management systems have "everything": 20 competencies built in, 12 different goals, calculated end-of-year ratings -- in short, he says, "everything and anything they could have added in, they added in."

"It's the culmination of adding one new bell or whistle after another, to the point where it is both unusable to, and unused by, the average manager," says Effron, president of New York-based Talent Strategy Group and a consultant to Fortune 200 companies.

Indeed, technology hasn't helped -- if anything, it's hindered, he says.

"A lot of talent-management vendors have ended up simply paving over the HR cow path, taking a process that was going in the wrong direction in the first place and simply making it faster and easier to get there," says Effron, author of One Page Talent Management: Eliminating Complexity, Adding Value.

Experts such as Effron and Schuyler agree that performance management -- as it exists today in too many organizations -- is broken. Fixing it, they believe, involves going back to the basics: setting business-linked goals that are challenging yet achievable, teaching managers how to give feedback that is helpful and not demeaning, and supporting it all with a process that is intuitive rather than complicated. None of this, they admit, will necessarily be easy to implement.

Coaching, Not Competition

One of managers' biggest bugaboos regarding performance management is the need to assign ratings, often considered a stressful and unfair process. Late last year, Bersin & Associates released its year-long study on performance management, which involved more than 500 senior HR leaders from a variety of companies and industries.

It found that companies are moving away from competitive assessments and toward a coaching-and-development approach to PM. The study, part of a five-part series titled High-Impact Performance Management, found that 70 percent of companies have moved to the coaching-and-performance model, while the number that rely on competitive assessments fell to 30 percent last year, compared to 40 percent in 2008.

"Some people are motivated by competition -- but a lot of people are not," says Stacia Sherman Garr, a principal analyst at Bersin & Associates and author of the study.

However, as companies move to a coaching-and-development model, they're discovering a rather tall hurdle: Many managers and executives aren't very good at coaching effectively. Perhaps even more problematic, they often perceive that campaigns to help them become better coaches are being driven by HR, not the company's senior leaders.

"A big part of this [being successful depends on] HR not coming in and saying, 'We need to do this,' but, instead, going to the senior leaders, laying out the challenges the organization faces and then determining, together, whether coaching and development is a potential solution," says Garr.

The next step should be for the leadership team to model the behavior by going through a pilot program themselves -- ideally over a 12- to 18-month time period to allow actual results to accrue -- so they can be effective champions of it.

"When senior leaders have gone through coaching and development themselves, they're going to be much more effective at talking this up and showing it's effective," says Garr.

The coaching model will have even greater support from managers, says Effron, when they see a clear link between what they're coaching employees to achieve and the business.

"The science is very clear that the higher the goals set for us, the more we push ourselves," he says. "But if the goals are too easy or too soft, everyone exceeds them and now there's no money to pay them.

"That's where a lot of the anger and the angst about performance management come from. So set fewer goals, and make sure they really are 'stretch' goals."

No Surprises

At Hilton, Schuyler is doing everything he can to keep needless complexity out of performance management. "We've attempted to keep it really simple, make it very business-focused and have the administration of it be very seamless, especially considering that we're in the age of elegant products like the iPad," he says. "We're adjusting it as we get feedback -- it's an ongoing process."

The process is organized along the following framework: Managers set objectives at the beginning of the year and check in by the middle of the year to see how things are going. If everything works as it should, there will be no "surprises" at the end of the year.

"Decompressing that fear factor people have about performance management has been part of our goal," Schuyler says. "For us, a lot of our communication is centered around a very simple description of how the process should work and [how we're] enabling the system behind it to ensure we're meeting that commitment."

However, a "fear factor" among Hilton managers regarding the process proved a little harder to dispel, says Schuyler. Specifically, they had some trepidation around how they were expected to go about helping employees address any of their weaknesses or shortcomings uncovered by the process. The new system is designed to allay those fears, he says.

"What we've tried to do is ensure that our system documents, along the way, not only what you're getting done but how you're getting it done -- the behaviors and competencies -- as you deliver against your objectives, so that there are no surprises at the end of the year," he says.

Hilton's systems prompt managers to conduct a "mid-year check-in" as a formal step to ensure employees are getting regular feedback. The check-ins require managers to discuss year-to-date performance with their direct reports and enter comments into the system on their job performance to date.

Once the check-ins are completed, managers and employees may add more comments between then and the end-of-year reviews. The point, says Schuyler, is to minimize the amount of information that will need to be recorded at the end of the year while encouraging continuous feedback between managers and their direct reports.

Schuyler's efforts seem to be resonating within the organization: Satisfaction with the PM process increased by 37 percent in a recent survey of Hilton's employees, up substantially from previous surveys.

"I've been in HR a long time, and I've never seen a positive jump in satisfaction with performance management," he says. "I believe the root of that jump was this notion of keeping things simple, having the focus be on the conversation, and the emphasis on giving and getting feedback.

"What's often lost in the shuffle is that the goal of performance management is to give you feedback so you can get better, not to damage you or make you feel bad," says Schuyler.

The Art of Conversation

At IM Flash Technologies, a joint venture between Intel Corp. and Micron Corp. that has about 1,600 employees, the company had also created its performance-management system from scratch, relying on Word documents and once-a-year conversations. Then, as the Lehi, Utah-based company moved from "ramp-up" mode, it created a more formalized process that used performance ratings.

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About a year ago, the company's leaders decided that managers needed to stop focusing so much on numbers and focus more on being coaches and mentors instead, in order to inspire employees to greater performance.

"Our managers love numbers and matrices and spreadsheets, so this has been very difficult for them," says Korie Roscher, IM Flash's organizational-development specialist.

The company began training its managers on having effective one-on-one conversations with their direct reports, and offering guidance for how often such meetings should be held. It worked with trainers from Provo, Utah-based VitalSmarts to teach line leaders how to have meaningful, productive conversations with their direct reports that left them feeling motivated, rather than put-upon. The company's leaders lent their full support, says Roscher, talking up the benefits of coaching and preventing managers who hadn't yet mastered the art of coaching from assigning performance ratings until they'd done so.

Teaching managers to have good performance conversations involves helping them "unlearn" the natural tendency to focus on what went wrong and, instead, work with the employee to determine how to prevent it from happening again, says Amy Armitage, director of member research programs at the Institute for Corporate Productivity (i4cp) in Seattle.

"I teach a course called 'Asking Powerful Questions,' about how those questions will often get us to higher performance," she says. "It's about the 'why' versus the 'what.' "

For example, it could mean asking why there might be a problem with a project, or why customers might not be interested in a particular survey the company wants them to take, says Armitage. "By using questions like these to get at the root of the problem, you're probing in a way that will lead in a positive direction. Employees will learn what they need to do differently, whether it's making more calls to generate sales or engaging in specific behaviors that will drive outcomes, rather than simply what not to do."

On the Same Page

At PNC Financial Group, the Pittsburgh-based company found itself with 20 different performance-management processes after a series of mergers that doubled the organization's size within a few short years.

"One of the core [foundations of] strong talent management is strong performance management," says Kathy Prime, the 57,000-employee company's director of talent development. "We couldn't have multiple ways of teaching managers to manage performance if we were going to be effective."

PNC also wanted its 7,000 managers to learn to be better talent coaches. "We needed to have consistency across the company," she says.

Prime and her team interviewed PNC's executives and line leaders to find out what they liked and didn't like about the company's existing processes. They also examined the best practices of other firms within and outside the financial-services industry. Through this, PNC arrived at its current strategy for performance management, which puts the conversation between managers and their direct reports at center stage.

"We realized that what really affects behavior and performance is the conversation between managers and employees, which really needs to be two-way," she says. "We wanted the process to support the conversation, not the other way around."

Prime and her team introduced a new coaching curriculum for all of PNC's 7,000 managers. They also explained to managers the importance of goal-setting and having employees do their own self-assessments.

Today, managers at PNC have a minimum of two annual performance-evaluation conversations with their employees, and are expected to coach them "as part of a daily process," says Prime. Gaining the support from managers for the new strategy was hardly a snap, she says.

"For managers, the hardest part of having these conversations is preparing for the unknown," says Prime. "The natural tendency for managers is to 'talk off the facts' -- you either hit your goals or you didn't. It's harder to prepare for the conversation that follows: Why weren't they met?"

PNC's HR department created a training curriculum that includes courses to help managers help their employees understand what they can do to better ensure goals will be met in the next cycle.

The conversations are documented in PNC's talent-management system, but to get a better handle on whether they're effective, Prime is relying on employee-engagement surveys.

"We're not sure whether just tracking the number of completions is really the way to measure this, so we ask employees how often their managers are talking to them and use that as an additional metric," she says.

They're also making sure employees are involved in the process by offering them training and resources for initiating and holding those development conversations with their managers.

"We're telling employees, 'You own half the equation here,' " says Prime.

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