The Value Spectrum of Performance Management
When we are working with Senior Management teams and Executives, it becomes clear that very few have the skills or know how required to drive what we call the ‘Value Spectrum' of Performance Management (PM). i.e. to make the PM program really work for the organisation as a whole. The ‘Value Spectrum' is a term we use to describe how Managers and Executives should be positioning performance goals so that their employees can significantly improve organisation performance. The ‘Value Spectrum' is part of what an employee does that adds significant value to the organisation as opposed to doing things that need to be completed as part of their core duties. Core duties relate more to the position or job description document i.e. tasks the employee already executes to a high standard but which don't help transform the organisation as a whole.
The ‘Value Spectrum' can be visualised in the diagram in the Value Spectrum whitepaper on the PeopleStreme website.
Driving the ‘Value Spectrum' of Performance Management
In the majority of cases, we find that managers set Objectives or Goals that relate to the Core Role and Responsibilities. i.e. related to the job description. This adds very little incremental value to the organisation but rather sustains the status quo. Setting objectives on the Core Role and Responsibilities is necessary in cases where employees are not achieving the Core Role and Responsibilities. However, it is not necessary where employees are already achieving their Core Role and Responsibilities and are looking for further challenges.
The question for any organisation striving to improve performance is: Why do managers set objectives that merely maintain performance, rather than increasing it?
We usually find the answers to be:
a) Managers don't know how to set goals for improving performance as they have never been trained or shown how to set proper objectives. This is a skills issue for managers.
b) Managers fundamentally don't know or understand that Performance Management is the only viable way to drive incremental value for the organisation in the real world. They lack understanding of why and how Performance Management contributes to the ‘Value Spectrum'.
c) The organisation's existing Performance Management process does not require anyone to think about the level or measures of success for each objective or goal. Therefore, the employee and manager do not have to think about how to define clear levels or measures and consequently never acquire the skills to set objectives that address the ‘Value Spectrum' process.
Examples help to clearly illustrate the ‘Value Spectrum' issue. A typical manager wants to set an easy numerate objective (quite common for most managers) and writes one as follows:
"Improve sales by 13% by June 2011."
This manager has been informed by the HR Manager that they should set SMART Objectives (Specific, Measureable, Achievable, Relevant, Time Bound). The manager looks at the objective and notes that she thinks the objective is Specific (to do with sales improvement), it is definitely Measureable (increase by 13%), definitely Achievable (the employee agrees they can achieve it), Relevant (the employees role is to win new sales) and Time Bound (by June 2011, presumably 30th June).
The manager and employee discuss the objective and agree it is valid. The employee works on the objective, discusses progress with the manager at regular intervals and at June 30, achieves 13%.
The real question is, where does 13% sit on the ‘Value Spectrum' ? Did this employee really help the organisation or was the 13% easy to achieve ? Did the employee generate real value for the organisation or did they achieve the goal whilst perhaps less capable team members achieved far greater results ?
To drive effective goal and objective setting, it is possible to map your ratings on the ‘Value Spectrum' as indicated in the diagram in the Value Spectrum whitepaper on the PeopleStreme website. This illustrates to an employee how the ratings at the end of the period will be used to determine success.
A more effective method is to not only graphically illustrate how the ratings will be used, but also to write each objective with measures, as explained below:
Improve sales by more than 20% by June 2011
Improve sales by 13% to 20% by June 2011
Does not meet Expectations:
Improve sales by less than 13% by June 2011
Objectives with measures that clearly spell out the desired outcomes drive value by enabling the employee to understand how they will be rated and what they need to do to get to the higher rating.
Performance Management is a simple yet very powerful program if conducted in the correct way. This means that processes need to be clear and require the right managerial skills to set high quality objectives that articulate where value is being added and where it is not.