The state of performance management sucks.
I wrote as much in a recent cover story for The Conference Board Review. Not that you need to read my article to tell you what you already know. In fact, criticizing the way we fail to help people succeed at work has become one of corporate America’s favorite sports — in which everyone ends up losing.
Worse, companies continually reach into a bloated box of Band-Aids to fix a system that isn’t actually broken — because it never worked to begin with.
Managing by objective, or by results?
To a large extent, organizations still manage by objectives. Sure, it’s a 1990s concept, but businesses continue to base their performance-management systems on it.
Actually, few companies manage by objectives. Rather, they manage by results; that is, evaluating people against goals meant to yield all kinds of easily countable digits.
So, what’s wrong with creating a results-oriented culture?
For starters, by basing ratings, compensation, rewards, and recognition on results, you may suffer something like what happened at Sears some years back. When it was discovered that the company’s auto-repair workers were overcharging for (sometimes unnecessary) work to meet targets, then-chairman Edward Brennan apologized that a “goal-setting process for service advisers created an environment where mistakes did occur.”
Ain’t that some crafty PR flack’s definition of “mistakes?”
Focus on input rather than output
Nonetheless, it can really hit fan when you tell people to aim at targets without considering where their arrows might land.
Ethical infractions aside, the more pervasive problem is that the worst way to achieve results may be to assess people based on whether they achieve results. Instead, you ought to concentrate on one’s input, or how one works, rather than output, or what one produces. In other words, assess employees based on behaviors.
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Take sales, a field defined by results. Instead of tracking performance against goals, you’re better off reviewing role-relevant traits and activities — pursuing leads, crafting pitches, etc. — typically necessary to achieve objectives. Obviously, many of these are measureable, but the point is not to affix numerical targets a year in advance and then base performance on meeting them.
Admittedly, in my article, I really struggled with how to make behavior management measureable (on second thought, you really do need to read it!). I’m still not entirely sure, but I’m sure of this: Setting goals is not the problem. Judging people against them is. It’s OK for managers and subordinates to set objectives, but in doing so, it’s crucial to assess the objectives themselves, not people based on meeting them.
Are accomplishments and failures beyond a person’s control?
I’m sure of something else: In his book Drive, author Dan Pink writes about the difficulties involved in drawing cause-and-effect links to meet objectives in most white-collar work. Similarly, Michael Mauboussin, author of The Success Equation, told me:
There’s a continuum of things that are pure luck on one end and pure skill on the other. When your outcomes are truly a reflection of the work that you’re doing, a results-oriented evaluation is not unreasonable, like in manufacturing, which is very skills-oriented. But things like launching a successful R&D project are inherently probabilistic, with a lot of randomness and luck to them. There are profound influences that are hard to anticipate, so you have to move the orientation away from outcome and more toward evaluating process, not because you want to dodge the outcome but because that’s the ultimate way to get it.”
Wait, there’s more. Mauboussin points out that the higher up you are in an organization, the greater the likelihood that luck, not skills, will influence outcomes.
Quite simply, it’s illogical to base performance management on results when you can’t establish causal relationships between input and output. Worse, by concentrating on meeting objectives, you may be rewarding or punishing people for accomplishments and failures beyond their control.
So focus on what employees actually can control — their behaviors. Sure, results matter, but you won’t get them until you stop obsessing over them.