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Performance Mismanagement

Summer 2013

Performance Mismanagement
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To get results, stop measuring people by them.

By Vadim Liberman

Just Say No

Vadim Liberman is senior editor of TCB Review. He hates performance appraisals as much as you do.

The state of performance management sucks. You know it. Everyone knows it. That’s why you’re now reading yet another article about how much performance management sucks.

Here’s the truth: It really does suck.

Each year, a performance-appraisal form taunts you to conjure objectives. Because goals within a company usually cascade down from the top (or occasionally the reverse), devising your own—and coaching your staff through theirs—feels like pressing into a jigsaw puzzle pieces that don’t quite fit, no matter how hard you pound them into place. Still, you carefully craft targets that you hope to (and are fairly certain you can) achieve, by the announced deadline, or invite an avalanche of increasingly urgent missed-deadline HR memos.

“There’s a lot of pain in performance management,” laments Julie Jasica, a senior consultant for Towers Watson.

There sure is. Tyranny by numbers menaces performance management, inciting animosity, bitterness, cynicism, and mistrust. While most executives recently surveyed by the Society for Human Resource Management agree that performance management should develop employees and optimize how people work, they concede that it really serves primarily administrative purposes related to compensation, hiring, and firing. More than 70 percent of respondents report that their system fails to effectively establish goals or bolster performance.

No detailed flowchart or PowerPoint explanation will effectively patch a botched goals process.

That’s the good news. The bad news is that organizations are using Band-Aids to make repairs, not realizing that they can’t fix what isn’t broken—because it never worked. “Performance appraisals should help people succeed,” says management consultant Aubrey Daniels. “Most performance-management systems don’t do that.” And no detailed flowchart or PowerPoint explanation will effectively patch a botched goals process.

Granted, there’s nothing inherently wrong with “management by objectives,” a goals-centric approach to strengthening a workforce. But most businesses do not really manage by objectives. They manage by results, evaluating managers and workers against goals deliberately drafted to yield all kinds of easily countable dollar digits and percentage points.

So what? Everybody knows that you need a results-oriented culture to succeed. But what if everybody is wrong or, at least, not totally right? What if focusing on results is not the best way to get results?liberman3

We’ve gotten overly accustomed to and enslaved by the unfair, illogical, and counterproductive notion that attaining results requires appraising people based on attaining results. It’s time to consider reconfiguring performance management around input, how one works, rather than output, what one produces—that is, judging people less on results and more on behaviors related to problem-solving, innovation, creativity, innovation, ethics, and other attributes. That means assessing salespeople not on whether they sold anything but on whether they exhibited skills and competencies and followed processes that normally lead to closing deals. It means evaluating your advertising team not on whether a client bought a campaign but on how your people went about creating it. It’s examining how your marketing manager launched a social-media initiative rather than page views garnered.

“If you really want to develop people, then pushing harder on behaviors and input is a really easy place to land,” Jasica says.

Now, your organization may already do this or, at least, aim to do this. But most likely, there’s an implicit—if not outright—understanding that the ends if not justify then at least supersede the means. “Companies don’t look at behavior enough, and when they do, they think it’s trivial,” Daniels says.

Then, too, a job’s how is more challenging to gauge than its what, especially given that many of us work remotely nowadays. However, since behaviors actually drive results, it’s because we’re on our laptops at Starbucks that businesses must strive harder to revamp performance management around traits. To do so, it’s worth pondering the goal of goals.

When SMART Is Not

“Warning: Goals may cause systematic problems in organizations due to narrow focus, unethical behavior, increased risk taking, decreased cooperation, and decreased intrinsic motivation.” So proclaims “Goals Gone Wild: The Systematic Side Effects of Over-Prescribing Goal Setting,” a seminal paper by professors Lisa Ordóñez, Maurice Schweitzer, Adam Galinsky, and Max Bazerman.

If the authors were merely cautioning against specific types of objectives, you’d nod in agreement—because obviously performance management rests on setting the right sort of goals. But they go a step further and indict goal-setting in general, which may leave you shaking your head sideways. To disregard the authors’ claim, though, misses a relevant implication: Constructing objectives around results may aggravate potential problems fundamental to goal-setting.

You may already be thinking that a performance management program’s success hinges on having the right conversations with your subordinates and your boss. Let’s be real. If all it took were regular sit-downs, we wouldn’t dread the annual process and lament its various failures. Many well-meaning managers and employees are already talking. Such discussions, however, are only as fruitful as the corporate performance-management framework allows. If a system ultimately bases appraisals on results, then meeting them will guide the dialogue.

Often, objectives are SMART: specific, measurable, attainable, relevant, time-bound. Or SMARTER: evaluate, re-evaluate. (Warning: Great ideas rarely constrict themselves into neat acronyms.) The following pitfalls are not exclusive to SMARTEST (yes, it exists too) goals or focusing on results—they’re just more probable when you do.

Specific. By their nature, objectives “direct attention and effort toward goal-relevant activities and away from goal-irrelevant activities,” point out researchers Edwin Locke and Gary Latham. So when you ask someone to set a target, expect two things: (1) The person will focus on meeting that target. (2) Gorillas will become invisible.

That’s what professors Christopher Chabris and Daniel Simons discovered when, in 1999, they asked people to watch a now-classic video of two groups of basketball players, one wearing white shirts, the other wearing black. Chabris and Simons told viewers to count basketball passes only among players in white. Turns out, people were so focused on their singular assignment that they failed to spot a man in a gorilla suit pounding his chest at one point. Similarly, meeting specific goals can blind workers to the 400-pound gorilla in the room, be it a risk or an opportunity.

"Warning: Goals may cause systematic problems in organizations due to narrow focus, unethical behavior, increased risk-taking, decreased cooperation, and LOWER intrinsic motivation."

Meanwhile, professors Barry Staw and Richard Boettger highlight the benefit of not setting explicit aims. When they asked students to proofread a paragraph, they found that those told to “do your best” were likelier to catch both grammar and content mistakes than individuals instructed to fix either grammar or content. In a workplace, you can imagine some SMARTEST-ass employee explaining, “That wasn’t part of my goals” or, worse, “That’s not my job.”

Measurable. We continue emphasizing employee output mostly because we always have. Tallying widgets shipped, products sold, reports written, clients gained, dollars saved, dollars earned, dollars lost—that’s not complicated. Figuring out how it all happened and appraising as a result? Go ahead, let out your hopeless sigh.

“Companies naturally want to default to the easiest system because then they don’t have to create new tracking methods,” says Paul Hebert, VP of solution design at talent-management consultancy Symbolist. Consequently, they stick to basing ratings on results because—you know the saying— what gets measured gets done. Actually, what is simplest to measure gets done. When researchers Stephen Gilliland and Ronald Landis gave study participants multiple quality- and quantity-related goals, people abandoned the former to meet the latter objectives, demonstrating a propensity to tackle easier-to-measure targets.

Unfortunately, adds Lisa Ordóñez of The University of Arizona’s Eller College of Management, “The easiest thing to measure is not the most important thing.”

Attainable. “So long as a person is committed to the goal, has the requisite ability to attain it, and does not have conflicting goals, there is a positive, linear relationship between goal difficulty and task performance,” point out Locke and Latham. The intuitive sensibility of this is nevertheless practically impractical, burdened by the claim’s numerous qualifiers, the most glaring being a “conflicting goal” lurking in your wallet.

The better your appraisal, the more money you stand to earn, so rather than create genuine stretch goals, you can set bars too low, knowing that making the numbers also means making other numbers in your bank account. “Your weakest performers are going to latch on to the attainable part of SMART and set goals completely within their comfort zones,” says performance-management consultant Dick Grote.

Furthermore, employees who pursue difficult goals don’t achieve them as often as those who set and meet easy targets, but those with hard objectives nonetheless perform at a consistently higher level. The irony, then, is that by rewarding people for meeting goals, you encourage them to pick less demanding ones and therefore miss out on better performance had they chosen tougher targets. Meanwhile, any employee who consistently meets objectives, year after year, is a really good psychic or someone who’s internalized the company’s not-so-hidden message: Go small or go home.

Relevant. To whom? For years, corporations have foisted upon people a system of lateral, horizontal, cascading, youname- it objectives within objectives within objectives, leaving many workers imagining ways to make their roles appear relevant by finessing and twisting perhaps less relevant goals.

“It’s good to know a boss’s goals, but not all are going to trigger goals for subordinates,” Grote explains. “Goal-setting should be independent of that. If the company is rigid about cascading goals, areas may be overlooked.”

Time-bound. Ordóñez and her colleagues write in their paper that people may “perceive their goals as ceilings rather than floors for performance.” For example, they continue, “a salesperson, after meeting her monthly sales quota, may spend the rest of the month playing golf rather than working on new sales leads.” Then, too, given the pace of change, your objectives may be valid for longer than a year or shorter than a week— which is why good performance management must encourage managers and subordinates to continually assess, alter, and track progress toward targets. Still, it should make you wonder: If you’re willing to move the goalposts at any point—which you should be—maybe it’s time to change the rules?

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The Conference Board Review is the quarterly magazine of The Conference Board, the world's preeminent business membership and research organization. Founded in 1976, TCB Review is a magazine of ideas and opinion that raises tough questions about leading-edge issues at the intersection of business and society.