Wednesday, March 21, 2012

Thought Leaders on Performance Management

Thought Leaders and Performance Management

There is no shortage of “Thought Leaders” in India. The trouble with India is we search for them everywhere else and don’t recognize when there is one in our neighborhood. How many Indian Managers have recognized Udai Pareek as a thought Leader? I recently said that Udai was far ahead of others in the world of Management. It is almost 25 years ago he wrote his book on beyond Management where he put Institution Building. I think Institution Building is more relevant to India and is ahead of all Leadership Theories. For all that he had done Udai Pareek was never noticed in India because he never promoted himself. It is only during his final years the Government of Rajasthan has nominated him for Padma Bhushan but the Central Government has other names that they had to honor. The same story repeats day in and day out in our corporate sector with respect to thought leaders and good performers. They may not always be noticed unless someone promoted them or a neighboring company picks them up. Scores of IIMA Faculty who serve their country and institution for their life time get hardly noticed but if one or two of them go abroad they become Thought Leaders and Management Gurus- very deservingly so. It does no good to those who are thought leaders here. If any they are often pointed out that they should be like those who went to USA and UK and prospered. India always loves their neighbors. The farther you are the more you are loved. The closer you are the less you are thought leader even in a filed like Management and Psychology!

Some Thoughts on Performance management

I have recently completed offering a course on Performance Management for LIC officers. I have given them many tips while teaching this course. The main lessons I offered in this course are the following:

Performance Management in organizations is a 24 x 7 activity and not merely to be equated with annual appraisal.
Annual appraisals are inevitable parts of the PMS process. They tend to be poisonous in India and while we look at the poison we tend to neglect the nectar called “enjoying the process of performing”. Work itself is enjoyable and getting the right kind of work and doing it with pleasure is the most crucial incentive one can aspire for. Work makes you healthy and happy if you learn to take charge of it and enjoy it. Work makes you live longer. You can enjoy work when you plan it and when you have a say in planning it. You must plan your work in terms of time and talent utilization. When you plan your work in tune with what your role’s goals and objectives are you tend to enjoy it and develop a sense of pride. When you plan your work in terms of the 2000 to 2400 hours you are required spend on work in a year you take more control of your work and you enjoy your work (as explained in my book on Hurconomics: Pearson Education, 2011).. Good work and application of talent is likely to contribute to building of one’s own intellectual capital and enhances one’s self worth as well as market value. Don’t work for small incentives like a few thousands of rupees but work for big incentives like self respect, work happiness, sense of power and autonomy et. And doing things you like and the way you like. When you work in tune with organizational goals and your role related goals the sense of accomplishment you get the recognition you get and the capital you build is worth several times the incentives and PLPs.

Not ignoring the utility of performance ratings, I have said that it is possible to reduce biases but not completely eliminate them. In India the issue of subjectivity is compounded due to our tendency to attach value to incentives on the basis of the incentives given to our neighbors rather than what we get. Though the trend is increasingly changing with the Gen Y and gen Z who is more concerned about themselves and not bothered about comparisons.  Ratings are poisonous. As explained in my book on Performance Management for Global Competitiveness (Sage India) we tend to sue performance ratings as Interval scales while they are often not even meet the criteria of Ordinal scales and they are at best nominal scales. No comparisons are possible s now two different roles or their bosses or the situations are equal. We should spend our time analyzing and improving performance of each individual, the _S pair, team work and organizational impact rather than figuring out the reasons for neighbors getting higher incentives. Average or low performance can be a result in a particular period of variety of things like lack of competence in a particular task, newness to the area of work, poor boss, low interpersonal competence, low work effort due to issues in the society or family or work situation or organizational policies and most significantly lack of organizational support etc. Unless we keep identifying and improving the factors responsible for low or poor performance we cannot even think of managing performance.
PMS is a great learning opportunity for seniors to learn from juniors and vice-versa. I have presented a paper on this at Taiwan a couple of years ago. I have given illustrations on how a senior can learn from his juniors through a Performance review discussion. Now days with technology available we all can learn from each other.
I recently heard a line manager explain to me something very interesting: He said” If I have two rupees and give one to you I will be left with one and you will be left with one. If I have two pieces of information, I share with you I will be left with two and you will be left with two.
This is the power of PRD in PMS continuous competence building. Are you listening? You can’t practice. You will all it utopian idea and it does not work in India as we are continuously looking for one up-manship even in knowledge.

My responses to Economic Times Correspondent on PMS

 Last night someone from Economic Times contacted me for my views on PMS. I explained the above and then responded to her questions as follows.  I don’t know if any of them reflect any thought Leadership. May be they become one if they are aired from the West.

* You spoke of communication and trust being crucial to the performance management process. Can you elaborate?

Performance Management is a process of talent management including planning performance and building intellectual capital. It should not be made into a political process. As appraisal is an unavoidable and integral part of the process. Appraisal has the potential to become a political process as people start comparison with each other. If people trust their boss and trust the top management and the HR department for designing and implementing a reasonably good system, most painful issues associate dint he past with appraisal will take back seat. Thus Trust becomes a critical element of the PMS. Such trust can be enhanced by continuous communication between each Manager and his juniors. If each manager invests time in developing their juniors, provides periodic recognition for good work done, and contributions made without having to wait for the company to give reward at a distant future and on a comparative basis, Trust will get built.
Most of the time mistrust develops due to poor or weak communication and transparency in communication. It is the rewards which vitiate the atmosphere. For several years in one company where when we introduced the HRD system we delinked rewards from PMS or appraisals to focus on development. It was difficult for them to continue this I understand as some of the Managers did not take the PMS process seriously due to it being not linked to rewards. In another company PMS was taken as an OD intervention and they succeeded through continuous communications and process sensitivity the implementation of a PMS linked to rewards. 

* How can organizations tell employees about meager or no increments?

They should explain the reasons transparently. Organizations are like families. If organizations trust their employees “no incentive’ or ‘low incentives ‘don’t come across as surprises. They should do performance analysis periodically to identify factors responsible for poor performance of a company or unit. Poor performance may be result of three factors: (A.) Lack of Competencies among the employee concerned, (B). Lack of motivation or hard work and/or (C). Lack of support from the organization or the environment. It is only a thorough performance analysis at individual, team and organizational levels that can give a correct picture. If a corporation accepts that low performance is a consequence of certain wrong decision they have taken and they own the decisions but at the same time unable to give large incentives as results are bad, most employees will understand and will continue to work and raise the level of performance. If competencies are lacking organization should invest on developing them. Poor performance due to each of these factors needs different type of treatment. If organizations genuinely find out reasons for poor performance and don’t merely blame employees but work for improvements low incentives are taken supportively.  You need to trust your employees and have faith in them that they are not there only to get high increments. I believe that people work because they believe that they are doing meaningful things and not for the incentives they get. If you give significance to the people and the work they do meager incentives don’t matter. Japan is a good example. A key chain as an incentive at the end of the year taken with pride. 

* How can organizations ensure employees feel a sense of participation in decision-making or creative fulfillment?

It is an organizational culture issue. Organizations should define their values properly. I strongly believe in OCTAPACE values: Openness to ideas and expression of views and opinions; Collaboration where people collaborate with each other in achieving group and organizational goals;  where people are trusted; Where people are given some autonomy in doing things; where there is also cope for Proactivity and initiative; Where people are encouraged to be authentic(they say what they mean than to feel one thing and say another; Where issues are confronted reasons analyzed and bottlenecks removed; and where experimentation is encouraged to the extent possible If such a culture and values are articulated by top management, and practiced, there will be more participation and ownership. 

* How can management institutions contribute in changing the way performance appraisals are conducted, or in shaping future manager’s ideas on performance management?

Continuous Education and communication. Trust employees and respect them. Treat them as members of the family. I don’t see any other way.

*I've been thinking about what you said, and it begs the question: To what end? What do organizations have to gain from tweaking performance assessment systems? At the end of the day, will it curtail attrition?

 I have defined performance management as continuous improvement of performance of individuals, dyads, teams and the organizational s whole. Its purpose is to improve performance. Recognition and rewards are a small though significant part of performance management. Performance can also be managed without rewards through a recognition process. There are many organizations where people work for doing and enjoying their work. If you have a good PMS where people are respected for the work they do, helped to enjoy their work, and have good bosses to learn from, attrition etc. become non issues. The younger generation by nature likes change. They are restless. The older generation likes stability and there is very low attrition. Good companies had high attrition as youngsters come for the brand and then leave when they get better opportunities. We need to appreciate this and not make too much out of attrition. A good organizational culture certainly retains more people and PMS certainly helps in creating such culture.

Also, you spoke of creating more "humane" organizations through the performance management systems. How do current systems of appraisals edge out the individual and his contribution?

The current appraisal systems are based on the assumption in most companies 80% of the work is done by 20% of the star performers and 20% work is done by 80% of the employees. So identify the stars and nurture them. I don’t fully agree with this. I believe that while the 20% should be helped to be recognized and incentivised a more important t goal of PMS is to lift up the80% to be like the 20% stars. Imagine what happened to a corporation if even 50% of this 80% become near star performers? You can only have incremental benefits from the stars and you can have large scale benefits from the average performers. I believe in using normal probability to lift up the average than to retain the average performers at average levels.

Thoughts on Training

I have also given the following replies to People Matters for their special issue in April. As most of them ask questions and ue only a small part of your replies that suit them I take the liberty of reproducing my replies for the benefit of all.

  1. What are the leadership challenges facing organizations and how are executive education programs evolving to address those challenges?
A major leadership challenge is succession planning. Three decades ago Mr. N. M Desai of L&T said in an interview to a business magazine that if one of these days if he is knocked down by  a red  bus, there are six people to take over from him. He was referring to his Vice Presidents. Thirty years later with all the progress in HRD many corporations  can’t find top level talent to take charge. I wonder where our HRD has failed. Not all corporations are like this but some are. There are a few others who seem to plan this well. Our Public sector Banks is a pathetic example of poor succession planning. In the next three to five years most top level managers of PSBs are going to retire and nothing is being done by most. A few like BOB and UBI have started grooming them but very inadequately. We don’t yet have mature methodology to identify and train the future leaders. The only methodology we have is to give them General management training and some training in foreign soil and by foreign experts who have very little idea of leadership and leadership development in India. In India Leadership besides other things is an emotional connect. Foreign scholars have limitation in understanding and training leaders for Indian corporations. There is some work in India but we have a long way to go.

2.      What kind of programs are popularly opted by organizations and why?
General Management programs are largely opted by corporations. This is because most of those who have come to occupy leadership position at present are either technical or functional specialists and had very limited general management exposure. Hence very rightly they are being sponsored for general management Programs with global exposure. However the global exposure needs to be better planned than mere education trips in other countries.
These programs also have Leadership modules. The leadership modules are largely theory based. A project component is a part of the program. This is very useful but poor follow up on the projects and providing incomplete experience and lack of seriousness in guiding and using such projects mars their effectiveness in some cases.
Very few are using 360 degree Feedback based and Development centre based programs. I strongly recommend the same with good follow up to develop leadership and succession pipeline
  1. What is the benefit that such programs bring to organizations and their leadership teams?
Global perspectives, vision development, long term thinking and ability to lead from the front. They also develop more self confidence. If they sue a 360 it would lead to a lot of self awareness, ability to take criticism, ability to view oneself from different perspectives. I have recently completed a study of 100 Managers from among a list of 8000 managers who underwent 360 degree Feedback based Leadership development program at TVRLS. We selected them on the basis of their 360 DF scores. We found that these managers whom we rate an influential managers shared certain qualities in common. They include a desire to learn from various sources, a desire to learn and a high degree of self awareness. So the programs do benefit in sensitizing hem to the leadership qualities and leadership roles. Some time make them restless so that they can start acting and make things happen.
  1. Is it possible to measure the ROI on Executive Education? What are the different ways to measure ROI on executive education? 
I have suggested in my book on Hurconomics (Pearson Education, 2011) a simple tool called R-COT and O-COT. Real Cost of Time and Opportunity Cost of Time. Talent of executives is cost in terms of their time. It is a simple formula of dividing the CTC by 120,000 (2000 hours multiplied by 60 minutes). It gives real and opportunity cost of your time and gives an estimate of a reasonable price for your talent. For example if your CTC is Rs. 6,00,000 (per year), your cost to company is Rs 5 a minute Which means when you use your cell phone for ten minutes you are using Rs 50 of your company time. If two managers are talking to each other for ten minutes on cell it costs the company Rs 100 besides the connectivity cost. The opportunity cost for the same (that is a rough estimate of the return on the time invested or talent invested) is ten times in manufacturing and three to four times in the services sector like IT and financials services. Which means the opportunity cost for a ten minute conversation on your mobile or e-mail is Rs. 400 to Rs 1,000. Use this formula to cost the returns on Executive education. For example you can calculate the benefits accruing due to a program on conflict resolution when two of your    executives are sent to such program by keeping track of the reduction in time due to a conflict resolution program or availability of talent for productive purposes. I have given in this book several examples of measuring return on investment. You may pick some examples if you like.  


Yogesh said...

In many organizations, PMS still a last minute exercise to meet the HR deadline of submitting the reviews. Is there a way this process can be improved, will giving incentives to managers for doing a better PMS review help?

shanecastane said...

Performance management systems (PMS) represent information-based routines and procedures formally expressed that managers use to maintain or alter patterns in organizational activities (Simons, 2000). More and more organizations are implementing new and alternative performance management systems in order to obtain better results.

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