Effective performance management systems are a competitive advantage

By Bob McKenzie

rsz_154015695Survey after survey of employees assessing the usefulness of their company’s performance appraisals indicate that management programs do NOT do what they are intended to do. Surveys have been conducted by very large firms such as PriceWaterhouseCoopers, Hewitt & Associates, and Watson-Wyatt. And, more informal surveys, by some Internet junkies, have also been conducted. Surprisingly, the data received over the past several years is fairly consistent.

In these surveys, over half of the responses from employees say the feedback is not fair or not based on an accurate assessment of the work they do. Over two-thirds of employees say they were surprised and disappointed by the ratings they received. The real kicker is that three-fourths stated that they received no concrete examples of specific behaviors (positive or negative) from their supervisors. The end result of most performance appraisals is that employees come out of these meetings feeling like they were just kicked in the shins and have no more desire to work hard.

It is no secret that organizations with effective performance management systems in place achieve better results. We do not need a survey or some empirical study to prove this. It just follows common sense and typical human behavior. In a great majority of cases, when an employee is told what needs to be done, it gets done.

What’s Wrong With the Current System?

There seems to be a human trait that makes us focus on the negative. Since most of us expect things to go right, we concentrate on times when things go wrong. In assessing any performance, managers generally only look at variations from what is expected—good or bad. And since good performance is expected, what managers measure are the mistakes that were made. Another problem with performance appraisals is that they take time—time we do not have. To save time, there are new software programs available, or often, forms are simplified to just checking off the boxes. The supervisor calls the employee into the office, gives the employee a piece of paper with a lot of check marks on it, and tells the employee to sign the bottom of the form… and the performance appraisal is over in less than thirty seconds.

Window of Opportunity May Have Opened?

Competitive Advantage Ahead

The way I look at it is this opens up an excellent opportunity for your company to be an employer of choice—one that the good people seek out as a favorable place to work. As the economy improves, many employees are looking to jump at the next opportunity. Why not make performance management a competitive advantage for your organization? The only true competitive advantage is your people—and how well they perform. The good companies will do all they can to make every employee shine.

Improve Future Performance

If you remember one thing about this article, remember this: The only purpose of a performance appraisal is to IMPROVE FUTURE PERFORMANCE! What was done last year is not good enough this year.  Likewise, what is done this year will not be good enough next year. With the world changing so fast and expectations of customers increasing, businesses must improve just to survive. The business leaders who embrace a culture of continuous improvement by giving honest and supportive feedback will thrive.


Here are some characteristics of an effective performance management system:


1. Measurable goals and objectives are determined prior to the review year. Having the ability to measure performance makes the appraisal a much simpler exercise.

2. Performance factors are defined for each position. The competencies for an accountant are different than the competencies for a computer technician. Items such as customer service skills, teamwork, and cooperation mean different things for each position. Acceptable performance for these factors must be defined at the beginning of the review period.

3. The system is customized to the organization. Off-the-shelf or generic tools are for generic companies. Effective organizations will institute programs that compliment their culture and organizational objectives.

4. A culture of continuous improvement is instilled in the workplace. To stay competitive, it is important to remember that what was done last year is not good enough this year. The companies that understand this, and incorporate this philosophy into their performance management processes, will be more likely to succeed.

5. Compensation is tied to performance. Tying performance improvement to compensation and pay increases gives employees more of an incentive to achieve better results.

6. Honest feedback, both positive and corrective, is provided. With measurable standards, it is much easier to assess the level of performance on all factors.

7. Feedback is continuous. An effective performance management system provides feedback to employees throughout the year. It’s not just an annual event.


Your People Are Your Only Competitive Advantage

For a performance management system to work well, all of your people, employees and managers, must be fully engaged in the supportive process of continually improving performance. Pretty soon, your competitors will be sitting up and taking notice.

Make it happen—implement a new system now.


Bob - 2013Bob McKenzie is certified as a Senior Professional of Human Resources (SPHR) and has over 35 years of human resources management experience. He currently is a member of the Society for Human Resources Management and is actively involved in the Small Business Resource Network and other community organizations. He can be reached at

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