CIPD Podcast 72 - Implementing effective performance management

Date: 14/11/12 Duration: 00:22:26

In this podcast Angela Baron, lecturer in HRM at Croydon College, Kate Holt, KPMG, Lesley Ballantyne, Head of Performance Management, John Lewis Partnership, Anna Vasconcelos, Nomura and Simon Nas, Human Resources Director of Carey Olsen, look at the development and characteristics of good performance management and, through case studies, what it looks like in today's workplace.


Philippa Lamb: Performance management aims to manage and enhance individual performance with a view to improving performance across the entire business. Within HR it’s an area that's changed a great deal in recent years, it can be complex and it’s often misunderstood. When at their most effective performance management systems have been proven to not only enhance organisational capability but also to drive individual performance and profits. So what is good performance management and what does it look like in today’s workplace? 

Formerly an adviser on organisation and resourcing for the CIPD Angela Baron is now a leading lecturer in HRM. She's done extensive research on the subject. Speaking at a recent CIPD conference she had this to say:

Angela Baron: Mostly within the framework of performance management organisations would be setting some objectives, for example, measuring people against those objectives, carrying out annual appraisals, doing some other things perhaps like coaching and mentoring, maybe some 360 degree feedback where they get views of the person’s performance from different people around the organisation. What has changed over the years is the purpose of performance management. So having grown out of a very process-driven, mechanistic tick box thing, you know, set some objectives and then tick the boxes if people achieve those objectives, it moved through a period where it was much more developmental, it was about understanding what skills or experiences people needed to do their job well, it also became very pay-led in some organisations where it was about trying to understand people’s contribution to the business and reward them for it, in the latter years and particularly in the last piece of research I did at CIPD which was in 2010, we found very much an integrated process, a process that was integrated with other practices, so integrated vertically with other practices to manage careers, to manage talent, to succession plan, to develop people, maybe a little bit of reward and recognition in there and particularly engagement as well as vertical integration. So most people were talking about using performance management to align individual team objectives with business objectives, to give people a line of sight to understand what it was that the organisation was doing and to enable them to understand how their role fitted in with the overall purpose of the organisation. 

PL: The developments in performance management over the last few years have seen it evolve into a process which not only offers a simple appraisal on an employee’s past endeavours but can also incorporate setting professional targets, business values and reward schemes. In order to get the best out of it performance management strategy needs to look to the future rather than simply reflect the past. Here’s Angela Baron again. 

AB: The important thing around performance management is although much of the data collected is retrospective, so we tend to appraise people on how they’ve done over the last 12 months etc. but the actual ethos of performance management ought to be more forward looking, it ought to be about encouraging people to develop their capabilities, to become more flexible so that they can change quickly as the organisation needs deflects and change, it ought to be about equipping people to go out and be successful in organisations. So too much of a focus on the past can actually be quite damaging and quite limiting and successful performance management is about giving people a view for the future, about encouraging them to move on and develop. 

PL: At its best performance management is also a tool to ensure that managers are managing their staff effectively and therefore at its core is the need to get middle management on board with strategy. Here’s Angela Baron again.

AB: When Michael Armstrong and I finished our first book in 1997 we concluded that performance management was mostly about making sure that managers did what good managers ought to be doing, managing people well, sitting down with them on a regular basis, making sure they understood their role, making sure they were equipped to do that role, making sure they understood how they fitted into the organisation and also listening to them, giving them a voice through the process to talk about what they thought they were particularly good at or what they thought they needed some more support with and perhaps even making some suggestions about how they could be more effective in their role. 

PL: A key issue with performance management is sustainability. It’s essential to adopt a sustainable process that enhances employee engagement and encourages flexibility and improvement. I asked Angela for her take on how best to achieve sustainability within performance management. It’s easy to see how a process like this could become a kind of once a year exercise rather than a continuous process and there are big issues around sustaining performance management aren’t there?

AB: Yeah. 

PL: What’s the answer there to keeping momentum going on something like this?

AB: Well again the answer is good line managers. Good line managers don’t just rely on a once a year performance appraisal to manage their staff. In fact all of the real big issues with performance management that turn it into a negative experience are associated with that. When line managers save up a catalogue of misdemeanours so they go into the performance management and start saying things like, “Well six months ago you said this, or you did this, and I thought that was a bit inappropriate,” that should have been dealt with six months ago, not saved up for the performance management process. If anything comes as a shock to someone in their appraisal then they’re being badly line managed because it means the line manager hasn’t prepared them, hasn’t enabled them to understand what it is perhaps they’re doing wrong, how they could perform better during the past few months.

PL: The line here is that effective performance management should be about an ongoing dialogue not just an annual conversation. KPMG is a global network of professional services firms that provide audit, tax and advisory services. At KPMG they encourage staff to engage with performance management by integrating company values into the process. Here’s Kate Holt, UK People Director at KPMG to explain further. 

Kate Holt: My philosophy on integrating company values into goals and goal setting is that it’s vitally important to ensure that the individuals are aligned to the strategy of the firm and are exhibiting and developing the behaviours and attributes that you as an organisation value and feel are important. 

PL: And what are they at KPMG?

KH: At KPMG we have seven core values that look around integrity and open and honest communications and supports the communities and then around those core values we have five attributes around being passionate, expert, global mind set, value adding, forward thinking. It’s taking those and building those into the strategic goals. 

PL: Company values, though often laudable, can sometimes seem a little intangible and consequently KPMG feels it’s important to be able to build company values into a system that will be palpable for their people on the ground. Here’s Kate Holt again. 

KH: How we make it tangible taking those five attributes I talked about and making those a personal story for people, so using interactive employee sessions to explore what they mean to individuals and to personalise them so that they can resonate with them but know that there's flexibility, what global mind set means to one person will mean slightly different to someone else and that's okay and then they can help work what their development goals are in order to build those skills to be more globally mind setted. 

PL: At KPMG there's also a belief that if the performance management system is integrated with development goals then it becomes easier to sustain. If the process is more personal and people have a greater understanding of it then it’s more sustainable as they progress along their career journeys. In addition to this performance management is combined with a reward initiative at KPMG which is believe to help sustain a culture of high performance. Here’s Kate Holt on how that actually works in real terms. 

KH: We set people’s performance ratings against the five point scale. We are open that that is a relative performance and it’s calibrated against the right peer groups and we have a guided distribution curve and then we look at how we align the bonus and base pay to those top performers specifically and are clear that we want to focus our top reward to those high performers. 

PL: For global organisations such as KPMG it’s important that their approach to performance management is culturally sensitive. Here’s Angela Baron on why it’s so important to recognise cultural difference. 

AB: There are certain things around the performance management system that are important globally. So particularly the management skills, absolutely crucially it rests upon the skills of the line manager. So getting line managers to manage their people well and of course that means recognising individual differences. So that means recognising that there might be an overall process they need to follow but they need to apply that differently in different situation and particularly where there are cultural differences. And some people feel very comfortable about talking about where perhaps they’ve done badly, other people feel less comfortable about that. Obviously those issues need to be addressed but you need to be sensitive to people’s feelings. Some people feel very comfortable working as part of a team, other people feel less comfortable. So again it’s the old ‘think global, act local’ philosophy really that yeah you can have a framework saying this is where we want to go as a business, this is how we want to align people, this is how we want to manage people but you have to have some flexibility in the process to deliver that differently on the ground. 

PL: Anna Vasconcelos is vice president of talent, strategy and performance at the Japanese investment bank Nomura and she's globally responsible for the firm’s performance management process. Nomura is the company that acquired the Lehman Brothers’ business in 2008 and it now employs 25,000 people. As a global financial services group cultural awareness and sensitivity in the area of performance management is key. here’s what Anna had to say. 

Anna Vasconcelos: It’s been fascinating actually to work with Japan and India because culturally they are very different so when we approached our Japanese colleagues with our proposal for performance management we had a very strong business case and we did a lot of our homework as well before we approached them to understand what it was they were trying to achieve, where they were going for this, why they had different rating scales, for example, to the rest of the firm. We’ve created a lot of documentation to show why the system would work in this way, for example, and how by buying into the rest of the firm and have a consistency throughout the firm it would bring the firm into one. 

PL: So how does performance management actually work at Nomura? Here’s Anna Vasconcelos. 

AV: What we’ve learnt is that we need to let the businesses decide how they want to approach performance management, we do not sell the process as an HR mandatory requirement. Yes we do provide a very simple tool for the business to use and what we encourage and what is happening is that the businesses are embracing performance management and the embracing of the mid-year review process as well as the year end which is obviously a very high level because that feeds into the compensation and promotion processes, leaving our business heads to make the decisions what performance management will fit for their business at that point in time. We simply provide them with the expertise behind the scenes as well as the technology to make it happen for them. 

PL: At John Lewis a brand new system has been introduced to revolutionise the performance management process. Here it had become clear that centralising performance systems to a single accessible platform would save both time and money. I met with Lesley Ballantyne, the head of performance management for John Lewis. She explained that prior to the new system performance management at John Lewis came in a variety of different forms. 

Lesley Ballantyne: We had 17 different forms of appraisal across our business, everything from practically quill and ink through to an online system which was a basic oracle HR system and lots of variations in between. 

PL: Okay. So there was no coherent strategy across the board? 

LB: No there was no strategy and also there were no coherent outcomes. So how we measured performance varied across the business. Some measured purely what, based on KPIs for business outcomes and some measured more how, so intangible measures such as behaviours and the methodology was different so we had ratings one to five where one was good. We had ratings five to one where one was bad. So we had all sorts of different things and actually as one organisation we needed it all to work together because our people are one of our best assets and we needed them to be able to move across our organisation and that was a limiter. 

PL: Lesley went on to tell me how they have now unified the performance management strategy at John Lewis. 

LB: We have one appraisal system. It’s based on an approach where we look back and we look forward and we do that all at the same time. So we’ve hardwired our personal development plan into our appraisal system so that they are the one thing and what we’re looking for is continuous development throughout the year so not the Christmas lunch as I call it where it’s one occasion in the year where you have your performance review and you forget about it the rest of the year. We’ve also created a very clear methodology that we’re looking at both what you do and how you do it and we rate each of them equally and we do that because we care both about what you do, the outcomes that we’re looking for, and how you do it as a business. So they align to our business strategy. 

PL: For performance management to yield the greatest results a continuous dialogue is essential. This was a common thread throughout all the case studies we looked at. Here’s Lesley Ballantyne again from John Lewis. 

LB: We very, very much have worked on the fact that actually the system or the tools will not drive the outcome, that actually the outcome we’re looking for is a great and honest conversation and those great and honest conversations are not once a year but they’re continuous. So actually you have a once a year pit stop where you review and you record but that that's not a surprise because you've had this ongoing dialogue throughout the year and it’s a continuous development. So having the outcome not the process being the main focus and then having those honest conversations and having managers tooled up and equipped to have those conversation and in our trial that was one of the areas that was most interesting was that when we introduced these set of behaviours for some managers it was quite difficult to have those conversations, it was quite difficult to step into the honest space. So great performance management would look like we’re having those honest conversations. 

PL: At both Nomura and John Lewis new tools and processes have been introduced to streamline performance management and subsequently buy in from senior management was critical. Here’s Lesley Ballantyne again. 

LB: Our interaction with our senior managers is key and our chairman and our two managing directors used platforms that they had, senior conferences and so on, to signal that this was an important step for us and to signal that they wanted senior manager buy in and management buy in right the way through the organisation. And then we took a bottom up approach as well and we appointed an individual who’s a trusted operator to be our communications expert and that trusted operator went out and trod the boards with colleagues and really sold the benefits to colleagues and they had kudos because they knew what it was like in the real world. So it wasn't some corporate person rocking up and saying, “Here’s the perfect system.” 

PL: Simon Nash, the human resources director at the Channel Islands based law firm Carey Olsen has adopted a pragmatic solution which presents a stark contrast to the other case studies we’ve heard. 

Simon Nash: We acknowledge we’ve got a quite different approach to performance management. We do do appraisal but we have decoupled it from any aspect of reward and rating and ranking. So while we do do reward and we do promotion and we do things like bonuses in the firm we don’t want appraisal to carry any of those processes. We want appraisal to be about relating, mostly, and as soon as a relationship is also made instrumental then it becomes very strained and you get language games within the relationship about what do I need to say in front of my manager to get a higher bonus or get a promotion rather than what do I need to say with my manager that's true. 

PL: If you don’t relate reward to the appraisal system presumably it is related to performance is it? 

SN: Yes we have got some performance based reward processes but we try to keep them well clear of the appraisal process. We want the appraisal space to be a place where managers and performers can relate honestly, can work on what we call reform which is effectually learning and development and change and reorientation around shifting our goals and our mind set towards what makes things good for our clients and what makes things good for the firm. The other thing about Carey Olsen is that we do not have a single appraisal process. We have lots of appraisal processes, lots of different ways of doing appraisal, lots of different styles because we want to work with the individual styles, skills and preferences of our performers and partners. So there are long appraisals and short appraisals. There are detailed appraisals and brief appraisals. There are some introspective, psychological appraisals and there are some give me the numbers and set some targets. And we appreciate there's room in the firm for all of these different approaches. 

PL: So rather than streamlining a performance management system that’s unified across the entire organisation at Carey Olsen the process is tailored to the individual. 

SN: If all of our partners were identical as managers then we would give them an identical process but they’re not, they come to their job as human beings with different backgrounds and skills and values and preferences and we honour that in the process and we will help them to do things in a better way and so if we have a partner who does not want to use a hammer to drive in a nail, he wants to use his fist, we will help him to show that maybe he wants to move to a hammer and that will give him greater benefits but we’re not going to say, “You can’t drive in that nail with your fist.” 

PL: We’ve already learnt that one of the keys to successful performance management is getting the managers on board with the strategy. So how do Carey Olsen help to support their partners to deliver performance management effectively when their approaches are so diverse? Here’s Simon Nash again. 

SN: My approach is to work with the partners to find the areas in which they most want help and to provide the resources in a way that's most successful to them. So for some I will provide them the services of a professional coach who will help them grow and develop. For others I will throw them a book and say, “If you read that it’ll answer the question you've got,” and actually reading books is a mode of learning that lawyers really like. Sending either of those people on a course wouldn’t actually help them and they'd just be frustrated feeling for seven hours that they’re not doing any billable work and so I'm always on the look out for the content and the method that is most likely to help them to acquire the skills that they want. 

PL: But that approach does rely on them coming to you or being self-analytical enough to understand where their shortcomings are as line managers, that's quite a big ask isn’t it?

SN: It’s mostly pull, there's a little bit of provoke and then the big secret is I use peer to peer work. So I might work with two or three partners on an approach or a method or a piece of training and then I’ll leave them to convince their peers that it’s a good idea and so I’ll let the change ripple through the organisation at the pace in which it can go rather than either trying to push all of them through at once or pulling back from the process. So it’s about attending rather than driving it. 

PL: For all the businesses we’ve looked at in this podcast the right performance management strategy can really improve results and add value to the organisation. I asked Anna Vasconcelos from Nomura how her business had grown and improved through performance management.

AV: I think that's quite a difficult one to measure but what I can say is that engagement is at an all-time high. We completed our year-end review process with a 97% overall completion rate globally. We weren't just looking at stats at the end of the day we were also looking at rating distributions. We spent quite a significant amount of time during the year-end process supporting our senior managers and our global HRAs providing them with data that showed what’s going into the system, how the ratings are being distributed, looking at any areas of concerns, any dialogues that are not being completed, going back to the managers, having those conversations with the managers and re-expressing why it’s important that engagement and dialogue is important at both the mid-year and the year-end reviews. So we were astonished by the 97% completion. The 3% were actually on long term leave of one form or another. 

PL: And finally with the last word on performance management adding value to your business here’s Kate Holt at KPMG. 

KH: We’re only as good as the individuals we employ and develop. It’s vital that we unlock their potential and develop their career. So it’s a very tangible line of sight for line managers to say, “I do need to develop this individual,” them prospering in their career will make us prosper as an organisation.

PL: That’s it for this month. Next time we’ll be hearing about Think, Act, Report, that's the government’s initiative to promote gender equality in the workplace. Join me then.


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