Designing and Implementing Impactful Performance Management Programs

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In today’s competitive world, most organizations are trying to do more with less, thereby escalating the importance of maximizing human performance. Companies are increasingly putting more resources into performance management processes with the hope that this will drive greater productivity and help to achieve company goals. In 2007, E. L. Goldberg & Associates (in collaboration with Creative Metrics) undertook a study to examine which design and implementation factors play an important role in determining whether or not a performance management process achieves its intended goals.

Participants from 42 organizations completed an online survey regarding the design and implementation elements of their process. Seven outcome items were used to identify the relative effectiveness of the performance management process. A composite score was created across these items, and companies were rank-ordered in terms of their relative effectiveness. The top four companies were identified as having the most effective processes, and the bottom four represented the least effective initiatives.

The results are very clear: The two most important factors that drive program effectiveness are leadership support and management capability. The most effective performance management programs were more than three times more likely to have support from both senior leadership and line leaders. Furthermore, the study showed a significant link between manager training, manager capability and successful program outcomes. Meaning, those companies that provided more training on performance management reported that their managers were more capable of delivering on the elements of performance management and those programs received significantly higher scores on the effectiveness index.

Beyond the items mentioned above, we found that the most effective performance management initiatives:

• Included goal setting as part of their annual planning process, thus making it a business process
• Aligned and cascaded goals from the top of the organization
• Were more likely to require development goals to be established
• Were more likely to link pay to performance
• Improved their capability to deliver results

Recommendations

Based on the results from this survey, we offer the following recommendations to create a high-impact performance management process:

1. Get senior leadership involved in the process early and ensure they will be active sponsors of the process.
2. Tie individual goal setting process to the organizational goal setting process and cascade goals in a timely manner.
3. Provide training for both managers and individual contributors to develop performance management capabilities.
4. Conduct calibration sessions with managers as a tool to help differentiate performance within and between groups.
5. When possible, tie bonus payouts to results, as measured by goal achievement.

First published on Human Resources IQ.