Performance Management

Don’t Reward A While Hoping for B

February 23, 2016 By Nagesh Belludi Leave a Comment

Effective Award Systems

We do what we are rewarded for doing. We are strongly motivated by the desire to maximize the positive consequences of our actions and minimize the negative consequences. Academics identify these aspects of behavioral psychology using the monikers “expectancy theory” and “operant conditioning.”

Flawed Reward Systems

Reward systems ought to commend positive behavior and punish negative behavior. But many organizations tend to reward one type of behavior when they really call or hope for another type of behavior. For instance,

A manager who wants his sales force to create long-term customer relationships mustn’t reward salespeople for new business from new customers, but for retaining customers and expanding sales to them.
A project manager focused on work quality shouldn’t reward a team for completing a project on time.
At institutions of higher learning, especially at prestigious universities, a professor’s primary responsibilities ought to be teaching and advising students. However, the academic rewards systems assert that the primary ways to achieve promotion and tenure are through successful research and publishing. Hence, given the constraints of time, a professor is likely to dedicate more time to research at the expense of quality teaching. Alas, mediocre teaching isn’t censured.
As I described in my article on “The Duplicity of Corporate Diversity Initiatives,” managers who extol the virtues of “valuing differences” stifle individuality and actively mold their employees to conform to the workplace’s existing culture and comply with the existing ways of doing things. Compliant, acquiescent employees who look the part are promoted over exceptional, questioning employees who bring truly different perspectives to the table.

“On the folly of rewarding A, while hoping for B”

In 1975, Prof. Steven Kerr wrote a famous article titled, “On the folly of rewarding A, while hoping for B” that’s become a management classic. Over the decades, this article has been widely admired for its relevance and insight. The article (the 1975 original is here and the 1995 update is here) provides many excellent examples of situations where the reward structure subtly (or sometimes blatantly) undermines the goal. The abstract reads,

Whether dealing with monkeys, rats, or human beings, it is hardly controversial to state that most organisms seek information concerning what activities are rewarded, and then seek to do (or at least pretend to do) those things, often to the virtual exclusion of activities not rewarded. The extent to which this occurs of course will depend on the perceived attractiveness of the rewards offered, but neither operant nor expectancy theorists would quarrel with the essence of this notion.

Nevertheless, numerous examples exist of reward systems that are fouled up in that the types of behavior rewarded are those which the rewarder is trying to discourage, while the behavior desired is not being rewarded at all.

Idea for Impact: “Put Your Money Where Your Mouth Is”

Aligning Reward Systems If you see behavior in your organization that doesn’t seem right or doesn’t make sense, ask what the underlying reward system is encouraging. Chances are that the offending behavior makes sense to the individual doing it because of inefficiencies in your reward system.

Take stock of your reward systems. Effective systems should induce employees to pursue organizational goals by appealing to employees’ conviction (or intrinsic motivations) that they will personally benefit by doing so. To inspire employees, translate levers of extrinsic motivation at your disposal to intrinsic motivation as I elaborated in my previous article.

Idea for Impact: Make sure that you understand and clearly communicate expectations, and reward what you really want your employees to achieve. Don’t encourage a particular behavior while promoting an undesirable one through your rewards and praises.

Effective Goals Can Challenge, Motivate, and Energize

January 12, 2016 By Nagesh Belludi Leave a Comment

One of my blog readers asked me to write more about goal-setting and performance against goals. In response, I studied the work of University of Maryland’s Edwin Locke and University of Toronto’s Gary Latham, two renowned researchers on goal-setting. Here is a summary.

Effective Goals Can Challenge, Motivate, and Energize

Goals Impact Performance in Several Ways

Goals can help direct: A person’s goals should direct his/her attention, effort, and action toward goal-relevant actions at the expense of less-relevant actions.
Goals can help motivate: A person’s goals can motivate him/her to pursue specific outcomes. The person can be motivated only when his/her goals are sufficiently challenging and can nudge him/her to put in special efforts.
Goals can help persist: A person is likely to persist at his/her efforts when his/her goal is worthy enough to attain.
Goals can trigger learning: Goals can either activate a person’s knowledge and skills that are relevant to performance or induce the person to acquire such knowledge or skills.

Best Practices for Goal-Setting and Performance

Specific, difficult, but attainable goals lead to better performance than easy, vague, or abstract goals such as the general-purpose exhortation to “do your best.” Hard goals motivate because they require a person to achieve more in order to be content with his/her own performance.
Goal specificity and performance share a positive, linear relationship. When a person’s goals are specific, they direct and energize his/her behavior far more effectively than when they are vague and unspecific.
Performance is directly proportional to the difficulty of a goal as long as a person is committed to the goal, has the requisite ability and resources to achieve the goal, and does not have conflicting goals.
Taking on excess work without access to the necessary resources to realize the goals (“overload”) can moderate the effects of goals.
A team performs best when the goals of the individuals on the team are compatible with the team’s goal. Therefore, when an individual’s goals are incompatible with his team’s, his/her contribution to the team will be subpar.
The goal need not be in focal awareness all the time. Once a goal is accepted and understood, it resides in the periphery of the person’s consciousness and serves to guide and give meaning to his/her actions.
While long-term goals are relevant and helpful, most people find short-term goals more effective because they channel a person’s immediate and direct efforts and provide quick feedback. This suggests that it’s best to divide long-term goals into concrete short-term objectives.
Self-efficacy plays a key role in the achievement of goals. A person is much more likely to buy into and pursue goals if he/she believes himself/herself to be competent enough to reach those goals. The most effective goals must therefore embrace a person’s strengths—such goals help him/her strive towards success by leveraging the best of who he/she is and what he/she can do.
One reason a person may lack self-efficacy is his/her past failures with undertaking similar goals. Such a person may believe that he/she may never reach his/her goals and should first undertake a series of small, near-term goals instead of difficult, distant goals. The person’s success with a series of smaller goals can boost his/her confidence and can inspire him/her to undertake larger goals. For example, a chain-smoker will find the goal of smoking cessation daunting. He should therefore focus on smaller goals like gradually cutting down the number of cigarettes he smokes every day. Experiences of goal achievement can build up momentum to tackle the larger goal.
Goals are not effective by themselves. Feedback is the most important moderator of goal-setting because it tracks the progress of performance towards goals and creates new sub-goals. If a person finds his/her progress towards a goal unsatisfactory, the feedback he/she receives can drive corrective efforts to develop new skills or pursue the goal in a new way.

“Goals Gone Wild”: The Use and Abuse of Goals

July 7, 2015 By Nagesh Belludi 2 Comments

The Use and Abuse of Goals

An article in The Economist (7-March-2015 Issue) discussed the side effects of goal setting, more specifically the perils of overprescribing goals. This article echoes my earlier commentary on “The Trouble with Targets and Goals.”

The Economist article mentioned a Harvard Business School paper titled “Goals Gone Wild” by Lisa D. Ordonez, et al. This engaging literature review discusses many of the predictable side effects of goal setting on individual and organizational performance:

When goals are too specific, they can narrow people’s focus. People tend to fixate on a goal so intensely that they overlook aspects of a task that are unrelated to the goal. Even if unrelated, these overlooked details may be significant enough to warrant attention.
When people are assigned too many goals, this can encourage them to concentrate on tasks that are comparatively easier to achieve.
When goals aren’t afforded an appropriate time-horizon, they can distort long-and short-term priorities. Short-term goals can steer people toward myopic behavior that harms their organization in the long term. Conversely, long-term goals can be vague about the immediate course of action and obscure what’s required in the short term.
When goals are too challenging, they can discourage risk-taking. As a result, people may use deceitful methods to reach their goals or even misrepresent their performance levels—they may exaggerate their feats, conceal underperformance, or claim unmerited credit. The authors acknowledge the complexity of setting goals “at the most challenging level possible to inspire effort, commitment, and performance—but not so challenging that employees see no point in trying.”
When goals are complex, specific, and challenging, they can push people to focus narrowly on performance and neglect opportunities for experiential learning.
When goals are comparative, i.e., when goals pit employees against their peers, goals can hinder cooperation between people and even create a culture of unhealthy competition within a team.
When goals, by definition, try to increase extrinsic motivation, they can subdue people’s intrinsic motivation. Goals can challenge some people far more or far less than necessary if the intrinsic value of the job itself is already deeply motivating.
When goals fail to consider individuals’ skills or prior achievements or when they are not tailored enough, they can be too easy for some and too difficult for others. On the other hand, customizing goals can lead to feeling of discrimination or favoritism.

A Warning Label for Setting Goals

The authors propose a clever cautionary graphic sign and conclude,

For decades, scholars have prescribed goal setting as an all-purpose remedy for employee motivation. Rather than dispensing goal setting as a benign, over-the-counter treatment motivation, managers and scholars need to conceptualize goal setting as a prescription-strength medication that requires careful dosing, consideration of harmful side effects, and close supervision.

Idea for Impact: Set objectives that are not only well designed, but also challenging and attainable.

Collegial Goal-Setting and Goal-Monitoring?

April 28, 2015 By Nagesh Belludi Leave a Comment

An article in The Economist (7-Mar-2015 Issue) mentions a new trend in setting and monitoring goals. The “Quantified Work” system lets employees collaborate with each other to set targets for their peers.

Collegial Goal-Setting and Goal-Monitoring Apparently, this collegial system has improved performance and transparency at Google, Twitter, Intel, and Kroger, among other organizations. “Quantified Work” is a checks-and-balances system which allows peers to set and monitor goals for each other. This both enforces accountability and ensures that goals are neither too hard nor too easy.

Kris Duggan, CEO of BetterWorks, the Silicon Valley startup behind “Quantified Work,” argues, “The traditional once-a-year setting of employee goals and performance review is totally out of date. To really improve performance, goals need to be set more frequently, be more transparent to the rest of the company, and progress towards them measured more often.” Amen to that.

Interestingly, the article mentions that achieving 60–70% of the goals thus set is considered normal rather than a failure. The article also cautions that salary raises and bonuses should not be linked to these goals. I deduce that “Quantified Work” is more for collaborative task-and-deadline management than for meaningful employee performance assessment.

In my consulting practice, I have tested collaborative task management. It’s not as efficient as it purports to be: employees tend to get carried away and spend more time adding goals and checking performance than doing actual work.

The Trouble with Targets and Goals

March 17, 2015 By Nagesh Belludi Leave a Comment

The Trouble with Targets and Goals

In a well-known 1992 Harvard Business Review article as well as a book on translating strategy into action, Robert Kaplan and David Norton explained the need for a “balanced scorecard.” They encouraged leaders to develop tools with which to monitor the performance of any organization. The authors explained, “Think of the balanced scorecard as the dials and indicators in an airplane cockpit. For the complex task of navigating and flying an airplane, pilots need detailed information about many aspects of the flight, like fuel level, airspeed, altitude, bearing, etc.”

Goals are effective apparatus—a persuasive system indicating what achievements matter the most to an organization. Well-defined objectives, expressed in terms of specific goals, often direct an organization’s performance, sharpen focus on the execution of the organization’s strategic and operative plans, and boost productivity.

In terms of an individual within a company, goal-setting is especially important as a way to provide ongoing and year-end feedback. You can give employees continuous input on their performance and motivate them by setting and monitoring targets.

Still, there are four things to look out for when setting and managing targets:

Some organizations get so overwhelmed with setting and meeting targets that managers tend to adopt whatever behaviors necessary to meet the goals set by their superiors.
Some organizations get carried away and set too many targets. While goals are beneficial, having more of them is not necessarily better. In fact, too many targets can lead to stress, muddled efforts, and organizational atrophy. In this instance, employees feel as if they’re being asked to throw darts in multiple directions all at once. Adding to the confusion, priorities can even conflict with one another—e.g. decreasing production cycle-time while not hiring more workers or buying more equipment. According to a 2011 study by consulting firm Booz (now named Strategy&), 64% of participating global executives reported facing too many conflicting priorities. The celebrated management consultant Peter Drucker famously advised his clients to pursue no more than two priorities at a time:

Develop your priorities and don’t have more than two. I don’t know anybody who can do three things at the same time and do them well. Do one task at a time or two tasks at a time. That’s it. OK, two works better for most. Most people need the change of pace. But, when you are finished with two jobs or reach the point where it’s futile, make the list again. Don’t go back to priority three. At that point, it’s obsolete.

Sometimes, organizations can be so eager to reach a target that they institute an overly aggressive system (unreasonable “stretch goals“) in an attempt to drive people to heroic levels of performance. Instead, it’s best to have goals that represent what senior management thinks ought to happen, not the contents of their wildest dreams.
When grading an employee’s performance depends heavily upon that individual meeting his targets (e.g. bonuses promised to salesmen who achieve certain revenue targets,) it can pit employee against employee. This tends to create an unhealthily competitive environment with colleagues scrambling over each other to get to the client or show off their achievements to management. Conflicts and rivalry between employees is one of the dominant criticisms of the individual performance rating system and the forced ranking system that many companies currently practice.

Idea for Impact: In goal-setting, less is more and simple is better. A few well-chosen, consequential targets and goals can sharpen an individual’s or an organization’s focus and boost productivity. Too many targets can lead to stress and even disaster.

Performance Appraisal Systems “Don’t Meet Expectations”

November 26, 2012 By Nagesh Belludi Leave a Comment

Across the corporate world, the annual performance appraisal system has been reduced to a perfunctory exercise to “do what HR needs and check-the-box,” and produce paperwork to weed out the laggards and reduce liability against discrimination lawsuits. So much so that one company I know recently distributed copies of the book “Perfect Phrases for Performance Reviews” to hundreds of its managers to help “use relevant phrases and standardize the vocabulary” and “ease the whole process.”

Empirical evidence suggests that, taken as a whole, the annual performance appraisal system has failed to “meet expectations.” It produces no durable improvements in employee behavior and seldom assists the employees meaningfully with career development. Nor does it have a discernible impact on organizational development. Thanks to a system that is highly subjective and easy to game, this annual ritual has become a stressful exercise for managers and employees alike.

At many companies, performance appraisals center too much on filling out forms. The actual performance appraisal meetings tend to be uncomfortable encounters for both managers and employees. Much time during these meetings is devoted to disputing the self-evaluations of employees, summoning up their failings, and defending the employee rankings previously determined by a “consensus” process administered by HR. Besides, during the ranking process, managers tend to overstate the accomplishments of their own employees and put down other employees—after all, managers do not want to incriminate themselves and admit failure in managing employees as successfully as their managerial peers might assert.

Performance appraisal systems do not meet expectations

Core to this problem is that most managers fail to understand that employee performance management is about establishing relationships and ensuring effective communication about how employees, managers, teams, and organizations can succeed and create enduring value.

Performance management should not be limited to just once a year during the annual performance appraisal. Helping employees to reflect on their performance and learn from their mistakes, and coaching them should be part of the everyday interactions between employees and their managers. This way, the employees can solicit feedback promptly, know where they stand, and make small ongoing improvements. The managers do not have to wait until the appraisal time and then make an extraordinary attempt to convince their employees to correct themselves. The constant communication can eliminate any surprises for both the manager and the employee during the formal performance appraisal exercise.

As part of this informal practice, the managers can keep a diary on employee performance. Recording significant and relevant examples of an employee’s performance (achievements and shortcomings) can help the managers write objective performance summaries. In addition to diminishing the recency bias, the awareness that a manager might write up opinions may persuade an employee to pay attention.

For now, HR can develop a “Performance Improvement Plan” to overhaul the performance appraisal system and truly help improve individual and organizational performance.

More Ideas for Career Success

[Rating Errors] Beware of the Recency Bias

April 27, 2010 By Nagesh Belludi Leave a Comment

Preamble: This is a first of a series of articles on common mistakes in judgment. Even if the focus of these articles is on performance assessment of employees, the discussions hold in all forms of social judgment.

Common mistakes in social judgment

Recency Bias in Performance Assessment

Suppose that you have executed a project effectively and exceeded all expectations during the first ten months of a year. If your manager has overlooked all these achievements and rated you poorly based on a major roadblock your project encountered in November, then you are subject to a Recency Bias. Your manager is in effect evaluating excessively positively or negative, depending on what is most recent.

Many managers tend to rate an employee’s job performance based on a “what has he done lately” mindset. They do not weigh the employee’s performance from earlier in the year (or quarter, if their organizations use a quarterly review system) and tend to rely more on the employee’s performance in the period immediately preceding the performance evaluation deadline. Consequently, achievements and events that happened lately tend to bear more influence on the employee’s performance rating than achievements and events from earlier in the evaluation period.

The cognitive bias (positive or negative) where judgment is founded only on readily recallable recent experiences is termed the ‘Recency Bias’ or ‘Recency Effect.’ This is analogous to people tending to recall items that are at the end of a list rather than items that are in the start of the list. (See Wikipedia’s entry on serial position effect.)

Some employees may exploit the recency bias by being more resourceful and trying to stay in the boss’s good graces in the period leading to performance reviews. I know of a manager who every year organizes community service events at his boss’s favorite non-profit during November and stay in the boss’s good graces ahead of his annual performance review in December. I have also identified wily employees who underperform earlier in a year and shape-up in the months before a performance evaluation is due.

To Avoid Recency Bias, Maintain a Performance Log

If you are a manager, maintain an informal log or diary where you can record each employee’s accomplishments, contributions, praises, and comments from peers and management. When a performance evaluation is due, review all the significant and relevant examples of employee performance you have recorded and write an objective performance summary report. This ensures that you keep yourself informed of your employee’s work and demonstrates that you care about his/her current work and achievements.

As an employee, you can maintain your own log or diary of your achievements. Review this information with your employee once every week. Whether your organization requires a self-assessment or not, refer to this log at the end of the evaluation period, summarize your achievements and submit a concise report to your manager.

General Electric’s Jack Welch Identifies Four Types of Managers

February 6, 2008 By Nagesh Belludi 5 Comments

Jack Welch's Four Types of Managers

Four Types of Managers

Jack Welch, former Chairman and CEO of General Electric Jack Welch, Chairman and CEO of General Electric from 1981 to 2001, described four categories of managers in General Electric’s year 2000 annual report.

Type 1: shares our values; makes the numbers—sky’s the limit!

Type 2: shares the values; misses the numbers—typically, another chance, or two.

Type 3: doesn’t share the values; doesn’t make the numbers—gone.

Type 4 is the toughest call of all: the manager who doesn’t share the values, but delivers the numbers. This type is the toughest to part with because organizations always want to deliver and to let someone go who gets the job done is yet another unnatural act. But we have to remove these Type 4s because they have the power, by themselves, to destroy the open, informal, trust-based culture we need to win today and tomorrow.

We made our leap forward when we began removing our Type 4 managers and making it clear to the entire company why they were asked to leave—not for the usual “personal reasons” or “to pursue other opportunities,” but for not sharing our values. Until an organization develops the courage to do this, people will never have full confidence that these soft values are truly real.

Live by Corporate Values

Keep the company values front and center in people's mind Organizations face the challenge of developing and sustaining a culture that is both values-centered and performance-driven. They begin by developing mission and value statements that, in due course, become little more than wall decorations because the organization’s leaders and managers fail to uphold these values.

Nothing hurts morale more than when leaders tolerate employees who deliver results, but exhibit behaviors that are incongruent to values of the company. For instance, an organization that thrives on teamwork will suffer, over the long term, if a manager habitually claims all credit for his team’s accomplishments.

Idea for Impact: Core Values Matter!

As a manager, drive accountability. Hold employees responsible for their behaviors. Reward employees for proper behaviors and publicly discourage behaviors that do not uphold values. Do not make exceptions—exceptions signify your own indifference to the upholding of values.

As an employee, understand that an essential requirement for your success in your organization is your fit. Your behaviors must be congruent with the character and needs of your organization. Even if you are talented, you will not fare well if your behaviors are inconsistent with the values of your organization. Reflect on your behavior. On a regular basis, collect feedback from your managers, peers and employees. Seek change.

Keep the company values front and center in people’s mind.

Four Questions for Employee Performance Appraisals

July 22, 2007 By Nagesh Belludi Leave a Comment

Peter Drucker is widely regarded as the “Father of Modern Management,” and one of the most influential management philosophers of the modern era. In “The Effective Executive,” Peter Drucker advocates that a manager focus on an employee’s strengths when appraising his/her performance.

Four Questions for Performance Appraisals

Effective executives usually work out their own unique form of performance appraisal. It starts out with a statement of the major contributions expected from a person in his past and present positions and a record of his performance against these goals. Then it asks four questions:

What has he [or she] done well?

What, therefore, is he likely to be able to do well?

What does he have to learn or to acquire to be able to get the full benefit from his strength?

If I had a son or daughter, would I be willing to have him or her work under this person? If yes, why? If no, why?

Call for Action

Four Questions Managers Can Address in Employee Performance Appraisals Strong performance motivates outstanding performers. Therefore, managers must make it a priority to understand each employee’s motivation and strengths and provide objective, fair and consistent appreciation to keep him/her fully engaged.

Managers, however, often fail to realize the prospect of enhancing employee performance by targeting their efforts on each employee’s strengths. They often resort to deliberating over an employee’s shortcomings, and, thus attempt to develop abilities not inline with the employee’s strengths.

Address the above four questions when preparing the performance appraisal of an employee. These questions enable you, the manager, to reinforce the strengths of the employee and guide a career that focusses on his/her strengths.

Keeping a Diary on Employee Performance

December 8, 2006 By Nagesh Belludi 1 Comment

Keeping a Diary on Employee Performance

Blog reader Sasawat from Bangkok (Thailand) asks:

“I recently joined a multinational chemicals company that uses a performance appraisal system. I supervise seven engineers. To help me do their performance evaluations at the end of the year, should I maintain a diary to record their projects and actions?”

Most managers rely on employee performance in the period immediately preceding the performance evaluation deadline. Unfortunately, they do not weigh performance from throughout the year (or quarter, if their organizations use a quarterly review system.) Some employees exploit this behavior by slacking-off during most of the year and by shaping-up in the weeks before a performance evaluation is due.

Keeping a Diary on Employee Performance A log or a diary will help managers record employee projects and behaviors in one location. Clearly, recording significant and relevant examples of employee performance helps managers write objective performance summaries.

Recording events in a dairy every week, however, becomes overwhelming when you have seven employees. Instead, ask each employee to keep a diary of his/her achievements. Review this information with your employee once every week. Give regular, specific feedback, both affirmative and corrective. This ensures that you keep yourself informed of your employee’s work and demonstrates that you care about his/her current work and achievements.

When a performance evaluation is due, study the employee’s diary along with your notes, if any from your weekly meetings. You should not have to dig through your files or seek reports from various sources. You will have accumulated all the data you will need, in one place, to help you prepare for an effective performance evaluation statement and discussion.

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Performance Management

Flawed Reward Systems

“On the folly of rewarding A, while hoping for B”

Idea for Impact: “Put Your Money Where Your Mouth Is”

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Goals Impact Performance in Several Ways

Best Practices for Goal-Setting and Performance

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More Ideas for Career Success

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Recency Bias in Performance Assessment

To Avoid Recency Bias, Maintain a Performance Log

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Four Types of Managers

Live by Corporate Values

Idea for Impact: Core Values Matter!

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Four Questions for Performance Appraisals

Call for Action

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