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Change tack in performance management

A recent article published in the Harvard Business Review revealed that the current practice of evaluation-based remuneration conflicts with organisational goals.

Marcus Buckingham and Ashley Goodall, both of Deloitte, argue in the article titled “Reinventing Performance Management”, that evaluating the workforce and then training them, promoting them, and paying them accordingly, is increasingly out of step with organisational objectives.

More than half (58 per cent) of the executives questioned in a public survey they conducted believe that their current performance management approach drives neither employee engagement nor high performance. What is needed is something nimbler, real-time, and more individualised – something squarely focused on fuelling performance in the future rather than assessing it in the past.

Following the failure of the Structural Adjustment Programmes (SAPs), most governments in Africa started to implement several public sector management reforms, including performance management, ostensibly to run the governments like the private sector.

The shift was meant to lower inflation while maintaining macro-economic stability. Other objectives included cutting the cost of government by reducing deficit spending, and getting the government out of business by divesting from state-owned corporations.

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Thirty years after these reforms that ushered in performance management, these objectives have never been met, perhaps because we do a post-mortem on performance instead of fuelling it into the future as suggested by the article.

In 2003, the government introduced the performance management approach known as performance contracting (PC). The main reason for the introduction of performance contracting was the assumption that introducing performance measurements, clarifying corporate objectives, refocusing customer orientation and aspiring towards incremental productivity and cost reduction could lead to improvements in service delivery.

However, this marked a departure from the original objectives of reforms. Some of the measures introduced had nothing to do with macro-economic stability or curtailing inflation. Indeed, some of the implementers had no clue why the reforms started in the first place.

The performance measurement tools and techniques that were developed were, at the very least, complex and took such an inordinate amount of time that they negated the objectives of improving operational effectiveness, which refers to multiple practices that enable an organisation to better utilise its resources.

Cascading some of the targets from senior to lower ranks became an exercise in futility since virtually nobody understood the measurements and this too helped add more hours on the exercise, taking up vital staff hours for an exercise that was not contributing to productivity. The experience is consistent with the Deloitte findings.

When they tallied the number of hours the organisation was spending on performance management, they found that creating the ratings consumed close to two million hours a year.

When you consider annual staff appraisal, ISO audits, and other bureaucratic appraisals, you begin to see how staff spend their hours at work.

Deloitte has come up with a radical redesign of performance management by shifting the rating to peers and generating data that is used to predict the future performance of an employee, while at the same time comparing the employees with other peers and determining their importance to the organisation.

At the end of a project, or once every quarter for long-term assignments, team leaders are asked to respond to four future-focused statements about each team member. The questions highlight differences among individuals and reliably measure performance.

The questions measure overall performance and unique value to the organisation on a five-point Likert scale; ability to work well with others on the same five-point scale; problems that may harm the customer on a yes or no basis and promotion potential on same yes or no basis.

In effect, the system is asking team leaders what they would do with each team member rather than what they think of that individual.

In the end, a significant amount of data is generated and analysed, leading to an objective outcome. It’s not a particular number that will be assigned to a person that’s the problem, rather it’s the fact that there is a single number. This single number is what has been lacking in current performance management practices that are more often too subjective.

Since the start of performance contracting, no significant changes have ever been made, even in organisations that perform poorly in current practices. This is largely because the system cannot pinpoint the problem source. Effective and efficient service delivery can be achieved with systems that can highlight individual responsibility.

Bill Gates once said, “In business, the idea of measuring what you are doing, picking the measurements that count like customer satisfaction and performance... you thrive on that.” It is time for a paradigm shift in how we measure, reward and predict performance.

The writer is an associate professor at University of Nairobi’s Business School

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