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Developing an Effective Performance Management Strategy

By Melissa J. Anderson

According to a new report by PwC [PDF], the wrong talent management strategy can hamper a manager’s ability to lead his or her team, as well as the team’s ability to work effectively. The study cites recent research that shows that many employees have grown frustrated or indifferent about performance management schemes. The report says:

“Less than half (45 percent) of employees in one survey said their manager’s feedback at the annual review was fair and accurate, and in another, more than half the respondents felt their managers were ineffective at driving performance. Underscoring this is the fact that managers devote up to 20% of their time on coaching and performance reviews, but are many times ineffective in this role. In one ‘survey, 65 percent of senior HR leaders cited ‘managers’ ability to coach” as their top performance gap.”

Why are managers falling short when it comes to leading direct reports? PwC believes it may be to an incomplete or unplanned performance management strategy.

Clarifying the Approach

“Lofty messaging about transformation and culture, coupled with a seemingly arbitrary evaluation process and poorly delivered coaching and feedback, will inevitably lead the workforce to distrust both the program and the organization’s commitment to their progress,” says PwC’s new report, “Are you getting the most from your talent? Understanding and overcoming the common pitfalls in performance management.”

PwC believes having the right measurement system in place when managing talent performance will enable managers to achieve the goals they are looking for. The firm identifies three different performance management scenarios.

The bottom tier, according to the firm, is the “Rater” tier. The goal here is “to define objective measures of employee performance and efficiently assign basic performance ratings, often linked to compensation.” At the rater phase, employes are more concerned with meeting basic targets to achieve certain measures of compensation – rather than focused on more advanced goals, like achieving bigger picture goals or pushing the business forward.

Next, PwC describes the “Driver” tier. The goal of performance management drivers is to “improve individual employee performance and retention, and to accelerate development of employee capabilities.” At this stage, managers are concerned with employee engagement.

Finally, the top tier of performance management is “Transformer.” At this stage, PwC says, managers are focused on boosting team performance, as a catalyst for broad organizational change. In the transformer model, managers “establish a much richer, more frequent dialogue with their employees that includes both formal and informal elements of coaching and feedback.”

There’s no one right way to manage performance, PwC says, but the important thing is to manage it in a way that helps your business achieve its strategic goals.

Evaluating Performance Models

One of the key factors in how managers implement these performance measurement schemes depends on their practical integration, PwC says.

“Raters typically integrate performance management and compensation processes, and not much more. Drivers and Transformers require a firm grasp of employees’ capabilities and skills and solid integration with learning and development processes (at a minimum) as well as with recruiting and succession management. As the focus on boosting individual and team performance intensifies, talent analytics becomes an essential capability.”

Because of the greater resource expenditure on for the Driver and Transformer schemes, companies should analyze what they are hoping to achieve through performance management. The Rater system may work just fine in order to achieve business goals.

What’s important is that management set a goal, work out a way to achieve it, and stick to it in a practical sense. “Companies need to regularly take the pulse of their workforce to ensure that leaders, managers, and employees are aligned on the rationale of the program and that they are using appropriate tools and processes.”

Finally, PwC recommends, keep the channels of communication clear on how the system is working and what successes it has produced in order to achieve buy-in. “Use whatever strategy you have chosen to create greater alignment with business executives and leaders.”

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