Free Download Download our FREE Guide 'The Dos and Don'ts of Reference Checking'   Click Here

Performance Management

Issue 33 - December 2009

printer friendly version

In an economic downturn organisations will look at saving costs but what about getting more for your money? Are you maximising your biggest resource: your employees?

An IRS Employment Review survey ¹ (Managing underperformance: are line managers up to it?) found that three in four organisations had problems with employee poor performance. Respondents stated that this underperformance mostly took the form of "unauthorised absence, failure to meet set work objectives, poor standard of work generally and failure to meet deadlines" which led to "a fall in staff motivation and morale".

A survey by Personnel Today in 2007 estimated the cost of underperformance in UK businesses to be £32 million each year.

Performance management can help an organisation tackle underperformance. Performance Management means more than just the annual appraisal round; it encompasses a whole suite of activities and procedures (both formal and informal) designed to enable an organisation to achieve it's objectives by having an engaged, competent and efficient workforce. The Chartered Institute of Personnel and Development (CIPD) says that it "contributes to the effective management of individuals and teams to achieve high levels of organisational performance. As such, it establishes shared understanding about what is to be achieved and an approach to leading and developing people, which will ensure that it is achieved." Or more simply "the means by which many organisations ensure that managers do what good managers ought to do, ensure people know what they ought to be doing, have the skills to do it and complete it to an adequate standard."²

Performance management is not just about tackling underperformance; it can also identify and reward high performance too. A well designed and consistently applied performance management scheme can lead to the following benefits:

• A reduction in staff turnover; by identifying high achievers and developing them within your organisation.
• Attainment of Corporate Objectives as a performance management scheme is an effective way of cascading corporate objectives out to all employees and assessing an employee's performance against them. It improves communication across your organisation.
• Value for money on training; as can it identify and prioritise necessary development and help to ensure that training budgets are spent wisely and effectively.
• A workforce fulfilling its potential as developing the workforce's skills can lead to increased productivity, generate new ideas and motivate employees.
• Talent Management/Succession Planning: Identifying and developing your future leaders and other key staff to maintain consistency and retain knowledge.

The IRS Employment Review survey also found that 53.5% of its respondents believed an effective performance management system was very effective in deterring underperformance, with 45.5% believing it was quite effective.

A Performance Management process is found in most organisations these days but is it being used to its potential? Do you only hold one annual performance review? Do you wait until that review to highlight underperformance to employees? If the answer is yes then you are not managing performance, you are reviewing it.

Over recent years it has become clear that Performance Management is not solely an HR function; instead it is a continuous activity at the heart of the organisation being driven by the line managers. A Performance Management system can be used as the building blocks for an open, honest and ongoing dialogue between manager and employee to motivate and develop the employee to his/her full potential.

Yet are line managers equipped to handle performance management? HR Manager's aren't so sure. According to an IRS Employment Review survey in January 2008³, 65% of HR Managers felt their organisation's line managers do not implement the Performance Management system consistently and 34.9% said their line managers' attitudes to such policies were reluctant with one in three reporting line managers do not do a good job in developing their teams. Judging by the training these organisations offered to line managers there is a lack of soft-skill development. The survey also highlighted that over 70% of respondents felt a lack of confidence or competence on the part of the line mangers was the main barrier to improving employee performance. Training was provided on procedure but not always in coaching skills or how to handle difficult conversations which would give line managers the confidence to tackle underperformance, rather than just documenting it.

Although there is no statistical evidence to show that there is a direct correlation between performance management and organisational performance there is evidence to show that where employees are able, committed and motivated they are more likely to exhibit "discretionary effort and performance above that which is sufficient to fulfil the requirements of the job" (CIPD)⁴.

Another IRS Employment Review survey on Performance Management⁵ found that for the organisations asked, improving the performance management skills of line managers had proved to be the most effective way to improve employee performance.

So it seems that the best way to maximise your human resources is to develop the performance management skills of your line managers to engage and get the best out of your employees and in turn, attain the organisation's objectives.

Further Advice and Support

NorthgateArinso's HR Outsourcing team are able to provide specific support in performance management theory and application. We will also develop or review managing performance policies, procedures and processes, with customised training packages for your organisation to support you and your managers in managing performance effectively within your business, (including soft-skill development).

If you would like to discuss this matter further, or wish to discuss an existing issue around this subject, please call NorthgateArinso on 0800 0350545 and we will be happy to help.

References

¹ "Managing underperformance: are line managers up to it?", 2006, IRS Employment Review, Issue 854
² "Discussion Paper: Performance Management", January 2009, Reference: 4741 Chartered Institute of Personnel and Development
³ "Line managers' role in people management", January 2008, IRS Employment Review Survey, Issue 894
⁴ "Managing employee performance", February 2008, IRS Employment Review Survey, Issue 890
⁵ "Managing employee performance", February 2008, IRS Employment Review Survey, Issue 890