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Psychology At Work

Psychology At Work

An Oath for Performance Management: 'First, Do No Harm'

November 10, 2011
Related Topics: Strategy and Management
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I drafted the following article a few years back when I was gainfully employed by a Fortune 100 company as head of HR. Thankfully, wiser heads in our PR department kept me from publishing it, thinking it might shock a few board members. Reading Talent Management's special report on performance management gives me some hope that performance management has made strides since then toward being a net plus in the business world. But has it? Do our systems motivate -- or alienate -- the bulk of our employees? Do we need need a Hippocratic Oath nailed over the desk of every HR person? Let me hear from you after you read this:

The title of a recent article making the rounds of the executive suite is “Why We Hate HR.” The author’s thesis is not subtle: “ The human-resources trade long ago proved itself, at best, a necessary evil – and at worst, a dark bureaucratic force that blindly enforces nonsensical rules, resists creativity and impeded constructive change.”  Gee, really makes you feel good about your chosen profession, doesn’t it?

The author does have a point. Too often, well-intentioned human resources people create programs which have nothing to do with the business and become a wasteful, paper pushing exercise. Think about it – what is the first thing a newly minted HR exec in a company typically does? He or she immediately creates, or borrows from a former employer or consultant, some sort of performance/talent management system and jams it through the organization. The CEO, clueless as to what to expect out of HR, enthusiastically embraces it (and the promptly forgets all about it).

Never mind if it is not directly linked to the business strategy of the firm. Never mind if it uses language and terminology totally foreign to the firm’s culture. Never mind if it consumes time and resources and spits out results never acted upon and quickly forgotten.

That executive has created something he can brag about at the next SPHR meeting and stick on his resume. Might even get a raise from the uninformed CEO – hey, HR finally “did something.” Even if the system didn’t create value, but destroyed it.

I have long believed we need our own version of the Hippocratic Oath for HR: “First, Do No Harm.” Many, if not most, of the efforts we as a discipline are inflicting upon corporate America are doing more harm than good. No wonder they hate HR.

I saw some quantitative research recently in a private briefing from the Corporate Leadership Board that confirmed what many of us had always suspected. Performance management systems in most companies are worse than a waste of time – they destroy enterprise value and chase off some of the best people. The data, focusing on personal development plans, showed there is absolutely no correlation between the simple presence or absence of a plan and the personal growth of the individual. The data did demonstrate a direct correlation between a bad plan (defined as not sufficiently customized, achievable, credible and committed to by management) and a decline in employee potential. Although the study did not analyze other performance management processes, like performance reviews, I am confident the results would be similar. Let me summarize their findings: it is better to have absolutely no performance management system in place than anything less than a great one.

What about the administrative costs? I was asked to speak to a group of human resource managers at a well-known global  company not too long ago. They were very proud of their performance management system – lots of charts and boxes of different colors with lines snaking between them. Looked like the wiring of an airliner’s flight deck. Apparently (I was so confused I quit trying to figure out how it worked) it linked individual assessment back to compensation, with the notion of lowering overall payroll costs by limiting increases for those not performing at a certain level. Made sense. I asked them for how many (of three thousand) had the system recommended no annual increase. Three. I AM NOT MAKING THIS UP, and this is a company you all know. We did some quick calculations, and estimated the organization had spent approximately 100,000 management hours around the world to save $18,500 in payroll costs (not sure what ever happened to the poor threesome). You do the math on the ROI.

This might be an extreme example, but examine your own systems. If you aren’t in a forced ranking environment – which has its own problems, not to mention a chilling whiff of Darwinistic excess – I submit the return you are getting on performance management is a negative one, perhaps shockingly so.

But there are solutions. In the best companies, with properly calibrated performance management systems, HR is a positive difference maker, a game breaker. When we get it right, and this is key – when the corporation “goes all in” in support of our efforts – there are few levers more powerful than performance management to drive enterprise value and motivate your best people.

But until then, “First, Do No Harm.”

***

Next week I will come back from the dark side and focus on those positive changes we can make in performance management systems. In particular, the ready availability of valid and reliable psychological measurements offer intriguing possibilities for performance management, and I will share with you some ideas from the front lines of research.

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