brighttalk performance management summit
TRANSCRIPT
Performance management: what does the evidence tell us about
its impact?
Mark BeatsonChief Economist, CIPD
What do we mean by performance management?
Agree objectives
Monitor in-period
Assess end-
period
Feedback and
improve
What does performance management look like in practice?
• Linked to pay:• 37% (CIPD Employee Outlook survey, autumn 2015)• 60% entirely/to some extent (CIPD Labour Market Outlook survey, summer
2015)
• Feedback:• 61% receive formal feedback from line manager, 49% informal feedback, 18%
never receive feedback (CIPD Employee Outlook survey, spring 2015)
• Frequency of formal reviews:• 9% quarterly (or more often)• 25% twice-yearly• 48% annually• 18% less often (CIPD Employee Outlook survey, summer 2014)
• Future objectives agreed:• 56% (CIPD Employee Outlook survey, spring 2015)
• Linked to evaluation of employee’s training needs:• 90% (CIPD Labour Market Outlook survey, summer 2015)
Formal appraisal systems have become more widespread(% of employees)
Source: Skills and Employment Survey series and CIPD Employee Outlook survey, summer 2014
1997 2001 2006 2012 2014
53%
61%
70% 71% 71%
Prevalence of appraisals across the EU, 2013
DK RO FI SE NL CY BE AT UK FR HU LU IR LV DE SL EL PT IT MT SV CZ ES BG PL EE HR LT0%
10%
20%
30%
40%
50%
60%
70%
80%
% of employees in workplaces where all employees have appraisal at least once a year
Establishments with 10+ employees onlySource: European Company Survey 2013
Performance management systems are one of the key ingredients of high performance work (HPW) practices
ISO9000
IIP
Create project teams
Individual PRP
Flexible benefits
Awards performance bonuses
Training budget
Formally assess performance after training
Training plan
Business plan
Annual performance review
On or off job training
Work shadowing
0 10 20 30 40 50 60 70 80 90 100
% of establishments with 5+ employees
Source: Employer Skills Survey, 2013
Evidence of links between HPW practices and productivity• CIPD Megatrends paper: “While the evidence base is far
from perfect, there appears to be a positive relationship between the use of HRM or HPW practices and increased productivity, although this will, of course, depend on how well these practices are executed and the extent to which they are aligned with the broader orientation and culture of the business” [1].
• CIPD 2014 employer survey data: Positive links between workforce training, cultural fit some agile working/HPW practices and relative business performance [2]
• CIPD 2015 employer survey data: Positive links between relative business productivity and organisation culture (and fit) and learning and development – but no independent effect from existence of performance management process! [3]
What do employees think of their performance management?Satisfaction (winter 2013)
Very satisfied
Satisfied Neither satisfied nor dissatisfied
Dissatisfied Very dissatisfied
8% 31% 32% 18% 9%
Fair (autumn 2015)
Very fair Somewhat fair
Neither fair nor unfair
Somewhat unfair
Very unfair
13% 32% 29% 13% 9%
Effective in incentivising individual performance (autumn 2014)
Very effective
Effective Neither effective nor ineffective
Ineffective Very ineffective
2% 17% 34% 24% 17%
Excludes the self-employed, owner/proprietors and those in the top layer of the organisation‘Don’t know’/’not applicable’ responses not reportedSource: CIPD Employee Outlook surveys
Employee views on the most important aspects of their performance review
Feedback/recognition
Goal setting
Development opportunities
Self-appraisal
Rating/scoring
Understanding pay-performance link
76%
48%
47%
31%
24%
16%
Excludes the self-employed, owner/proprietors and those in the top layer of the organisationRespondents could make up to three choicesSource: CIPD Employee Outlook survey, autumn 2015
Impact of employee understanding of performance management on engagement
Strongly
agre
eAgree
Neithe
r agr
ee nor d
isagre
e
Disagre
e
Strongly
disa
gree
Strongly
agre
eAgree
Neithe
r agr
ee nor d
isagre
e
Disagre
e
Strongly
disa
gree
0%10%20%30%40%50%60%70%80%90%
% of employees engaged
Excludes the self-employed, owner/proprietors and those in the top layer of the organisationSource: CIPD Employee Outlook survey, summer 2014
I understand how my objectives fit into the overall company strategy
I understand the measures my organisation uses to assess my performance
Impact of perceived weaknesses in performance management on engagement
Strongly
agre
eAgree
Neither
agre
e nor d
isagr
ee
Disagre
e
Strongly
disagr
ee
Strong
ly ag
ree
Agree
Neither
agre
e nor d
isagr
ee
Disagre
e
Strong
ly dis
agre
e0%
10%20%30%40%50%60%70%80%
% of employees engagedMy performance review is a tick box exercise rather than a meaningful pro-cess
Excludes the self-employed, owner/proprietors and those in the top layer of the organisationSource: CIPD Employee Outlook survey, summer 2014
The performance review process is consistent across the organisation
Impact of perceived fairness of performance management process
0%20%40%60%80%
100%
Very fair Somewhat fair Neutral Somewhat unfair Very unfair
Excludes the self-employed, owner/proprietors and those in the top layer of the organisationSource: CIPD Employee Outlook survey, autumn 2015
When is performance management likely to enhance performance? • When it’s used to communicate and reinforce the big
picture, align organisation and individual objectives• When employee goals are clear and encourage
value-creating behaviour – and little or no scope for gaming [9]
• When employees understand how their performance will be measured
• When ‘objective’ performance measures are available [12]
• When allied with reward
When is performance management likely to hold back performance?• When trust is low• When performance management system is seen as
unfair, inconsistent or a tick box exercise - the outcome can be worse than if there was no performance management system
• When the (powerful) effects of rank-ordering and forced distributions mobilise anti-social behaviour [8]
• When over-elaborate subjective rating systems create more scope for negative effects on employees [12]
• When lenient ratings and lack of consequences encourage excessive entitlement behaviour [6]
Something’s got to change?
• Formal appraisal provides a means of making (and justifying) decisions on pay
• Cost and risk of change – especially when linked to pay – encourage conservatism [4]
• Employees are split over the merits of more frequent and regular reviews (39% change, 38% stick, 23% undecided) – CIPD Employee Outlook survey, autumn 2015
• Employees ambivalent about sharing of performance data and team appraisal – fears of backdoor control?
Lessons for practice
• Implementing HPW practices [3]:• Control• Capability• Context
• Pay attention to demographics of workforce/teams (such as gender)? [7] [8]
• Performance management can’t compensate for ineffective managers [10][11]
• CIPD looking to work with organisations pursuing innovative forms of performance management
References[1] CIPD (2014) Megatrends: are UK organisations getting better at managing their people?.[2] CIPD (2015a) Productivity: getting the best out of people.[3] CIPD (2015b) Investing in productivity: unlocking ambition.[4] A Cox (2005) ‘The outcomes of variable pay systems: tales of multiple costs and unforeseen consequences’, International Journal of Human Resource Management, 16:8, pp1475-1497.[5] A Falk (2014) Fairness and motivation. IZA World of Labour.[6] Fisk, G (2010) ‘“I want it all and I want it now!” An examination of the etiology, expression, and escalation of excessive employee entitlement’, Human Resource Management Review, 20, pp102–114.[7] Garbers, Y and Konrad, U (2014) ‘The effect of financial incentives on performance: A quantitative review of individual and team-based financial incentives’, Journal of Occupational and Organizational Psychology, 87, pp102-137.[8] Gill, D et al. (2015) First-Place Loving and Last-Place Loathing: How Rank in the Distribution of Performance Affects Effort Provision, IZA Discussion Paper No. 9286.[9] Goerg, S (2015) Goal setting and worker motivation, IZA World of Labour No. 178.[10] Groscurth, C (2015) ‘Great Managers Can Fix Broken Performance Management Systems’, Gallup Business Journal, June.[11] Groscurth, C (2015) ‘Managers Could Do a Lot Better at Performance Management’, Gallup Business Journal, June.[12] Kampkotter, P and Sliwka, D (2015) The Complementary Use of Experiments and Field Data to Evaluate Management Practices: The Case of Subjective Performance Evaluations, IZA Discussion Paper No. 9285.
