community performance Archives

WHY A FIVE-POINT PERFMORMANCE RATING SYSTEM MAY BE DETRIMENTAL TO PEOPLE MANAGEMENT

Written by Kai Donesa on February 23, 2023. Posted in Resources.

You probably finished 2022 with a performance evaluation round with a five-point performance rating system. To evaluate yourself, your supervisor, and your colleagues, you were probably given a scale of 1 to 5, with 5 being the highest rating.

I’ve worked with several employers, including at large firms and a nonprofit organization, and I’ve noticed that they follow the same approach to evaluating staff performance. To assess yourself, your supervisor, and your colleagues, you’re given a scale of 1 to 5, with 5 being the highest rating.

Most organizations use the traditional five-point performance rating system. But a five-point system carries with it a range of people management issues. Instead of motivating staff, it does the complete opposite. And the root cause is that employees want to receive a perfect rating of 5 out of 5. Anything less than that, even a 4, would be undesirable and be seen as a failure.

I’ve experienced this dilemma firsthand. When my work performance was rated a 4, I was disappointed. I couldn’t help but compare myself to my coworkers, who received higher ratings closer to a perfect 5. Looking back, this traditional five-point system for measuring performance is far from helpful for several reasons.

In this article, we’ll explore why a five-point performance rating system may be detrimental not just to people managers and human resources but to the organization. We’ll also share what your human resources department can do to address this all-too-common mistake.

Does striving for excellence work?

To achieve success and become a market leader, organizations ‘aim high’ in setting employee expectations and performance standards. The strategy: celebrate the few exemplary and high-performing staff members who will inspire others to do the same. Additionally, employees are encouraged to do exceptionally well at their job every time.

The consequences of such an approach are potentially disastrous, however.

What are the drawbacks of aiming for a perfect rating?

Many organizations believe that setting ‘exceed’ or 5 out of 5 as the gold standard for performance is the best way to meet their goals. But this can lead to undesired behaviors, as seen in the situations below.

Divide and conquer. Setting extraordinarily high expectations can lead to false confidence and optimism. If staff work hard to exceed expectations, there is a greater chance of being adamantly focused on their own goals than collective goals. This can lead to division and conflict as staff members try to reach lofty individual goals.

Expectations versus reality. Setting ‘exceed’ as the performance standard can also create unrealistic expectations. When staff members believe they can achieve incredible things, they may be disappointed when reality doesn’t meet their expectations. As a result, they become too critical of their work, always striving to improve, even when the work is satisfactory. Employees may feel they can’t succeed, leading to demoralization and frustration and harming team morale and productivity.

Under pressure. Doing one’s job well can sometimes be challenging, but it is even more problematic when it involves working under conditions that aren’t conducive to success. When the pressure is high, it is easy for performance to suffer.

Compare and contrast. Instead of working on their tasks and achieving their goals, employees may be more likely to focus on how they compare to others. And when comparing their work with that of their colleagues, staff may feel they need to do more. This can lead to resentment and conflict, and it can also damage morale.

Alienation. When managers reward only high-performing staff members, they may inadvertently harm employee engagement. Managers who target star employees may risk alienating others who feel they cannot meet expectations. This hurts employee engagement and affects the organization’s culture and vibe.

At a certain point, striving to excel and exceed expectations may become frustrating or demotivating. To avoid setting up your organization for failure and to keep staff accountable, consider shifting to a performance standard that is more realistic and meaningful to them.

What does Birches Group recommend?

Remember that people want to feel valued and that everyone in the organization matters. Setting the attainable goal of achieving targets and improving one’s skills and performance are better ways to motivate people.

In contrast to the traditional five-point performance rating system I’ve seen in several organizations, Birches Group uses a simpler, less problematic four-point system. At Birches Group, performance is measured on a four-point system—Fail, Needs Improvement, Achieve, and Exceed—where Achieve is the gold standard and Exceed is the highest and reflects exceptional work. What I appreciate about this more straightforward approach is that there is less pressure, politics, and alienation. Everyday achievers are held in high esteem. Most staff are achievers who deliver what is expected of them in a performance year. Through the Birches Group four-point rating system, the organization can celebrate the many ‘good’ or the many achievers while allowing the exceptional few to be rewarded accordingly. The fact that there are different kinds of performers—the good, the great, and the exceptional—is acknowledged.

Bottom line

Recognize only a few exemplary employees, and you could set up your organization for failure. If you want staff to remain productive, engaged, and empowered, celebrate the many achievers across your organization and aim for progress. Doing so will also help your people stay focused, deliver results, and ultimately help them feel that they matter.

Contact us to learn more about Birches Group’s Community™ Performance and schedule your demo today.

Carla is a part-time copywriter in our marketing team in Manila. Before shifting to freelance writing in 2020, she worked as a marketing and communications specialist at the offices of EY and Grant Thornton. She has written about HR and career development for Kalibrr.

PERFORMANCE MANAGEMENT IS BROKEN. FIX OR GIVE UP?

Written by Kai Donesa on April 21, 2021. Posted in Resources.

Performance management is the Achilles Heel of HR. It remains a contentious process that many companies have now abandoned, or at least are thinking of abandoning. A tool initially intended to communicate management objectives and keep the work of staff aligned throughout the year has now evolved into a dreaded exercise that just further leads to a disengaged workforce. With its rigid design and lack of adaptability, the traditional performance management approach has left many questioning its effectiveness. But without it, organizations are deprived of the feedback system needed between management and staff. Sure, you can abandon performance reviews, but before you do that, check with your lawyers to see if it’s a good idea. They will probably suggest that it is not.

Clearly, performance management is broken. Let’s explore why it’s broken and look at some ways to fix it.

The Failure of Cascading Objectives

In classic performance management, the broader company objectives provide the framework which is cascaded into the different departments and then finally delivered as individual objectives to staff. While this may certainly sound like a logical approach, many find the entire process confusing, subjective, and frustrating.

One of the biggest issues with the cascading objectives approach is that it is a one-sided conversation. Many employees, especially at the lower levels, find it difficult to understand the goals set out for them by management with respect to their actual roles. Since the approach does not allow the goals of the staff to be centered around their jobs, there is often a disconnect between what the employee is hired to do in the first place versus what they are asked to accomplish by the end of the year.

Another issue with the cascading objectives approach is that the process does not allow for much flexibility. Strategic goals established by management at the beginning of the year can easily change after some time. But classic performance management tools can be difficult to use, and executives are often reluctant to update their goals and go through the entire process again.

Finally, because managing cascading objectives is so time-consuming, running the exercise always requires extensive monitoring by HR. The problem with this top-down approach is t takes too much time. By the time the process reaches lower-level staff, the allotted timeframe for the entire exercise has already passed.

With these challenges, it is easy to see why many organizations have chosen to give up on performance management entirely. But before you throw in the towel, shouldn’t you consider some alternatives?

What if we tell you that there is a better approach? One that brings the entire performance management exercise back to what it was originally meant to measure – results. Introducing Community™ Performance from Birches Group.

Why Do You Need Performance Management, Anyway?

Community™ Performance

In our article about pay for performance, we highlighted the key differences between recognizing employee growth in their job and rewarding employee achievement. The former is focused on measuring the accumulation of skills and knowledge in staff as they become more expert in their job roles. This growth should be recognized through pay movement. Employee achievements, on the other hand, should be measured and rewarded with one-time recognition through bonuses or other, similar tools.

Like the performance of the stock market, past achievement does not guarantee future achievement. Therefore, performance should not be the basis for salary movement. Instead, achievements attained during the performance year should be celebrated and rewarded relative to that year.

Linking Performance to Purpose

One of the most glaring flaws of classic performance management is that it sets goals for staff that are often irrelevant to their jobs. Birches Group’s Community approach to performance management centers its expectations on performance to the actual definition of the job level. While specific initiatives set for each job may change year after year, the purpose of the job level remains the same.

Going back to Community’s approach that jobs at every grade level can be evaluated using only three factors – Purpose, Engagement, and Delivery – the same can be used to measure performance by simply asking three questions:

Purpose – Does the employee have good ideas?
Engagement – Did they listen and adapt to customer feedback?
Delivery – Did they deliver on time with high levels of quality?

Using an approach that measures achievement by linking it back to the job evaluation factors, this provides organizations a performance management system that is standardized, simplified, and can easily align with objectives across different grade levels and teams.

When the focus of measuring achievement becomes purpose-driven, employees will better understand how their objectives contribute to the overall mission of the organization, resulting to a more engaged and motivated workforce. Equally, this can allow employees the responsibility for setting their own initiatives in a way that contributes to the organization’s strategic priorities giving them ownership of their own performance.

Focusing on the Good

In traditional performance management, only the achievements of high performers are celebrated often causing the rest of the staff to feel demotivated and ignored. Because it uses a five-level rating system, many see the Achieve rating as inadequate. But the fact is most staff in an organization are reliable and satisfactory performers – those that deliver what is expected of them in a performance year. If most of the staff were able to carry out their jobs effectively by the end of the year, why only reward the achievements of an exceptional few?

Through Community Performance, we believe that achievement should be connected to reliable and satisfactory performance – celebrating the many good performers that are able to Achieve their primary purpose. Instead of a five-level rating system, we have developed a four-level rating system where there is only one level above Achieving the primary purpose of the job. This way, outstanding accomplishments achieved by an exceptionally few high performers during the year can be rated accordingly, but still allowing majority of staff to be rewarded.

360° Performance

Classic performance management applies a top-down approach where only the direct supervisor provides feedback on an employee’s performance. While it is the supervisor that would be familiar with the work of their staff, allowing for only one perspective can create room for partiality.

Additionally, the standards used in classic performance management has not always been clearly defined, making it possible to have differing interpretations among supervisors leading to inconsistent ratings despite similar levels of performance among some of the employees.

Our Community performance management approach allows for multi-rater perspectives. By applying our 360° feedback from the supervisor, peers, and external clients, this gives depth to the assessment and allows for a more holistic and objective outlook of one’s performance.

Traditional performance management has left many organizations confused and frustrated. But measuring performance remains essential to good workforce management. It provides an opportunity to link everyone’s contribution to the success of the organization. Rather than giving up on performance management, Birches Group is here to help your organization provide structure and clarity. Contact us to learn more.

Bianca manages our Marketing Team in Manila. She crafts messaging around Community™ concepts and develops promotional campaigns answering why Community™ should be each organization’s preferred solution, focusing on its simplicity and integrated approach. She has held various roles within Birches Group since 2009, starting as a Compensation Analyst and worked her way to Compensation Team Lead, and Training Program Services Manager. In addition to her current role in marketing and communications, she represents Birches Group in international HR conferences with private sector audiences.

PAY FOR PERFORMANCE – HR’S BIGGEST EPIC FAIL

Written by Bianca Valencia on March 11, 2021. Posted in Resources.

Recognizing and rewarding employees for their contributions is required to motivate and retain staff. But “Pay for Performance” as we know it just doesn’t work!

For the longest time, companies have used performance ratings to decide merit pay increases and sometimes, annual incentives. Typically, merit increases are determined according to a combination of performance ratings and position in range (compa-ratio) – those with a combination of higher performance ratings and lower compa-ratios are eligible for higher increases, while those with lower ratings and higher compa-ratios get less. The idea is that such an approach provides a differentiated reward to those with better performance, while ensuring that, on average, the company is paying at the market rate (compa-ratio of 100).

The level of differentiation between strong performers and good ones isn’t much with annual salary budgets of 3% or less in many countries. Employees don’t get excited about getting an increase of 3.2% instead of 2.9%. It’s not really motivating, and does little for retention, which are the two primary goals. Not to mention employees and managers probably hate your performance management system and do not trust the results are fair.

What’s Wrong with Pay for Performance?

Putting aside that last thought, and assuming your performance management approach is working well and is perceived by management and staff to be fair and effective, the problem with pay for performance is one of alignment. Pay for performance rewards a one-time achievement (as measured by the annual performance rating) with a salary increase forever. That’s a huge misalignment!

Merit increases are essentially “baked in” and will remain a part of salary until the employee leaves the organization. On the other hand, performance is variable, and usually changes from year to year. If an employee is a high performer one year, and gets a “high” merit increase, and then in the next year, their performance is lower, how much do they give back? Yeah, right. The penalty for lower performance is a smaller increase going forward.

Using annual performance assessment to determine salary increases is crazy.

Alignment is Key

To align your pay for performance strategy, the first thing you need to change is the role performance management plays in determining rewards. Birches Group believes performance management, which measures periodic, time-bound achievements, should be used to grant one-time recognition such as bonuses. When performance is higher, bonuses go up. If performance drops, bonuses go down, sometimes to zero. You should do something else for salary movement. But what?

Using Skills to Recognize Growth

In Birches Group, we believe that pay movement should reflect one’s experience. As an employee gains more experience in their job over time, they develop a deeper understanding of their role and accumulate the necessary skills that enable them to be more efficient and produce results of increasing quality. Linking an employee’s growth in skills and knowledge to the determination of their salary movement makes sense, and it’s totally aligned. The accumulation of skills and knowledge stays with your employees and can be applied continuously in the future. Skills are like an annuity that keeps paying over and over – like salary! The challenge with such an approach has always been how to measure skills and knowledge. Until now.

Birches Group Community™ Skills provides a framework for measuring experience. Skills uses five skill levels – Basic, Proficient, Skilled, Advanced, Master – anchored to our job levels. For each job level, explicit measures or milestones are defined, enabling managers to evaluate employees’ accumulated skills and knowledge. Companies can link their compensation administration to the progression of Skills in any number of ways, and provide increases based on employee growth in their jobs rather than performance.

The New Pay for Performance

Employee’s should be recognized for both the growth they demonstrate in their job and their achievement during a performance period. By structuring your pay for performance philosophy using two concepts instead of just one, you can solve the alignment issue and create a pay for performance program that works.

If an organization’s goal is to motivate and engage their staff, the approach must be clear and fair. By linking salary movement to growth in skills and knowledge, you will be paying for increased capacity, while also recognizing achievement. Contact us to learn more about our Community™ approach to recognition and reward.

Tag: community performance