Fixing Performance Management

By Andreas Petrou

Performance management is one of the most important practices in any organization, yet studies show that on average over 50% of line managers and employees disengage from key performance management activities. Why is this happening?  And what should senior managers and line managers do to make performance management more meaningful?

From my experience as an academic and management consultant, I concluded that there is a more productive way of managing performance than running annual performance appraisals and corporate KPI target allocations in isolation. The book proposes a performance management framework that integrates and enhances this traditional performance management practice. 

This book is a valuable tool box for line managers and employees who wish to develop the skills required to take a more active and productive role in performance management. Line managers should learn how to identify and use value-adding KPIs to manage their team as well as manage employee appraisals more effectively. Employees should understand how to identify suitable KPIs for themselves and how to become valuable team players. Moreover, senior managers should understand how to adopt this proposed framework and the supporting policies, resources and processes throughout the organization.

• Language: English
• Publisher: Andreas Petrou
• Release date: Nov 15, 2017
• ISBN: 9781386473633

Book preview

Fixing performance management

How to develop and use KPIs and appraisals to manage your team

Andreas Petrou, PhD

Copyright © 2017 by Andreas Petrou. All rights reserved.

First Edition

No part of this publication may be reproduced in any form by print, photo print, microfilm or any other means without written permission from the author.

The information in this publication is distributed on an ‘as is’ basis without warranty. Although this publication has been composed with much care, neither the author nor the publisher can accept liability for loss or damage caused or alleged to be caused by possible errors and/or incompetence’s in this publication. The material, instructions, methods or advice contained in this publication may not be suitable for your situation. Neither the author nor the publisher shall be liable for any loss of profit or any other commercial damages.

Published by Expert Views Publishing

Contents

List of Figures

List of Exhibits

Preface

PART I

Chapter 1

How line managers can help fix performance management problems

Line manager: The hero of the modern organization

The challenges of the line manager

KPI-based performance management systems are not sufficient

The need for an integrated performance management system to support the line manager

Line managers require support since they cannot rely exclusively on existing corporate practices

How line managers should manage performance

Key messages

Chapter 2

How employees respond to performance assessment and implications for managers

Theories of employee behavior in light of performance assessment

Empirical observations of employee behaviors and implications

Implications for managers

Key points

PART II

Chapter 3

The process of identifying suitable KPIs for the team

The team’s objectives

Identifying value-adding KPIs

The characteristics of good KPIs

Engaging staff in the process of developing KPIs

Key points

Chapter 4

Useful KPIs for line managers and how to measure them

Identifying KPIs suitable for measuring process performance

Data challenges in measuring process KPIs

Meeting customer and supplier expectations

Creating KPIs for support departments

Team versus individual KPIs

Mega KPIs

How to discourage staff behaviors that constrain KPI measurement

Key points

PART III

Chapter 5

Setting KPI targets

Setting KPI targets

Setting the right target

Seeking support for targets from team members

Reviewing targets

Key points

Chapter 6

Managing team performance through KPIs

The required technical competencies and processes for managing KPIs

Embedding KPIs in managerial practice

Using KPIs to manage change

Key points

PART IV

Chapter 7

Employee performance appraisals—opportunities for improvement

The employee performance appraisal system

The process of appraising staff

How line managers should improve the appraisal

Key Points

Chapter 8

An integrated performance management system

The design of an integrated performance management system

The benefits of an integrated performance management system

How the integrated system operates

The new requirements of an integrated performance management system

Resources

Infrastructure

Key Points

Chapter 9

Using the integrated system to manage performance

Augmenting employee jobs with ad hoc tasks

Focusing employees on specific team objectives

Utilizing practices within the integrated system to motivate employees

Key points

Index

List of Figures

List of Exhibits

About the author

Andreas Petrou is Associate Professor at Cyprus University of Technology. Andreas obtained his MBA from the University of Southern California and his PhD from the University of Warwick. One of his research interests is performance management practices in the organization and how such practices influence the implementation of business strategy.

Before joining the academic community Andreas worked in the industry, with roles in project management, strategic planning and management consulting. During his business career he worked with large companies, in different industries, where, among other, he had the opportunity to design and implement performance management systems.

Preface

Organizations today use two independent systems to manage performance; a top-down KPI-based system and a human resource focused employee appraisal system. Despite their wide adaptation in management practice, both systems exhibit important weaknesses. For example, KPI systems focus on achieving quantitative targets which are often arbitrary and inflexible. In addition, important intangible parameters of performance, such as individual effort, knowledge sharing and team working, cannot be measured effectively. Application of KPI-based systems is shown to raise stress, promote cheating and create many unhappy employees. In a similar vein, appraisal systems display other weaknesses; they are infrequent, involve subjective assessment and create potential for conflict between the supervisor and the employee. As a result, appraisal systems are not taken seriously by many line managers and employees.

An effective performance management system that aims to improve and integrate these two systems should be driven by three best practices: 1) development and management of value-adding KPIs to commit employees to specific team and/or individual targets; 2) encouragement of employees to contribute to improvement actions; and 3) timely assessment of staff competencies and behaviors so that employees commit to a personal development plan that is line with business needs.

Moreover, this system requires that line managers become more involved in performance management. Specifically, they have to create appropriate KPIs for their team, manage the team through KPIs, manage operational improvement actions, and actively engage with the employees to provide feedback, to advise on their development plan and to appraise their contribution fairly and frequently. To manage all these responsibilities competently, line managers should master the following skills:

Learn how to develop KPIs. The development of value-adding KPIs is not a trivial task since team KPIs must support the corporate KPIs, the team objectives, and additionally, promote appropriate staff behaviors.

Be able to influence. Influencing skills are pivotal when negotiating KPI targets, when engaging staff in improvement actions and when providing feedback to staff about their performance.

Possess strong planning skills. Managing improvement initiatives demands that the manager is able to plan tasks in a way that optimizes the use of available resources.

Furthermore, employees must develop new skills and behaviors that support a high performance environment:

Project management skills. The emphasis on improvement tasks demands that all employees are proficient in planning, implementing and controlling projects of different types and complexity.

Time management and multi-tasking skills. Carrying out the every-day job responsibilities and working simultaneously on improvement tasks/projects requires ability to manage time and switch tasks effectively.

Team working skills. Employees should be able to communicate and work effectively with others because most tasks are planned and implemented under projects, and achieving team KPI targets requires collaboration.

Willingness to pick up tasks. An agile work philosophy that allows employees to take more responsibility in managing their contribution to the team requires that employees are willing to select tasks and to manage implementation.

Finally, senior managers should be prepared to adopt an organization-wide performance management system, provide supportive infrastructure and allocate more resources to the front line.

Book objectives

The book proposes a performance management system that integrates and improves the traditional performance management practices, and demonstrates in detail: 1) how line managers should manage through this system; 2) the desirable team member skills and behaviors; and 3) what support senior managers should provide. The book should be of great practical value to line managers and employees and offer valuable insights to senior managers.

Line managers will learn how to:

Identify meaningful KPIs for their team.

Manage successfully improvement tasks within their team.

Manage employee appraisals more effectively.

Engage and commit staff to the team and the organization.

Employees will understand:

How to identify meaningful KPIs for themselves.

How to discourage disruptive behaviors.

How to become valuable team players.

What to expect from performance appraisals and performance management.

Senior managers will understand:

What resources should be made available to line managers.

What policies, new processes and system functionality are essential.

What changes to performance management practices are required throughout the organization.

Many ideas, examples and case studies discussed throughout the book are derived from comprehensively researching organizations of different sizes, industries and nationalities in an effort to uncover how line managers manage performance, what challenges do they face, and how they deal with specific performance management problems.

Research focused on departments or teams with either front-line or support responsibilities, such as sales, marketing, manufacturing, customer support, purchasing, human resources, accounts, etc.

Book overview

The book is composed of nine chapters organized in four parts as shown in figure 0.1. The first two chapters (part I) set the scene by discussing how to deal with the performance management challenge.

To provide a remedy to this challenge, the book proposes a performance management system that improves and integrates the employee performance appraisal system and the corporate KPI-based system.

Line managers have a central role to play in this system and therefore, the book attempts to show 1) how line managers develop KPIs; 2) how to manage their team through KPIs; 3) how to manage the appraisal process; and 4) how to assist team members achieve their goals. In addition, the book suggests what behaviors employees must develop to support performance management.

Chapter one supports the case for integrating the corporate performance management with employee performance appraisals to form a more comprehensive and versatile approach to performance management. In addition, it discusses how line managers should employ this system and what support they need from the organization.

Chapter two recognizes that performance management systems cannot be designed, and deployed successfully without understanding and accommodating human behavior. Hence, I discuss theories linking employee behavior with performance assessment, I provide empirical observations of such behaviors and how they support or inhibit efforts to develop and manage performance measures and processes, and I discuss how managers could stimulate desirable behaviors.

Chapter three explains the process for identifying suitable KPIs for the team and how to gain buy-in from team members. KPIs often do not reach deep into operations and line managers need to cascade KPIs further for them to become meaningful for team members. A key decision in this endeavor is the selection, among many possible KPIs, of the ones that will contribute most to the management of the team.

Chapter four discusses the nature of KPIs at the front line and offers ideas about which KPIs managers should use. Operations-related KPIs pertain to certain tasks executed by team members and, therefore, employees should find meaning in them and feel confident that they can control the achievement of targets. To this end, the book discusses KPIs that have relevance for operations and how to allocate responsibility for these KPIs. In addition, the book discusses challenges with data and with employee behaviors, and how managers can mitigate these difficulties.

Chapter five discusses the challenge of setting motivating targets and proposes different approaches for determining targets and engaging staff in the process. Specifically, the book discusses the current practices of target setting and provides insight into how current practice can be improved to accommodate more commitment from staff. Moreover, managers are advised to be very careful when setting targets because employees can exhibit entrenched behaviors if they consider them to be non-achievable.

Chapter six provides insights to line managers on how to use KPIs effectively to manage team performance.  Specifically, it discusses the capabilities and processes that managers need to develop to link KPIs with core management activities, such as communicating, steering and motivating staff. In addition, it discusses how managers can use KPIs to facilitate reform in a team’s operations.  To this end, it discusses case studies of managers who have used KPIs to drive change within their teams.

Chapter seven discusses the limitations of employee appraisals and possible ways to improve them. First, it highlights the usefulness of employee performance appraisal systems and agrees that the potential benefits surpass the costs involved. Second, it identifies inherent design limitations that limit the benefits extracted from performance appraisals. Third, it outlines the employee performance appraisal process and draws attention to weaknesses and possible improvements. Finally, it makes suggestions as to how managers can improve the system by taking a more active interest in overseeing the employee appraisal process.

Chapter eight presents the integrated performance management approach and how it works. First, it discusses the content and the processes underpinning the system. Second, it demonstrates how this system is superior to the traditional employee appraisal system used by most organizations. Third, it explains how the system is utilized to improve performance assessment and management. Fourth, it discusses the skills, resources and infrastructure that are required to adopt this system successfully.

Finally, chapter nine demonstrates how managers should use the integrated system to engage in practices that focus staff on team objectives and increase their commitment. Specifically, it focuses on managerial practices within the spirit of the integrated approach that can enhance the effectiveness of performance management. In this endeavor, five case studies are used to demonstrate specific practices that aim to achieve the following management objectives: 1) establish improvement initiatives as core to team activities and make employees’ jobs more interesting; 2) focus employees on team objectives; and 3) utilize practices within the integrated system to motivate employees.

PART I

Setting the Scene

Overview

In most organizations performance management systems are disconnected and provide little support to line managers who have the critical responsibility to manage performance at the front line and contribute to achieving company objectives. The first two chapters aim to set the scene by discussing how to deal with this important challenge.

In chapter one I support the case for integrating corporate performance management, which is based on KPIs, with employee performance appraisals to form a more comprehensive and versatile approach to performance management.

In chapter two I recognize that the biggest obstacle to performance management is