
Administer valued rewards and appropriate punishment.
SOURCE: Adapted from A. J. Kinicki, K. J. L. Jacobson, S. J. Peterson, and G. E. Prussia, “Development and Validation of the Performance Management Behavior Questionnaire,” Personnel Psychology, 2013, 1–45.
How Much Would You Pay Fannie and Freddie?
Fannie Mae and Freddie Mac are organizations at the heart of the US housing industry. They buy mortgages from lenders and either hold them or package and sell them to investors. They were cen- tral players in the financial crisis and were subsequently taken over (bailed out) by the government. It has been a long road back, and Mel Watt, the regulator who oversees Fannie and Freddie, recom- mended that their CEOs each get raises of $3.4 million, taking their salaries from $600,000 to $4 million each.
What Goes Wrong with Performance Management Volumes of research and employee surveys report that the majority of managers and or- ganizations do a poor job of managing employee performance.
These unfortunate perceptions raise the question: Why do companies often do so poorly with performance management?
Step 1: Define the problems confronting the regulator Mel Watt.
Step 2: Identify the potential causes of these problems.
Step 3: Make your recommendations.
First, performance management practices are often obsolete. Customer needs and job responsibilities change frequently and quickly, but PM practices often fail to keep pace. This can result in a disconnect between the elements in your review and what you actually do day-to-day in your job. This can reduce the whole process to “chores” that require lit- tle more than checking boxes.
Third, performance reviews are too narrow. This means managers administering them commonly focus on only a limited number of elements, which may not be the only or the most important ones. One reason for this narrow scope is that many companies include only what is measured instead of what should be measured. For example, law firms may say they want and need attorneys to focus on client service and community involvement, but the only thing they measure and link to rewards is billable hours with clients. This is largely what they get.
Applying all the elements of performance management discussed in this chapter will help you overcome these negative perceptions at work and show you that performance management is an important, practical process that connects many inputs and outcomes in the Organizing Framework of OB.
precisely the behaviors that define effective performance management: setting clear expectations, helping employees accomplish work, providing regular feedback, and find- ing new opportunities for employees to succeed and develop.16 This means that managing performance successfully requires that you have effective managers. PM policies and practices cannot substitute for poor management, yet effective managers can be under- mined by poor PM policies and practices.
Who does your boss’s performance review? Who does that person’s review? On what elements is each of these people evaluated? Ask the same questions about the president or CEO of your employer. The answers can be very telling about how serious your organiza- tion is about performance management, and the extent to which leaders role-model PM and practice what they preach. The bottom line: Senior leaders need to develop and hire good managers, and they need to ensure that everybody practices effective PM.
Pervasive poor views of performance management practices have led many no- table companies including Adobe, GE, Juniper, Accenture, and Cigna to scrap exist- ing PM practices.18 One such company is Deloitte. The following OB in Action box illustrates how this accounting firm has tackled the challenges of performance management.
As part of a renewed commitment to developing its high-caliber workforce, De- loitte made a $100 million investment in The Leadership Center (called Deloitte University) in 2011. In the process it reviewed the role played by its performance management practices.
The internal review and research revealed two things. First, performance, re- tention, and client satisfaction were all better when employees felt they were play- ing to their strengths in their jobs.19 Second, current PM practices were interfering. The company then embarked on a dramatic transformation of its practices. Its new approach is as interesting for what it excludes as for what it includes. Gone are once-a-year performance reviews, 360-degree feedback tools, and cascading goals.20 Included are the four steps of effective performance management out- lined above and described below.
Step 1: Setting Goals and Objectives. Like its many clients, Deloitte has objec- tives, financial and otherwise, it must achieve. All are important and consequential for employees. However, instead of goals being set centrally by senior manage- ment and cascading down through the organization, goals are now set per client, per team, per employee. This means that goal setting and expectations are much more local and are handled by team leaders, rather than global and done by se- nior executives at headquarters.
Now that you have a general understanding of the performance management pro- cess and its importance, let’s take a closer look at how to define performance expecta- tions and goals.
Step 3: Reviewing Performance and Providing Feedback. Performance re- views and feedback happen not once or twice a year but at regular check-ins. Check-ins are one-on-one, real-time discussions between team leaders and their team members. Their purpose is to discuss progress, expectations, feedback, and any other relevant details related to current or near-term work. The rationale is that performance is driven through conversations, and check-ins give frequent op- portunities for managers and employees to meet and talk. Check-ins are not man- dated or tracked. Deloitte simply prompts all employees via periodic e-mails that ask, “Did you have a check-in conversation with your team leader this week? Yes or No.”22 Snapshot responses are aggregated every quarter, and HR reviews and discusses the results with business leaders. Along with other metrics, such as rev- enue per employee, Snapshots give leaders a more holistic and timely view of in- dividual and unit performance.
Step 4: Rewarding Performance. Snapshots provide regular and ongoing op- portunities to recognize and correct performance, and the quarterly reviews pro- vide yet another opportunity. All of this culminates in annual compensation decisions, which are now based on a wealth of information consistently captured throughout the year.
Deloitte’s new system is viewed very positively and has been expanded to cover 2,000 employees, then 7,000, then 40,000, and now all business units are given the choice to participate.
1. From an employee’s perspective, what do you think are some of the pros and cons of Deloitte’s new PM system? Explain.
2. Assuming you are a team leader at Deloitte, describe one benefit and one challenge of the PM system for you.
3. What do you think are the major challenges in implementing Deloitte’s new PM practices?
How can improving my goal setting give me an advantage?
S. C. Johnson has since achieved its goal of a 7 percent reduction in greenhouse gases and earned yet another award, the very prestigious Excellence in Greenhouse Gas Management award given by the En- vironmental Protection Agency (EPA).25 Research supports the benefits of goal setting, as S. C. Johnson realizes. For instance, teams have been shown to in- novate more effectively when their team leaders help clarify their goals.26 This shouldn’t be a surprise.
It makes sense that improving goal setting is a way to boost both your own performance and your ability to manage the performance of others. But once again, common sense is not common practice. According to Gallup’s “State of the American Man- ager” report, only 12 percent of employees strongly agreed that their manager helps them set perfor- mance goals.27 To improve your own goal setting, let’s begin by differentiating two general types of goals—performance and learning.
Do You Want to Perform or Learn? One way to organize or differentiate your many goals is to categorize them as perfor- mance or learning. A performance goal targets a specific end result, and a learning goal promotes enhancing your knowledge or skill. Managers typically overemphasize the former and ignore the latter as they try to motivate greater effort and achieve results.
This insight also applies in college (and later in life). Depending on socioeconomic sta- tus, between 55 and 80 percent of students who start college don’t graduate in six to eight years.29 One conclusion: Students’ goal-setting skills need more attention. A study of stu- dents who were struggling academically demonstrated the power of teaching people how to skillfully set and integrate both learning and performance goals. The students participated in an intensive online tutorial on how to write and achieve personal goals, which led to signifi- cant improvement in academic achievement four months later.30 The lesson? Learn about and apply goal setting to improve your grades now, if not also your performance at work.
Managing the Goal-Setting Process There are four general steps to follow when implementing a goal-setting program (for yourself or others). Deficiencies in one step cannot be made up for with strength in the others. You need to diligently execute all four steps. We label these Step A, Step B, and so on to avoid confusion with the numbered steps of the effective performance manage- ment system (compare Figure 6.2).
Step A: Set goals. Step B: Promote goal commitment. Step C: Provide support and feedback. Step D: Create action plans.
Step A: Set Goals Whether your manager sets your goals or you set them together,