In a March 16, 2011 keynote address, Office of Personnel Management Director John Berry said, “Our formal performance reviews are infrequent and rote…the formal review process seems to take place in Garrison Keillor’s Lake Wobegon, where everyone is above average. If that doesn’t make our performance ratings suspect, I don’t know what would.” In short, it is widely recognized in both public and private sectors that performance management (PM) is “broken” and must be reformed.

Improving performance management has been a long sought-after goal for many organizations, and has recently been targeted by OPM as an area for reform. Many agree that PM is broken, but given that it has been the subject of numerous reform efforts over many years, a critical question becomes: Can performance management actually be fixed?

In most organizations, PM boils down to a formal system of steps (like setting goals, examining rating standards, rating employees, etc.), where priority is placed on completing the process on time. This orientation promotes a “check the box” mentality that reduces PM to sporadic, prescribed activities that actually detract from, effective PM behavior.

Although attitudes toward PM are largely negative, several key manager behaviors have been shown to yield the very outcomes that PM promises – enhanced performance and high employee engagement. (See articles references below).

These behaviors, interestingly, are exactly those that define effective PM – communicating expectations regularly, providing feedback in real time when performance occurs, and developing employees through job experience.

The critical factor that drives outcomes is whether these behaviors occur sporadically, when the formal PM system says it’s time to do something, or whether they occur day-to-day when it makes sense to engage in them. What makes PM effective is when managers and employees alike engage in effective performance management behavior on a regular basis. This means that companies must focus on building a performance-based culture that supports and reinforces effective performance management.

What Does a Performance-Based Culture Look Like?

It is one that is focused squarely on increasing the frequency and effectiveness of three key PM behaviors.

Vision. Alignment between employees’ work and the organization’s mission is essential, and can best be achieved through informal but regular conversations between managers and employees that relay crucial information about how current work impacts organizational goals. When employees understand this, they become empowered and act in alignment with the company’s overall mission.

Action. Setting clear expectations and standards are essential to achieving effective performance. However, these must be communicated on an ongoing basis to accommodate the ever-changing nature of work. Real-time expectations and feedback clarify what needs to be done in the near term and what success looks like, enabling employees to produce higher quality work the very first time. Expectations set at the beginning of the year and feedback programmed into one or two formal review meetings are far too infrequent to have any measurable impact on performance. In contrast, more informal, regular feedback has a profound impact on performance.

Growth. The vast majority of learning on a job occurs through job experience. When managers plan and provide the right developmental experiences to employees at the right time, it not only helps employees perform better and accomplish more; it’s the most effective mechanism for improving job-specific competencies and preparing employees for advancement.

The charts above show 1) what our current PM systems drive versus 2) where we need to be tomorrow with respect to PM behavior.

How Do We Get There?

We are not the only authors to suggest that effective performance management hinges on effective behavior, but achieving this cannot happen with simplistic interventions like training and coaching alone. The organizational environment and its reinforcers play a larger role in driving effective PM behavior, much more so than individual leader training and skill. With this is mind, there are three strategies that are essential for success.

Strategy 1: Shift Your Mindset
The promise of PM can only be realized if there is a fundamental shift our collective mindset about what PM actually is. This requires everyone to embrace the notion that PM is not a formal system that requires completion of intermittent forms and steps, but rather, key everyday behaviors for which everyone is responsible.

Strategy 2: Stop Focusing on the Formal System and Build the Informal One
On the surface, improving ongoing manager behaviors seems like common sense but organizational surveys show that they do not occur consistently. When they do, performance, engagement, and attrition all improved. Employees and managers need to understand what behaviors are important, how to engage in them effectively, and most importantly, how they directly benefit from these behaviors. The latter, in particular, is important for organizational members to be motivated to learn and engage in them.

Strategy 3: Give Informal PM Staying Power
Initial PM training only introduces concepts so reinforcing and internalizing effective performance management is the key to long term success. Managers and employees must be supported, reinforced, and given feedback on how they are doing. This can be accomplished through pulse surveys to provide feedback on PM behaviors; automated tools that facilitate communicating ongoing expectations and feedback and providing developmental experiences; and communities of practice that provide forums for regularly discussing PM experiences and lessons learned.

Just because formal PM systems have not produced their intended outcomes does not mean PM should be abandoned since it is critical for organizational success. It is only when we start viewing PM as a set of ongoing leader and employee behaviors that we will be able to realize PM’s promise.

Dr. Elaine Pulakosis ispresident of PDRI and Past President of the Society for Industrial and Organizational Psychology. A Fellow of APA and SIOP, she is a recognized contributor to the field of industrial and organizational psychology in the areas of hiring and performance management.

Dr. Rose Mueller-Hanson is the Manager of the Leadership and Organizational Consulting group at PDRI. Her areas of expertise include leadership development; performance management system design, development, and implementation; training needs analysis, design, development, and delivery; competency modeling; individual and organizational assessment; and organizational development.

For further reference, articles referenced from above):
i. Corporate Leadership Council. (2004). Driving employee performance and retention through engagement: A quantitative analysis of the effectiveness of employee engagement strategies. (Catalog No. CLC12PV0PD). Washington, DC: Corporate Executive Board.

ii. Google’s Quest to Build a Better Boss. New York Times, March 12, 2011.Perf