One expert argued that objectives seem to be forced on hapless employees who then had to achieve targets for which they really had no say. He argued for a strong alignment between company and personal goals and for a deeper, more empathetic understanding of employee motivation. Decades later, we have found something more ironical at work. While performance management systems continue to be viewed as unresponsive to individual sources of motivation, they do not seem to be explicitly aligned to achieving organizational goals either.
In an economy where nothing really seems broken, alignment still matters for two reasons. First, because it is possible to build performance management systems that are responsive to both business goals and to personal aspirations. Second, this nurturing of harmony opens up great possibility for individual and company potential to get realized. Currently, many companies feel forced to set limits on achievable, sustainable growth because they do not see any other way out. Neither companies nor employees need operate under such unnecessary and painful constraints. One Limited company has reshaped its Performance Management System (PMS) by focusing on alignment and on eliminating slippage as a result the company and its employees have seen significant improvement in results.
Slack stealthily creeps into performance management systems. Take for example the timing of performance related discussions. In India, there is a tendency to conduct performance planning for the year ahead and performance evaluation, for the year gone by, in the same meeting.
Though it may sound counterintuitive, companies need to have two separate sessions. This saves time because both processes of setting strategic goals and of evaluating employees then receive the attention they independently merit.
Organizations should synchronize their performance planning with their business planning and budgeting processes. This will ensure that goals are set and communicated before the start of the fiscal year. Performance evaluations should take place in the first quarter of the fiscal year, when all necessary data is available. The above mentioned Limited company implemented these changes, and found that they not only saved time but also had a better aligned process.
Wasting organizational energy due to lack of focus and misalignment is another example. This happens when a company focuses on a number of goals rather than a crucial few. Too many Key Result Areas (KRAs) spread across a diverse number of themes and roles usually indicate poor focus.
Focusing on the vital few goals that were aligned with organization’s short and long term objectives has shown actual results in improved performance rather than too many unimportant KRAs.
A company can conserve energy by building synergies across units. Each department would define and cascade its KRAs in isolation. After understanding the importance of integrating KRAs across businesses and functions the company could shortlist to critical KRAs only.
This has resulted in inspired teamwork between teams that are now focusing on a larger goal for the unit rather than the earlier narrow spectrum of objectives. Look at the KRAs for any role and check if similar priorities are reflected in the KRAs for other roles that are expected to collaborate with it.
Not all roles during a particular year are likely to have KRAs. Those divisions that are contributing to the company’s strategic goals should have KRAs. Others should focus on function-centric local initiatives and on daily priorities. A knowledge outsourcing organization, a leader in their field, in one particular year, the organization’s energies were focused on new product development. Therefore only the sales and research functions had KRAs.
In another year, the finance function had the most KRAs due to financial restructuring. Second, a company benefits most from having a formal process linking inter-departmental KRAs.
Mutuality should be a central component of goal setting. Unfortunately, goal setting often does become a top-down unilateral process, with little scope for individual inspiration. That inspiration can be tapped if employees understand what is mandated and what isn’t.
Most employees do not have a say regarding strategic organizational goals, which are reflected in the KRAs. For example, the board may mandate that the company will “launch a new product in the last quarter of the year”. It is in the two other sets of goals mentioned earlier local initiatives and daily priorities that one can see the most scope for personal inspiration.
‘Local initiatives’ refers to the improvements that a department or business unit needs to make to its performance.
‘Daily priorities’ refer to an employee’s job description, the rock solid ‘business-as usual’ activities that need to be done superbly. Organizations can now gain greater control over what gets done while leveraging a bottom-up process to channel individual talent.
Many companies follow the Bell curve for their performance rating distributions. Usually, companies follow a 4 point scale for employee ratings: 10% get a 1, 40% get a rating of 2 or 3, and 10% get a 4. These percentages are rarely subject to change.
Organizations must remain open to three kinds of distributions instead. The standard distribution holds good only if the company is on target. When targets are exceeded either by the company or a particular unit, then the company should skew the performance curve
Even the most rigorous systems however cannot replace leadership, wisdom and prudence. The company’s board has to take ownership of the performance management process by asking questions like: Are the goals fair? Can we also reward work on a ‘best efforts’ basis rather than only on outcomes, so that initiative and motivation do not get squashed?