Research Articles

Performance Management - A Perspective

A presentation made by Paul R. Gibson (Dr), Managing Director Gibson Curtin & Co. Pty Ltd, at the HRworkbench Inaugural Marketing Conference, November 2003.

My observation of Australian organisations is that Performance Management is either not done by line managers, or is done badly by them.

Where it is not done by line managers - it is done by HR Managers, and in which case Performance Management is therefore done by "proxy" through various mechanisms.

Recent Experience of Performance Management

Consider the following experiences that say a great deal about performance management and the environment in which it is occurring:

Trend to restructure and redundancy

An observation of corporate behaviour is the growing tendency to remove underperforming or difficult or aging staff from organisations by the twin mechanisms of restructure and redundancy.

The approach is to restructure (sometimes even subtly) the organisation ensuring that the staff with whom the organisation has problems or who have fallen from favour, become the victims of the restructure. These people are then made redundant and paid out.

The level of the payout is such that the "problem goes" away, and doesn't resurrect itself in a claim under the provisions of employment law, contract law or common law. To achieve this effect various "Deeds of Separation" have been constructed by lawyers to render protection for the employer in exchange for cash.

In this mechanism, both employees and shareholders become victims. This mechanism is also avoiding the whole issue of managing performance, under which the employees concerned would have either improved their performance, been placed in more suitable positions, have chosen to resign with dignity and seek their career elsewhere, or been dismissed for continued unsatisfactory performance.

Large public Australian company

This organisation employees tens of thousands of staff, and is coincidentally not regarded as a "high performing company". In YE Dec 2002, 21 staff were "dismissed". Of this number, 17 were dismissed for misconduct (either unlawful behaviour e.g. harassment, or criminal acts e.g. theft), and of this latter category the Police were involved in less than half of the cases. Only 4 staff were dismissed for "performance related reasons". The culture of this company is "appeasement at all costs" and it is heavily unionised with a predominant union-driven management culture.

Australian subsidiary of large international company

This organisation regularly surveys its staff (quarterly). The newly appointed CEO noted that staff responses to the measurement of the "Integrity" index were low and had remained low for some time. An investigation of his observation followed.

Focus groups of staff revealed that the "policy" was that "staff would be summarily dismissed for breaches of the organisation's publicly stated Values", and yet there were many examples of where this "policy" had not been applied.

The CEO, with the support of the Board, decided that the policy was to be enforced, irrespective of the industrial or litigious consequences. Five staff were dismissed within the next 6 months (and the fact of, and the reason for these dismissals were communicated to staff). In the first survey after these dismissals, the measurement of the "Integrity" index started to rise - the organisation was doing what it said it was going to do, that is, manage performance and behaviour.

The policy continues to be enforced, about 1 staff member per month is dismissed for breaches of the Values, and the index remains high, as does morale. This organisation is regarded as a high performer in its industry sector.

Unfair dismissals

Presently, there are approximately 1000 claims per week across Australia being registered with the IRC for "unfair dismissal". This figure is 1.5 times higher than it was 3 years ago.

The majority of these cases are settled (expediently) by employers at conciliation for amounts averaging in excess of $25,000 as a payout. This figure is double what it was 3 years ago.

Because most employers "settle", there is an increasing culture of litigation for "wrongful dismissal claims" within the workforce and the tide is increasing not decreasing. The tide is being driven by both economics, and the avarice and opportunism of the legal profession. The economics are simple - defending a case through arbitration will cost in excess of $10,000, and often twice that figure. Miscreants within the legal profession are increasingly offering their services on a "% of payout" basis" - and as the majority of employers settle (and the lawyers don't have to disclose the basis of their engagement at conciliation), it is a "goldmine" for lawyers, especially for small firms, who have little reputation at stake.

Employees' reasons for litigating incorporate the following:

There is a growing trend to not want to accept any responsibility for what happens - "I was a victim". This is a way of pushing responsibility from them (for poor performance or inappropriate conduct) to their employer for acting "unlawfully";
They know that their employee is most likely to settle - the process is known to yield cash (upwards of $25,000 on average) - therefore the odds are high, and they will mostly likely receive something; and
Because the employer wants an "in globo" settlement so that there can never be any other claim associated with this employee, the employee can often extract an additional benefit of having their reason for termination ameliorated to "resignation", which then has little or no adverse affect on their future employment.

As an example:

Recently an employee who had worked with a community based (not-for-profit) organisation took her employer to the IRC for "unlawful dismissal". While this employee had worked for the organisation for 19 years, for the last 8 years of her employment, there was evidence of her failure to follow instructions and policy. She refused to commence her client service at times decided by management, she refused to collect fees from clients, and she became aggressive and wilful when counselled about a litany of incidents. She had been instructed in writing, counselled, and warned in writing. She was ultimately dismissed for "wilful misconduct".

Her solicitor advised her that she would be entitled to 60 weeks pay, even though the maximum that she was entitled to under the Act was 26 weeks.

At the conciliation hearing the commissioner didn't even hear argument from the parties as to reasons and defences, but rather went straight to "horse-trading". The matter was settled for 26 weeks pay, and there is still argument by the employee's solicitor that she should be entitled to the settlement being paid "as a genuine redundancy" to more positively affect the "after tax" payment to the employee.

This small case highlights:

That the employee was terminated in accordance with the Act, but still sought litigation:
- For substantive and legitimate reasons; and
- With regard to due and fair process,
The IRC was not interested in "justice" but went directly to determining a sum of money,
The ease with which $26,000 of additional payout was obtained by the employee, and
The lack of professional integrity on the part of the lawyer - both in falsely raising the expectations of the employee, and the flagrant abuse of the taxation system.

The question is why is this happening?

The reasons should be looked at from at least two perspectives:

The first is from the HR Managers' perspective (and taking the kindest view):
- They have witnessed the abdication of a powerful management tool by Line Managers, and have been forced for a variety of very good reasons to "do it themselves";
- They see, and in many cases have to manage the consequences of, the failure of Line managers to manage the performance of their staff - both from an IR perspective, and from a legal perspective;
- They either see or are required by the executive of their organisation to address the issue from a corporate governance perspective;
- They need performance data as input to the salary administration processes;
- They have some view of the motivational effect of performance management - often from the perspective of trying to administer an incentive program;
- Pay for Performance has become fashionable (even though there is no substantive link between providing monetary rewards, and sustained levels of higher performance);
- They have an administrative focus and therefore, performance management (or performance appraisal, or performance review) becomes one of their administrative processes.
Secondly from the Line Managers' perspective - the reasons can be looked at from both the CAN'T and WON'T positions:

CAN'T
- "Junior" managers have either not been "taught" to manage performance at all, or they have not been trained well. (Business Schools don't help because they either only provide a theoretical, and often inappropriate framework, or the "academic staff who teach the subject are HR Managers themselves and not line managers, with the real experience. Often the illustrative examples are vicarious, or theoretical.);
- There is not a culture of "performance" in their organisations, and therefore performance management is not seen as an important part of "the way things happen around here";
- They have no good role models around managing people - and as managers are being promoted at a much younger age, this effect is exacerbated; and
- They have learned to become dependent on HR Managers to do the job of managing performance through the "proxy mechanisms".
  
  WON'T
- Managing the performance of staff is difficult, arduous and time consuming - particularly if managers are trying to manage underperformance, or to raise performance levels of staff generally.
- It is often regarded by those managers who have done it well, as the most difficult thing they have to do as managers. It is therefore left as the lowest priority task of a manager (even though it is the most important) and because of conflicting time demands, they don't ever get to do it; and
- Performance Management involves "eyeball-to-eyeball" interaction between managers and their staff and often the need to be honest with feedback, firm and sometimes directive leads to fears of unpopularity (and the managers either have confused notions of respect with those of popularity, or psychologically, they have an overwhelming need to be liked and therefore will not take action that leads to unpopularity). This effect is often more true, the younger and more inexperienced the manager is.

The Challenge for Performance Management

The strategy of an organisation to turnaround the trend of avoiding Performance Management will be a substantial challenge. It is also a marvellous opportunity to bring real management skill into the organisation.

Why do it all?

Performance Management is the most potent management tool to which a manager has access;
Performance Management done properly:
- Aligns what staff do with the goals and values of the organisation,
- Focuses the application of often scarce resources on the business priorities of the organisation,
- Improves morale and motivation of staff,
- Aids individual and organisational development,
- Yields direct bottom line benefits (measured through better service levels, sales, cost control, productivity and profits), and
- Keeps the line managers managing their staff
Managing performance is a line management accountability - it should never abdicated to "the HR function".

Why do it this way?

It is the easiest way to perform what is a reasonably difficult task - in this model of Performance Management, the manager is always dealing with "small deviations in performance or behaviour", not large perturbations;
It requires the least amount of management time (once managers develop an adequate level of proficiency). This is the paradox - more frequent Performance Management actually takes less time!
Done properly, it makes managers "look good" - it adds to the measure of their own performance, in their managers' eyes.

Why start now?

The system, the tools, and the training is in one package and it works. It has been developed by practising managers - and is conducted in the same way as a mentor would assist a less experienced manager;
The benefits will flow immediately - the training incorporates the systematic remediation of current performance problems. And the immediate benefits are twofold - the manager starts to look good in their manager's eyes, and a lift in staff performance can be expected;
Managing performance is a skill; like any skill development, "practice make perfect". Actually, practice leads to improvement; perfect practice makes perfect!