In companies with fewer than 500 employees, for example,
these decisions can often be made intuitively. In addition, the positive effect
on the performance of meritocracy through variable remuneration based on
performance (pay for performance) is scientifically quite controversial, with
studies with inconclusive and often counterproductive results.
Read more: about motivation, bonuses and Daniel Pink
Strategy and performance management
Another important effect of performance management
processes is the execution of the
company's strategy.
In many organizations, the results produced by employees are
evaluated using goals that are broken down from strategic objectives — mission,
vision, short and medium-term planning — and therefore tend to contribute to
the company's strategy being executed.
Even if there is no breakdown of goals, objective numbers
can be measured, such as:
quality — for example the percentage of defects on a
production line;
productivity — the number of invoices processed;
cost — the adherence of a company board to the annual
budget.
In all cases, whether or not there are goals, results that
are aligned with the organization's strategy can be measured, thus ensuring the
achievement of its strategy.
Culture and performance management
Another slightly more subjective aspect of a performancemanagement program is to ensure that the
company's employees are acting on a daily basis in accordance with the culture
and precepts defined as important by the organization.
This can happen both in measuring the behavior of employees
and in directing – developing – their behavior in alignment with the company's
cultural behavior.
Legal Aspects of Performance Management
Finally, performance management can serve an important legal
role in companies, as it serves as evidence of work performance for any labor
claims that a company may suffer from its employees. For this, it is important
that the processes are properly documented in reliable systems, which can be
consulted for a long period, and that they maintain a “record” of the employee.
It is noteworthy that the quality of a system for legal
purposes can often conflict with the quality of the system for employee
development purposes. In these cases, it is up to the company to consult legal
experts and weigh both purposes in the design of its system.
What are the two dimensions of performance?
Most experts divide professional performance into two broad
dimensions:
results (outcomes);
behaviors (behaviors);
An intuitive way to understand the difference between
results and behaviors is to think that results are “what” the employee
produces, and behaviors are “how” the employee produces those results.
Both dimensions of performance are important as they will
serve as the backbone for the performance management cycle, which we will
discuss later.
What is the performance management cycle like?
The performance management cycle is the main process of a
performance management program.
performance expectations
The beginning of any performance management cycle is the
definition of performance expectations between the employee, their manager and
the company.
Performance expectations are represented and communicated in
different ways among these three participants. Let's go to some of them:
job description
The job description is the most fundamental document for
defining expectations between an employee and the company. When well written,
it must outline, always in relation to the position/function filled by the
employee:
The “mission”, that is, for which the position/function
exists;
The main responsibilities associated with it;
The main indicators that measure success in the role;
The skills, knowledge and skills required.
Many companies ignore the job description because they turn
them into dead, boring and generic documents, which end up saying nothing to
the employee about what is expected of him. But the job description when
properly used can be an extremely clear and objective way to define
expectations.
behaviors
Another way to define a company's expectations of an
employee is to define and communicate what behaviors are expected (the “how” we
mentioned above).
Behaviors can be directly derived from job descriptions
(which in turn come from the analysis of the work to be done – job analysis),
they can be common to all employees (in the case of critical skills derived
from the company's strategy) or even derived from values of the company's
culture.
In some companies, behaviors are common to all employees,
and in others they can be specific to each position, seniority level and/or
functional area (a mix of both types can also be used). Therefore, the matrix
of behaviors for a given function can be derived from the work to be performed,
the company's critical competences and its values, and even specific to the
position, functional area or degree of seniority of the function.
If the employee knows what behaviors are expected of him, he
can direct his behavior during the cycle, to work more in line with what is
expected of him.
Read more: Your company does not know how to assess
competences.
Activities, indicators, goals and projects: what are these
points?
Another important aspect of an employee's expectations at
each beginning of the cycle is the definition of the results to be achieved
(the “what” we mentioned above).
The most traditional and basic way to define what is expected
of an employee is by defining the activities that will be performed by him.
Activities are usually derived from a study of the company's processes, which
are broken down into steps and activities.
Activities
These activities are, in turn, assigned to different roles
and employees. The main activities of a job/role are usually explained in its
job description. An example of a task is “closing product sales contracts with
current and new customers”, which can be defined as important for the employee,
including the company, the company and the manager. Thus, at each beginning of
the cycle, activities that the employee must perform are defined.
Indicators
One step ahead of activities are indicators, which are ways
to measure the efficiency and/or effectiveness of activities performed by an
employee. In this case, satisfactory levels for these indicators can be
defined. An indicator linked to the example above, for example, is the “number
of sales contracts for products closed per month”. Employee, company and
manager can define at each beginning of the cycle, for example, that the
employee must make as many “contracts” as possible.
goals
Ahead are the goals. Goals generally define objective levels
that must be achieved by the employee in the indicators that measure their
activities.
Here, the company, employee and manager define a level that
generally involves the increase or reduction of an indicator (improvement
goals) or its maintenance within acceptable limits (maintenance goals).
Examples: in the case above, it can be defined that the
employee must close at least 30 product sales contracts in the cycle (starting
from a performance of 27 in the previous cycle, that is, an improvement goal),
and that the contracts are necessarily closed with payment terms between 45 and
60 days (a maintenance goal).
