verall Goal

Overall Goal and Focuses of Performance Management

The overall goal of performance management is to ensure that the

organization and all of its subsystems (processes, departments, teams,

employees, etc.) are working together in an optimum fashion to achieve the

results desired by the organization.

Performance Improvement of the Organization or a Subsystem is an

Integrated Process

Note that because performance management strives to optimize results and

alignment of all subsystems to achieve the overall results of the

organization, any focus of performance management within the organization

(whether on department, process, employees, etc.) should ultimately affect

overall organizational performance management as well.

Ongoing Activities of Performance Management

Achieving the overall goal requires several ongoing activities, including

identification and prioritization of desired results, establishing means to

measure progress toward those results, setting standards for assessing how

well results were achieved, tracking and measuring progress toward results,

exchanging ongoing feedback among those participants working to achieve

results, periodically reviewing progress, reinforcing activities that achieve

results and intervening to improve progress where needed. Note that results

themselves are also measures.

Note that these general activities are somewhat similar to several other

major approaches in organizations, e.g., strategic planning, management by

objectives, Total Quality Management, etc. Performance management brings

focus on overall results, measuring results, focused and ongoing feedback

about results, and development plans to improve results. The results

measurements themselves are not the ultimate priority as much as ongoing

feedback and adjustments to meet results.

The steps in performance management are also similar to those in a well-

designed training process, when the process can be integrated with the

overall goals of the organization. Trainers are focusing much more on results

for performance. Many trainers with this priority now call themselves

performance consultants.

Basic Steps

Various authors propose various steps for performance management. The

typical performance management process includes some or all of the

following steps, whether in performance management of organizations,

subsystems, processes, etc. Note that how the steps are carried out can vary

widely, depending on the focus of the performance efforts and who is in

charge of carrying it out. For example, an economist might identify financial

results, such as return on investment, profit rate, etc. An industrial

psychologist might identify more human-based results, such as employee

productivity.
The following steps are described more fully in the topics Performance Plan,

Performance Appraisal and Development Plan, including through use of an

example application. The steps are generally followed in sequence, but

rarely followed in exact sequence. Results from one step can be used to

immediately update or modify earlier steps. For example, the performance

plan itself may be updated as a result of lessons learned during the ongoing

observation, measurement and feedback step.

NOTE: The following steps occur in a wide context of many activities geared

towards performance improvement in an organization, for example, activities

such as management development, planning, organizing and coordinating

activities.

1. Review organizational goals to associate preferred organizational results

in terms of units of performance, that is, quantity, quality, cost or timeliness

(note that the result itself is therefore a measure)

2. Specify desired results for the domain -- as guidance, focus on results

needed by other domains (e.g., products or services need by internal or

external customers)

3. Ensure the domain's desired results directly contribute to the

organization's results

4. Weight, or prioritize, the domain's desired results

5. Identify first-level measures to evaluate if and how well the domain's

desired results were achieved

6. Identify more specific measures for each first-level measure if necessary

7. Identify standards for evaluating how well the desired results were

achieved (e.g., "below expectations", "meets expectations" and "exceeds

expectations")

8. Document a performance plan -- including desired results, measures and

standards

9. Conduct ongoing observations and measurements to track performance

10. Exchange ongoing feedback about performance

11. Conduct a performance appraisal (sometimes called performance review)

12. If performance meets the desired performance standard, then reward for

performance (the nature of the reward depends on the domain)

13. If performance does not meet the desired performance standards, then

develop or update a performance development plan to address the

performance gap* (See Notes 1 and 2)

14. Repeat steps 9 to 13 until performance is acceptable, standards are

changed, the domain is replaced, management decides to do nothing, etc.

* Note 1: Inadequate performance does not always indicate a problem on the

part of the domain. Performance standards may be unrealistic or the domain

may have insufficient resources. Similarly, the overall strategies or the

organization, or its means to achieving its top-level goals, may be unrealistic

or without sufficient resources.

* Note 2: When performance management is applied to an employee or

group of employees, a development plan can be initiated in a variety of

situations, e.g.,:

a.) When a performance appraisal indicates performance improvement is

needed, that is, that there is a "performance gap"

b.) To "benchmark" the status of improvement so far in a development effort

c.) As part of a professional development for the employee or group of

employees, in which case there is not a performance gap as much as an

"growth gap"

d.) As part of succession planning to help an employee be eligible for a

planned change in role in the organization, in which case there also is not a

performance gap as much as an "opportunity gap"

e.) To "pilot", or test, the operation of a new performance management

system

Performance Management Applies to More than Employees

Typically, we think of performance in organizations, we think on the

performance of employees. However, performance management should also

be focused on:

1. the organization

2. departments (computer support, administration, sales, etc.)

3. processes (billing, budgeting, product development, financial

management, etc.)

4. programs (implementing new policies and procedures to ensure a safe

workplace; or, for a nonprofit, ongoing delivery of services to a community)

5. products or services to internal or external customers

6. projects (automating the billing process, moving to a new building, etc.)

7. teams or groups organized to accomplish a result for internal or external

customers

Development and Contents of a Performance Plan

Most of us are used to thinking of performance management focused on the

employee, rather than the organization, groups, etc. Therefore, when first

reviewing the steps to develop a performance plan, it may be best to use the

example of employee performance management as done below. The reader

should keep in mind that these steps might be followed in performance

efforts focused on the entire organization or some subsystem of the

organization.

In the example below, the focus -- or domain -- of the performance

management process is an employee. The employee is a machine operator;

consequently, application of performance management in this example is

rather straightforward for clarity in the example. Most applications are not

this straightforward.

NOTE: As review about key terms in performance management, key terms

are bolded and italized below.

1. Review organizational goals to associate preferred organizational

results in terms of units of performance, that is, quantity, quality,

cost or timeliness

Organizational goals are often established during strategic planning.

Performance management translates these goals toresults, which typically

are described in terms of quantity, quality, timeliness or cost. Results are the

primary products or services desired from the focus of the performance

process. Examples are a percentage increase in sales, extent of impact on a

certain community, etc. Goals should be "SMART" (an acronym), that is,

specific, measurable, acceptable, realistic to achieve and time-bound with a

deadline. For example, an overall goal may be to increase the organization's

profit by 30% by the end of the next fiscal year. An associated strategy (or

sub-goal), among others, may be to increase profit of the Catalog

Department by 50% over the next fiscal year.

2. Specify desired results for the domain -- as guidance, focus on

results needed by other domains (e.g., to internal or external

customers)

For example, the operator's results are high-quality, printed images for the

internal customer, the Catalog Department. This aspect of performance

management is sometimes called "goal setting", particularly when the focus

of the performance process is on employees. Goals should be "SMART" and

challenging.

3. Ensure the domain's desired results directly contribute to the

organization's results

Aligning results with organizational results is another unique aspect of

performance management process. Do the employee's results directly

contribute to the results of the organization? What organizational goals?

How? For example, do the prints directly contribute to the desired profit

increase of 50% of the Catalog Department? How? Is there anything else the

operator could be doing that would be more productive for this goal? Should

a job analysis be done to verify efficiency?

4. Weight, or prioritize, the domain's desired results

A weight, or prioritization, is often in the form of percentage-time-spent, or

a numeric ranking with "1" as the highest. For example, the employee's

results might be weighted as follows:

a) 80% of his time over an 8-hour period, Monday through Friday over the

next fiscal year, to be spent running the machine

b)10% of this time in training

c)10% of this time in a Quality Circle.

5. Identify first-level measures to evaluate if and how well the

domain's desired results were achieved

Measures provide information to evaluate accomplishment of results.

Measures are usually specified in terms of quantity, quality, timeliness or

cost. For example, measures for the operator might be the number of prints

over some time interval, a certain grade on a test during his training and

attendance recorded on attendance sheets to his Quality Circle. Identifying

which measures to take is often the toughest part of the performance

management process. You have to look at the appropriate level or domain in

the organization, its desired results, and consider what are the most valid,

reliable and practical measurements to use. With complex and rapidly

changing domains, it often helps to identify outcome and driver

measures, and patterns of effects. More about these terms

in Performance Measurement, which is also referenced back in Basic

Overview of Performance Management.)

6. Identify more specific measures for each first-level measure if

necessary

For example, regarding the operator's measure for operating his machine, he

may have to produce at least 500 high-quality prints an hour for eight hours,

Monday through Friday during the fiscal year. High-quality means no smears

or tears. The Director of the Catalog Department evaluates whether the

operator made this goal or not.

7. Identify standards for evaluating how well the domain's desired

results were achieved

Standards specify how well a result should be achieved. For example, the
operator "meets expectations" if the Director of the Catalog Department

agrees that the operator produced 500 high-quality prints an hour for eight

hours, Monday through Friday during the fiscal year. If he produces 600, he

"exceeds expectations", 700 is "superior performance", 400 is "does not

meet expectation", etc.

8. Document a performance plan -- including desired results,

measures and standards

The performance plan describes the domain's preferred results, how

results tie back to the organization's results, weighting of results, how results

will be measured and what standards are used to evaluate results.

Developing the plan is often the responsibility of the head of the domain (in

this example, the employee's supervisor). However, the plan should be

developed as much as possible with participants in the domain. (Note that a

performance plan is not the same as a "performance development plan",

which is mentioned later below.)

As described in that last subsection, development of the Performance Plan

typically includes the first eight steps of the basic 14 steps in performance

management. The Performance Appraisal picks up from step nine. We also

continue our example of the machine operator. At this point in our example,

the Performance Plan has been developed.

Information in this section is generic to performance management, that is,

the information generally applies to any performance management effort,

e.g., organization, process, subsystem or employee.

9. Conduct ongoing observations and measurements to track

performance

The operator's supervisor would observe the number of high-quality prints,

including staying in contact with the Director of the Catalog Department.

10. Exchange ongoing feedback about performance

Feedback is information relevant to how well results are being achieved.

Useful feedback is timely, feasible and understood. Ideally, feedback address

key activities to improve or reinforce performance. Usually, the larger the

number of sources giving feedback, the more accurate is the depiction of

events. In our example, the employee, supervisor and Director of the Catalog

Department should continue to share impressions of how well results are

being achieved. Any ideas to improve or support performance should be

implemented as appropriate. This ongoing feedback is often one of the most

important aspects of performance management.

11. Conduct a performance appraisal (sometimes called performance

review)

A performance appraisal (or review) includes documentation of expected

results, standards of performance, progress toward achieving of results, how

well they were achieved, examples indicating achievement, suggestions to

improve performance and how those suggestions can be followed. If the

above steps in the performance management process were followed, the

performance appraisal is usually quite straightforward to carry out. In our

example, the appraisal should include input from the employee, supervisor

and Director of the Catalog Department. The performance appraisal should

be carried out at regular intervals as performance tracking is underway.

12. If performance meets desired performance standards, reward for

performance

In our example, the machine operator may be due some form of reward, that

is, recognition or compensation, e.g., letter of recognition, promotion, letter

of commendation, etc. This step in the performance management process is

often overlooked when focusing on organization-wide performance

improvement, or on a major subsystem.

NOTE: Now is the best time to take stock of overall performance plans. Does

the domain have the necessary resources to achieve preferred results, e.g.,

necessary funding, training, input from other subsystems, etc? Are the

standards realistic? Can the domain realistically achieve the results within

the preferred time frame? Does everyone involved in the measures really

understand how to recognize the measures? Do they know their role in the

performance management process?

Cost/Benefit of Perf Appraisal LO3671

Nickols@aol.com

Sat, 11 Nov 1995 16:05:16 -0500

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• Reply to [ author only ][ Learning-Org list ]

Constructing a cost-benefit analysis of performance appraisal

systems ought to prove interesting, informative, useful, and even

fun. If you'd like to participate, by all means join right in.

Initially, I'd like to focus on the classic performance appraisal

system, that is, one in which the appraisee reports directly to

the appraiser. Input from others, 360 degrees or otherwise,

might or not be a factor. In other words, the focus here is on a

boss's appraisal of a subordinate's performance.

At this stage, I am not trying to reach conclusions. Instead, all

I want to do is catalog what people see as the costs and the

benefits of performance appraisal systems. Neither costs nor

benefits must be expressed in financial terms; however, some

certainly can (e.g., the cost of the time to prepare one).

Here, then, are two questions to get us started, and a "starter set"

of answers:
What are the costs of a performance appraisal system?

the time and dollar costs of preparing appraisals

the time and dollar costs of goal setting sessions

the time and dollar costs of periodic review sessions

the time and dollar costs of annual review sessions

What are the benefits of a performance appraisal system?

provides a basis for distributing annual merit increases

provides the occasion for performance-related discussions

reinforces managerial authority

Please think about additional costs and benefits and, if you're willing

to share them, send them in an e-mail message to: nickols@aol.com

I will compile the responses and share them first with those who

contribute and, later, with a broader audience.

As you can see, I have cross-posted this to several lists where I know

related discussions have occurred. My apologies to those of you who

receive more than one copy of this message. Also, please feel free to

pass this along to anyone whom you think might be interested.

Cheers,

--

Fred Nickols

nickols@aol.com
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