Most people think of performance management (PM) as a process that can help boost employee performance. And they’d be right. But a recent i4cp study found that certain PM practices can have an even more profound effect: that of actually boosting organizational market performance.
Purpose-Driven Performance Management in High-Performing Organizations, available exclusively to i4cp members, outlines five ways in which high-performing organizations (HPOs) create a performance management system that’s greater than the sum of its parts by supporting direction, dialogue, inclusiveness, relevancy and mission. Within each of those five characteristics, a number of PM practices make a difference between HPOs and low-performing organizations (LPOs). Adopting those practices that correlate most strongly to market performance is a good way to promote the use of performance management beyond the individual level to advance the organization as a whole.
Following are the practices with the strongest correlations to market performance in each of the five characteristics of the purpose-driven performance management system:
Direction: Ongoing goal review and feedback from managers
The inclusion of the word “ongoing” cannot be over-emphasized. In HPOs, PM is not a process that is delayed throughout the year to meet an arbitrary deadline. Instead, HPOs favor an ongoing process that incorporates the discussion of goals, progress toward meeting them, impediments faced, resources needed and other facets of moving the employee toward the accomplishment of objectives.
Dialogue: Training supervisors on employee goal development
Providing supervisors with training on the most effective way to develop goals with employees not only had the highest correlation of all the training topics surveyed to market performance, it also proved to be one of the ways HPOs differentiated themselves from LPOs , providing PM training that is laser-focused on achieving a purpose. Training on developing goals fuels the necessary dialogs needed to drive achievement and performance improvement and keeps PM aligned with organizational goals.
Inclusiveness: Including all executives in performance management processes
More than two-thirds of HPOs apply PM to executives―a practice that produced a differentiation between HPOs and LPOs as well as a high correlation to market performance. This sends a clear message that performance expectations and accountability are applicable at all levels of the firm. It’s important for employees to know that the leadership team’s performance is being examined every bit as carefully as their own performance. Media reports on executive compensation often isolate reports of top salaries, causing employees to resent the large differences between executive pay and worker salaries. But transparency in expectations of executive performance and the impact it has on shareholders can help make those connections more understandable.
Relevancy: Integration of workforce planning with performance management technology
A drill-down to determine the extent of technology integration that occurs between PM and other HR processes revealed that PM’s integration with workforce planning produced the highest overall correlation with market performance in this study. Despite this high correlation, smaller percentages of HPOs reported having accomplished this integration. Yet this is important because feeding information about which positions are underperforming due to lack of skills into workforce planning systems can alert planners to the need to re-evaluate or find new talent pools.
Mission: Agreeing that performance management processes promote the desired behaviors
The manner in which leaders view their PM programs not only differentiates HPOs from LPOs, it links to market performance. This positive mindset toward PM’s purpose translates to a message of having confidence in the critical role that PM plays to promote the desired behaviors. These behavior modifications can be the result of multi-rater feedback, effective rewards programs and other tools. HPOs use these tools in several ways: they provide the motivation to change ineffective behavior, thereby increasing performance; they induce capable employees to produce even more; and they encourage cooperation among employees, creating performance levels that otherwise might not have been possible.