Entries Tagged 'Performance Management' ↓

It was a hard discussion with one top manager. He wanted to motivate his employees and immediately provided his department with the solution. He was ready to decrease the base salaries and to increase the variable part of the salary.

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Every big organization runs Performance Management. But are you able to explain to employees a simple thing - “What is Performance Management?” Try to think about it, because the answer is not simple in many companies.

The HR Professionals tend to provide answers like these:

1. The Performance Management helps to improve the performance of the company by monitoring and evaluating the performance of individual employees.
2. The Performance Management helps the employees and the company to reach better performance.
3. The Performance Management helps employees to develop their competencies and skills.

But in reality? There are companies, where the Performance Management is used as a tool for the distribution of bonuses. It is sad, but the managers and employees agree to the rules of the game and the bonuses get distributed. This is a picture of the Performance Management in eyes of many employees. Because their main feeling is a bonus payment after the performance evaluation.

The correct answers for the question “What is Performance Management?” should be:

1. The Performance Management /mainly Goal Setting/ sets a frame for the year and it shows to the employee the main milestones during the year.
2. The Performance Management helps to identify development needs and to increase the value of the individual employee for the company.
3. The Performance Management helps the organization to identify gaps in the overall company performance and to prepare development plans to improve.
4. The Performance Management provides the employee with a strictly structured feedback at least once a year.

But honestly - can you provide honestly with these answers to the question “What is Performance Management?” in your own organization? The Performance Management is a very powerful HR Tool for managers, but they are usually very inexperienced in the usage of the whole concept.

Performance Management needs one crucial thing - Performance Management Training. The training is an essential part of the success of the whole concept of Performance Management.

The Performance Management System is not a system to work on its own. The PM needs a lot of support from Human Resources and business leaders to work correctly. When Performance Management System is not managed properly - then every single employee reaches the best performance rating.

The Performance Management Training is a key to success in many companies. The system does not have to be brilliant, but the Performance Management Training can help to set the correct expectations.

The expectations of managers and employees are the critical for the success of the whole Performance Management. The Performance Management Training helps to explain the processes behind the whole system and expected outcomes of the whole Performance Management.

The Performance Management Training helps to get a buy-in of employees involved in the whole process. You should try to develop a training about Performance Management to make sure, the company runs at 100% performance.

Many organizations around the globe use sophisticated performance management systems to monitor and evaluate the performance of their employees. These performance systems can be really sophisticated, but they fail in the most important goal – motivating employees to reach higher performance levels and keep developing their skills and competencies.

The overall goals of performance management systems are:

• Motivate employees for future development;
• Help employees to identify gaps in their skills and competencies;
• To provide feed back on the evaluated period and plan the action plan to improve and further develop skills and competencies;

Aiming these goals of Performance Management System is not easy. It is much easier to develop very complex system, which is difficult to use and it is almost a mission impossible to explain the system to individual employees.

As the managers and employees do not understand to the complicated logics and rules behind the system, they start to learn the “desired” behavior not to complicate their professional life. The managers tend to provide employees with a very formal performance appraisal and the employee is not kept to fill the development. As it is just the game to make Human Resources happy in their eyes.

The issue about this failure of the Performance Management System is the role of Human Resources function. Many times HRM is not able to accept the failure of the system and HRM tries to make the Performance Appraisals even more complicated to prevent managers and employees to avoid the failures of the system.

But - the Performance Management System must be simple, understandable and quick. Basic rules for every single Performance Management System.

When you attend the conference of HR Professionals about Performance Management System – the topic for attendees is always the same – the form for Performance Appraisals.

The people do not discuss the principles and processes behind the Performance Management; they really discuss the form to put the formal appraisal in. The formal process and formal appraisal tracking is for many HR departments more important than the real appraisal process and the process of formalized feedback provided to employees.

What is the real purpose of Performance Management for the organization? The real purpose of Performance Management system is to:

• Provide employees with the feedback, which is standardized;
• Provide employees with clear goals and tasks for the following period;
• Communication of company culture and corporate goals to the lower levels.

Today, Performance Management Systems are often mis-used as the system for development of the staff in the organization and as a tool of detection of corporate health. But, in the situation, when this happens, the employees and managers tend to lie to the whole system as no one wants to be identified as a person “highly suitable” for the next round of lay-offs.

The Good Performance Management System should really focus on its main functions for the organizations and it should stay as simple as possible.

A bonus scheme is not an easy task to accomplish successfully. A successful bonus scheme depends on Performance Management and mainly on efficient goal setting process. In many companies the Incentive Scheme and Bonus Scheme are taken as the same items in compensation and benefits area, but they are not the same.

Bonus Scheme is usually linked to the company goals with long term deadlines. But the Incentive Scheme is very individualized and the employee can fully control the income from the scheme. Even in the case the company is loosing money, the excellent salesman can earn a lot of money.

A successful Bonus Scheme needs realistic and achievable goals to be set. When the goals set are not realistic, the employees will not believe in the bonus scheme and they will become de-motivated rapidly.

The efficient bonus scheme needs the following criteria to be met:

• Transparency;
• Simplicity;
• Trust.

The bonus scheme must be transparent to employees. Each employee must have a chance to sit down with a calculator and based on goals or KPI fulfillment, he/she must be able to make a proper calculation of his/her bonus. Many companies do make a mistake – the bonus scheme is not transparent to the employees and they do not know exactly, what behavior and performance is expected from them.

Also – the bonus scheme must be simple. When the bonus scheme is simple, the employees can see, what is expected from them at the first look at the paper. When they do not have a chance to make a proper interpretation of the scheme, the company cannot expect the employees to deliver the results.

And trust – the employees must be sure, the money invested into the scheme will be really released. When the company tries to make a note about a final decision about the money released, the motivation and trust is lost.

The rules for developing the bonus scheme look simple, but they are really hard to achieve in the daily practice. Good luck to accomplish them.

Most people do not understand how their salary is set and what is the structure of their own salary. The bigger the company is the less understandable the system for setting the base salary and variable scheme is understandable for employees.

The salary is one of the most important factors in setting the whole motivation and performance management system in the company. In the small company, it is pretty easy to explain to people the goals, the company has to reach to survive. In large corporations, the employees do not see their own impact on the financial results of the organization and their contribution to the final result.

In small organizations, setting the salary is mainly on the sense and ideas of the founder or a leader of the company and the financial possibilities of the company. In larger organizations, the system for setting salaries must be put in place to keep the organization in shape and to allow employees to trust and feel fairness in the system, when they see their own salary and comparison with the rest of the organization.

Large corporations use services provided by external consulting companies to set the correct level for each position within the organization and to attach correct salary level to each position and to make adjustments every year to stay competitive with market.

Setting the base salary is not that hard task and it is pretty simple to explain it the employees, but with the variable part of the total income - it can be a complete mess. Human Resources tends to provide management with a very sophisticated system, when every calculation needs a lot of time from managers and Human Resources. And - it does not support performance in the organization as employees do not see the impact of their performance to the final result of the company.

Or - do you understand fully to the structure of your salary and how you can improve your total income?