Differentiating employee performance

When it comes to the definition and the differences between employee productivity and performance, there remains a great deal of confusion. Though the two terms are often used interchangeably — even by human resources professionals and senior managers — there are subtle differences between these two concepts. What people often forget about employee performance is it is a mixture of tangible and intangible factors. We sometimes use it to describe the ability of an employee to complete his or her work to a certain standard, based on their goals or objectives.

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Content:

• Employee Reward and Recognition Systems
• Defining Levels of Performance
• Definition of 'Performance Planning'
• Ratings, Differentiation, and the “Merit” Increase
• Differentiating Your Workforce Strategy
• Differentiate Yourself in an Interview by Asking About Performance Management
• Pay for Performance (P4P)
• Performance Differentiation Considerations
• We Wasted Ten Years Talking About Performance Ratings. The Seven Things We’ve Learned.

WATCH RELATED VIDEO: Performance Management and Employee Development

Employee Reward and Recognition Systems

The performance-management process at many companies continues to struggle, but not for lack of efforts to make things better. Of the respondents we surveyed recently , two-thirds made at least one major change to their performance-management systems over the 18 months prior to our survey. Employees still complain that the feedback they get feels biased or disconnected from their work.

Managers still see performance management as a bureaucratic, box-checking exercise. Half of the executives we surveyed told us that their evaluation and feedback systems have no impact on performance—or even have a negative effect. And certain experiments have gone awry: at some companies, eliminating annual performance reviews without a clear replacement, for example, has led employees to complain of feeling adrift without solid feedback—and some employers to reinstate the old review systems.

For additional research and insights into fairness in the organization, visit EthicalSystems. This eye-of-the-beholder aspect is critical. Our survey research showed that 60 percent of respondents who perceived the performance-management system as fair also stated that it was effective.

More important, the data also crystallized what a fair system looks like. Of course, a host of factors may affect employee perceptions of fairness, but three stood out. Our research suggests that performance-management systems have a much better chance of being perceived as fair when they do these three things:. Such factors appear to be mutually reinforcing. Among companies that implemented all three, 84 percent of executives reported they had an effective performance-management system.

And while embattled HR executives and business leaders no doubt want to be fair, fairness is a somewhat vague ideal that demands unpacking. In working with companies pushing forward on the factors our research highlighted, we have found that these require much greater engagement with employees to help them understand how their efforts matter, a lot more coaching muscle among busy managers, and some delicate recalibration of established compensation systems.

Such shifts support a virtuous cycle that helps organizations get down to business on fairness. Building a foundation of trust in performance management means being clear about what you expect from employees and specific about how their work ultimately fits into the larger picture of what the company is trying to accomplish. Give employees a say and be flexible. Connecting the dots starts with making employees at all levels feel personally involved in shaping their own goals.

Mandating goals from the top down rarely generates the kind of employee engagement companies strive for. At a leading Scandinavian insurer, claims-processing operations were bogged down by surging backlogs, rising costs, and dissatisfied customers and employees.

The company formed a working group of executives, managers, and team leaders to define the key areas where it needed to improve. Those sessions served as a blueprint: four overarching goals, linked to the problem areas, could be cascaded down to the key performance indictors KPIs at the business-unit and team level and, finally, to the KPIs of individual employees.

The KPIs focused on operational measures such as claims throughput and problem solving on calls , payout measures like managing contractors and settlement closures , customer satisfaction, and employee morale and retention. The company took a big further step to get buy-in: it allowed employees to review and provide feedback on the KPIs to assure that these fit their roles. Managers had observed that KPIs needed to vary even for employees in roles with seemingly similar tasks; phone calling for a targeted auto claim is different from skills needed to remedy damage to a factory.

So the insurer gave the managers freedom to adjust, collaboratively, the KPIs for different roles while still ensuring a strong degree of consistency. For the vast majority of traditional roles, this collaborative approach to KPI design is fairly straightforward. For more complex roles and situations—such as when tasks are deeply interdependent across a web of contributors—it can be more challenging to land on objective measurements.

Such complex circumstances call for even more frequent feedback and for getting more rigorous about joint alignment on goals. Adapt goals as often as needed. Yet KPIs down the line are rarely adjusted. Revisiting goals throughout the year avoids wasted effort by employees and prevents goals from drifting into meaninglessness by year-end, undermining trust. Of respondents who reported that their companies managed performance effectively, 62 percent said that those organizations revisit goals regularly—some on an ad hoc basis, and some twice a year or more.

Managers are at the proverbial coal face, where the hard work of implementing the performance requirements embodied in KPIs gets done. They also know the most about individual employees, their capabilities, and their development needs.

Much of the fairness and fidelity of performance-management procedures therefore rests on the ability of managers to become effective coaches. Less than 30 percent of our survey respondents, however, said that their managers are good coaches.

Start with agility. At the Scandinavian insurer, team leaders meet weekly with supervisors to determine whether KPI targets and measures are in sync with current business conditions. Then, in coaching sessions with team members, the managers discuss and adjust goals, empowering everyone. They review the work of individual team members monthly.

They keep abreast of the specifics of KPI fulfillment, with a dashboard that flashes red for below-average work across KPI components.

When employees get two red lights, they receive written feedback and three hours of extra coaching. Invest in capabilities. Building their confidence and ability to evaluate performance fairly and to nudge employees to higher levels of achievement are both musts. While the frequency of performance conversations matters, our research emphasizes that their quality has the greatest impact. One European bank transformed its performance-management system by holding workshops on the art of mastering difficult conversations and giving feedback to employees who are missing the ball.

To ready managers for impending steps in the performance-management cycle, the bank requires them to complete skill-validation sessions, moderated by HR, with their peers. Managers receive guidance on how to encourage employees to set multiyear stretch goals that build on their strengths and passions. Make it sustainable. That required some organizational rebalancing. To break through legacy functional mind-sets and help HR directors think strategically, they went through a mandated HR Excellence training program.

Better performance conversations, along with a growing understanding of how and when to coach, increased perceived fairness and employee engagement. Productivity subsequently improved by 15 to 20 percent. Capable coaches with better goal-setting skills should take some of the pain out of aligning compensation—and they do to an extent. However, new organizational roles and performance patterns that skew to top employees add to the challenges.

Incentives for traditional sales forces remain pretty intuitive: more effort measured by client contacts brings in more revenue and, mostly likely, higher pay. The only way, in our experience, is to carefully tinker your way to a balanced measurement approach, however challenging that may be.

Above all, keep things simple at base, so managers can clearly explain the reasons for a pay decision and employees can understand them. Yet companies that have tried this approach often struggle to help employees know where they stand, why their pay is what it is, what would constitute fair rewards for different levels of performance, and which guidelines underpin incentive structures.

Dampen variations in the middle. Cirque du Soleil manages this issue by setting, for all employees, a base salary that aligns with market rates.

It also reviews labor markets to determine the rate of annual increases that almost all its employees receive. It pays middling performers fairly and consistently across the group, and the differences among such employees tend to be small. Managers have found that this approach has fostered a sense of fairness, while avoiding invidious pay comparisons. Managers can opt not to reward truly low performers. Cirque du Soleil and others have also found ways to keep employees in the middle range of performance and responsibilities whose star is on the rise happy: incentives that are not just financial, such as explicit praise, coaching, or special stretch assignments.

Embrace the power curve for standout performers. We noted this idea in a previous article on performance management and are starting to see more evidence that companies are embracing it by giving exceptional performers outsized rewards—typically, a premium of at least 15 to 20 percent above what those in the middle get—even as these companies distribute compensation more uniformly across the broad midsection.

At Cirque du Soleil, managers nominate their highest-performing employees and calibrate pay increases and other rewards. Top performers may receive dramatically more than middle and low performers. Innovate with spot bonuses. Recognizing superior effort during the year can also show that managers are engaged and that the system is responsive. Cirque du Soleil rewards extraordinary contributions to special projects with a payment ranging from 2 to 5 percent of the total salary, along with a letter of recognition.

Digital technologies are power tools that can increase the speed and reach of a performance-management transformation while reducing administrative costs.

Sixty-five percent of respondents from companies that have launched performance-related mobile technologies in the past 18 months said that they had a positive effect on the performance of both employees and companies. A mobile app at one global company we know, for example, makes it easier for managers and employees to record and track goals throughout the year.

Employees feel more engaged because they know where they stand. The app also nudges managers to conduct more real-time coaching conversations and to refine goals throughout the year. Does technology affect perceptions of fairness? When app-based systems are geared only to increase the efficiency of a process, not so much. However, when they widen the fact base for gauging individual performance, capture diverse perspectives on it, and offer suggestions for development, they can bolster perceived fairness.

We have found that two refinements can help digital tools do a better job. In an attempt to move away from a manager-led performance system, German e-commerce company Zalando launched an app that gathered real-time performance and development feedback from a variety of sources. The company also found that feedback tended to be unduly positive: 5 out of 5 became the scoring norm.

Digitally enabled, real-time feedback produces a welter of crowdsourced data from colleagues, and so does information streaming from gamified problem-solving apps. That also undercuts the purpose and ultimately the benefits of digitally enabled feedback.

Apps should be designed so that employees can decide which feedback they ought to share during their evaluations with managers. To broaden adoption of the system, Zalando stressed that the app was to be used only for development purposes.

That helped spur intense engagement, driving 10, users to the app and 60, trials in the first few months. Employees reacted positively to sharing and evaluating data that would help them cultivate job strengths. With that base of trust, Zalando designed a performance dashboard where all employees can see, in one place, all the quantitative and qualitative feedback they have received for both development and evaluation. The tool also shows individuals how their feedback compares with that of the average scores on their teams and of people who hold similar jobs.

The many well-intentioned performance-management experiments now under way run the risk of falling short unless a sense of fairness underpins them. Skip to main content. The fairness factor in performance management. We strive to provide individuals with disabilities equal access to our website.

Defining Levels of Performance

Talk to us Subscribe. With a focus on pay for performance, we examined whether companies with five performance ratings distribute their merit budget differently compared to firms with fewer ratings. Since , the average merit budget in the United States US remained fairly static in the technology sector, ranging between 2. With a consistent amount of money being set aside for salary increases and a louder drum beat for the need to differentiate pay based on performance, we set out to examine how companies are optimizing their merit budget. Since the economic recovery beginning in , salary increases have become widely expected by employees. And with steady merit budgets, significant differentiation in base salary increases across performance levels is undoubtedly hard to deliver. While many companies are moving away from standard performance rating systems, they are still in place at a majority of technology companies.

Definition of 'Performance Planning'

The biggest barrier to modernizing the approach to performance management is the HR-created need to have a "number" or category to help determine pay. If we get rid of performance reviews and ratings, how will we calculate merit increases? This question indicates that the real need is finding a method that effectively differentiates performance. Traditional performance management schemes, whether online or paper-based, use an approach that involves the following:. Rating and commenting against five or more competencies communication, teamwork, accountability, customer focus, innovation, results orientation, etc. An overall rating representing a single category, such as "Meets Expectations. Managers end up scratching their heads wondering how to fill out the form. They wrack their brains trying to think about how the employee performed against each competency. They may even become fixated on filling out a form instead of thinking about the employee.

Ratings, Differentiation, and the “Merit” Increase

Skip to search form Skip to main content Skip to account menu You are currently offline. Some features of the site may not work correctly. DOI: Borrowing from the Pygmalion effect and conservation of resources theory, we craft and scrutinize a cross-level framework elucidating why and when feeling trusted shapes service performance by pinpointing relational energy as a linchpin mechanism, and feeling… Expand. View via Publisher.

Differentiating Your Workforce Strategy

Federal government websites often end in. Before sharing sensitive information, make sure you're on a federal government site. The site is secure. Rating employee performance is one of the key components in the performance management process. Supervisors must develop and demonstrate the ability to make fair assessments of their subordinates' performance. First and foremost, supervisors need to become experts in establishing performance plans that allow them to make meaningful distinctions in levels of performance.

Differentiate Yourself in an Interview by Asking About Performance Management

Differentiating performance is a key part of good performance management. It means that we are able as managers to separate our high performers from our lower performers. It means that we are able to challenge under performance and to celebrate high performance. Therefore, make sure you are clear with people from the outset what is expected of them. Best to remove any ambiguity now!

Pay for Performance (P4P)

Often in an organization, we see that the concepts of performance management and performance appraisal are used interchangeably. But little do we realize that both the concepts are very different from each other. The reason for this confusion is that both the concepts deal with evaluating performance and both come under the same umbrella term of the performance management system. Let us start by defining both the concepts first.

Performance Differentiation Considerations

RELATED VIDEO: How to Handle Poor Employee Performance Constructively-Leadership Training

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We Wasted Ten Years Talking About Performance Ratings. The Seven Things We’ve Learned.

In , UCR completely revised the performance management process. Further modifications were made for the process which simplified and provided better instructions than the earlier revision. Rating factors and rating categories were updated and redefined to more clearly reflect the high quality of work performed by UC Riverside employees. In , revised definitions provided clearer distinctions between ratings and included more specific criteria related to goals, achievements, job functions, skills and behavior. As in recent years, the process aligns the performance management process with the merit-based pay program for non-represented staff employees.

Here are some of the key findings from the study:. The performance appraisal is the elephant in the room for human resources. As the appraisal process is currently designed, nobody thinks it adds much value, but we're afraid to admit it. As soon as we admit that human resources and leaders have not been well-served by the design of the standard performance appraisal process, and we take steps to correct this, HR's reputation and credibility will increase exponentially.