Human Resources: Is your performance management system producing mediocrity or excellence?

When was the last time your performance appraisal system was overhauled? If the current approach has been around for more than five years, it’s probably time for a revamp. Here’s where to start.

Using insider knowledge and expertise, the Generator Group’s articles in our Expert Network are designed to present thought-provoking ideas, information and workplace trends that will help manufacturers and retailers alike acquire, retain or develop their workforce to drive business success.

Major studies consistently prove that top-performing companies have performance systems that work hard to breathe oxygen into organizational muscle. “Organizations with world-class performance management systems do things that the also-rans don’t,” according to Dick Grote, a management consultant specializing in employee performance appraisal for nearly 30 years.

Grote noted that top performers:

  • Insist that all managers maintain consistent, demanding standards for everyone — and they keep raising those standards.

  • Work relentlessly to identify their highest-potential managers and professionals and develop them quickly.

  • Move marginal performers aside so they don’t block the path of talent; they eliminate non-contributors swiftly.

Great performing companies have a language around talent. They can tell an employee with great detail what they value, what results are needed and what they need to be good at to get it done. In short, the executives of these companies have a talent mindset. They have high expectations of their performance process and use it to make important decisions in pay, promotion, development and retention.

In the not-so-distant future, more companies will be using this data to do predictive modeling on their organization’s future performance based primarily on their human capital assets. That’s truly forward-looking workforce management.

What’s new in performance appraisal?

Historically, performance appraisal has been seen as merely a backward-looking event — the painful annual exercise where the manager rates the performance of subordinates over the past 12 months. Fortunately, times are changing and new protocols are being put in place.

>> Standalone has now been replaced by integration. The performance appraisal system is no longer a standalone organizational relic. Advanced reviews link items on the appraisal directly to the organization’s strategic plan. This provides the missing X factor between organizational intent and individual goals.

>> Job specific focus. In the past one form was used for everyone, now more companies acknowledge jobs differ considerably and performance should be tailored. For instance, sales, customer contact and managers need to be measured differently for the work they perform. Forms might have common headers but specific requirements are tailored to the job. One size does not have to fit all, especially with technology to help.

>> Reinforcing the vital few. Previously, the performance procedure entailed telling an employee how he was doing and justify his annual raise. Organizations now realize that their performance appraisal system has enormous power to genuinely transform an organization’s culture. Companies can shift from random “best effort” to truly results driven. The key is to determine what excellence is.

Over the past several years, one of the significant developments in the framework of performance management has been the identification of specific “core competencies” by organizations. Competencies define the behaviors, skills, attributes, performance factors and proficiencies that underlie successful performance. 

Competencies are the mechanism that helps the organization highlight and communicate the critically important behaviors and skills. Using this information in a new performance appraisal system may help force the organization to define just what attributes or factors are actually at the organization’s core. The appraisal system can guarantee that these competencies are fully understood and institutionalized. Applied consistently over time, they become a competitive advantage

>> Technology is making the performance management process simpler. It is far easier for an appraiser to access an electronic form than to labor with pencil and paper. Sophisticated software can allow senior managers to see both the distribution of performance ratings across the entire organization and view pay inequities instantaneously.

Technology is being used to reduce the administrative burden of performance management — a burden that grows as the performance management system is increasingly linked with compensation, development and 360-degree feedback systems. Many are also finding innovative ways to use technology for just-in-time (JIT) feedback and training. Why should reviews be only once a year?

>> Multiple sources of data. Employees work remotely, solving problems managers didn’t know existed. Increasingly robust performance reviews incorporate feedback from co-workers, customers and project team members, as well as the manager.

>> Accentuate the positive. The first studies conducted at General Electric, published in the 1950s, confirmed that criticism has little effect on producing lasting behavioral change. Reinforcement of strengths, talents and positive behaviors, though, can generate an increase in their frequency. Most systems now ask the employee to list their top accomplishments for the year and managers are trained to draw out what is working for further development. Ultimately, poor performers don’t warrant additional organizational investment and should be weeded out.

What do appraisers need? Gumption. At the end of the day, providing feedback is hard work. Even with senior management support, a good set of competencies, snazzy technology and proper training, a manager must summon the courage to sit across from an underperforming employee to say with honesty: “I have bad news. There are parts of the job that simply aren’t being done as well as we both know you can do them. Let’s talk about what they are and why….”

–Elaine Lees

Elaine Lees is a partner and vice president of talent management at the Generator Group, which is an integrated talent management services firm delivering executive search and talent management consulting to brands in apparel, footwear, hardgoods and softgoods, retail and more. For more information about the group’s work or working with it, go to