Tuesday, July 20, 2010

How to Design an Effective Performance Management System

How many times have you heard a manager or business owner say, "Our people are our greatest asset?" In many organizations, the employees are treated this way. For every company that walks the walk, there is a company that only talks the talk. In these companies, what the manager should really say is, "I am the most important person in this company and my people know that I think so."

The employer/employee relationship takes on many forms. We interact daily in the workplace and often in social settings outside of the office. Through the frequency of our interaction we come to feel that we know our employees and that they know us as well.

Consider how much time you spend with your direct reports in open communication regarding their work life in a setting where they have my uninterrupted time. My guess is that most managers spend little time providing for such time with their employees and overestimate the quality time that they spend with their direct reports. We are going to examine the importance of creating time for open communication in today's business climate and how it can be used to change or further a company culture based upon results.

Structure, communication and accountability are vital to the success of any organization. Structure provides your staff with a basic understanding of what to do and how to do it in an organized fashion. Accountability ensures that responsibilities are met on time with quality results. Communication allows for the various parts of your company to work together seamlessly to meet your customer or client needs.

An effective performance management system will employ a simple structure that both the manager and direct reports honor as a commitment to be kept and meetings should be missed only in extreme situations. Most performance management practices center around a year-end review that affects prior bonus and future pay. The employee often feels like they are judged solely on the last 90 days of their performance. The manager struggles to provide an objective assessment as he or she finds it very difficult to look at the entire year objectively as the recent past is front and center.

Let's start by rethinking the whole process. We want to focus less on having a cursory meeting where we cram an entire year of an employees' work into a one-hour meeting. We want to focus more on establishing an effective mentoring process where open and honest feedback flows between both the manager and employee on a regular basis. Individual monthly meetings with each direct report should be the corner stone of this process. Employees should prepare for the meeting by providing a description of their last 30 days. This document should be provided in advance of the meeting and include their failures, successes, and plans for the next 30 days. The manager should be prepared to review the document, be mentally present in the meeting, accept no phone calls or interruptions, and be prepared to help with their failures, coach through their plans and celebrate their successes. If you notice a problem, discuss it. Don't leave anything unturned.

The next step in the process is a quarterly meeting. This meeting is best conducted over a couple of sessions and is a part of a formal review process. Your direct report should prepare for this meeting by answering a few questions in writing. You want to find out what the person feels he or she did well over the last 90 days and where improvement could occur. You want to find out what the person is particularly proud of with regard to his or her performance. In addition, you want to know if and how the employee is struggling. You should have the employee submit this prior to the meeting so that you can review and thoughtfully prepare your responses.

The second step of this quarterly meeting occurs as you tell the employee, verbally and in writing, what you have found to be the positive and negative points of their performance. Provide specific treatment to what improvements you would like to see in the negative performance and let the person know how serious the situation is as it relates to their job security. The goal here is open communication of your expectations with no surprises. The employee should respond to your assessment in writing with a short but simple improvement plan.

We work closely with our clients to help them improve their performance management processes. As with most business processes, follow through is critical. Do not adjourn any monthly meeting or quarterly review without scheduling the next one. Our clients derive value from this process through their commitment to their employees and cancel meetings only in the event of a critical conflicting appointment.

Phil Herron is the President and Director of Risk Management at Four Point HR, a Professional Employer Organization (PEO) based in Atlanta, GA. As a PEO, the company enables small businesses to cost-effectively outsource the management of employee benefits as well as human resources, payroll and workers' compensation. Learn more about these four points of service at http://www.fourpointhr.com/.

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