One of the most debated issues among Human Resource professionals for the past several years has been the back and forth arguments regarding effective performance appraisal processes.  Everyone seems to have their oar in the water, anxious to join the debate about what works and what doesn’t.

What companies should do, and what they shouldn’t.

In one corner you have the performance management crowd who want to divorce pay increases from the performance appraisal process.  Two separate discussions.  They prefer to focus attention on performance improvements and career counseling – issues that tend to have a longer term focus. Looking forward, not backward.  The subject of pay determination (the increase) would come later, during some vaguely defined subsequent conversation.

In another corner you have the so-called traditional practitioners, those who tie rewards directly to the work effort and in doing so tend to combine performance, reward determination and career counseling steps into a single conversation.  Performance improvements and the where-are-we-going? discussion are the epilogue here, not the main topic.

And finally you have the employee perspective, those who have delivered the performance and await management’s assessment and reward determination.  They want to see, and expect to see a direct connection between their efforts (performance) and a subsequent connecting reward (pay increase).

What’s wrong with performance appraisal?

Part of the reason for such active and long lasting debate between often opposing viewpoints is that performance appraisal systems are flawed; we all recognize that they are the object of numerous well-deserved criticisms.

• Managers do a poor job of it.  Whether it’s lack of training, lack of interest or simply an attitude of “I’ve got more important issues to deal with,” the result is often rushed, inadequately thought out and . . . short.

• Should pay increases be tied / linked with performance?  Appraisal conversations run the gamut from emphasizing the past review cycle’s performance to “looking forward for a more productive tomorrow.”  The cause-and-effect pay increase may or may not even be discussed.

• Favored son (or daughter) treatment.  The “I like you” or opposite syndrome, regardless of performance.  Fair treatment can be a casualty if appraisals are too subjective.  Refer again to the training issue.

• Job responsibilities not clarified. When the manager expects performance “A” and the employee thinks “B” is called for, and the outdated description shows a muddled “C” – what follows is going to be an awkward conversation.

• Forms gone wild.  Human Resources and systems people always tinkering with forms, creating ever longer, more complicated processes.  The usual result is a manager’s passive resistance and poorly handled assessments.

• Process evolution.  A good idea evolved into something bad, something feared, something to be avoided.  Other than the potential for a pay increase, almost nobody looks forward to these discussions.

• The focal date review.  “Let’s do these things all at once.”  Procedures that mass produce performance appraisal forms and meetings usually result in a loss of quality – and credibility for the process.  Pity the manager who has ten of these to work on at the same time.

What’s good about performance appraisal?

The process of performance appraisal has been around since the first manager – subordinate conversation, and that learning curve of experience has brought about a number of solid advantages:

• How else are you going to tell an employee how they’re doing?

• If your compensation strategy is to have a pay-for-performance program, you’ll need performance appraisal to assess the employee’s contribution, and to somehow assign a corresponding reward – to pay . . for. . performance.

• Employees expect a connection between performance and pay.  That’s what they’re listening for during the performance discussion.

• It makes sense to periodically review performance, to eliminate the need for employees to stress over when to ask for a raise.

During any performance appraisal discussion the employee’s first question (asked or simply thought) is always going to be, “how much is my raise?”  If you’re not prepared to discuss that, even mentioning your “recommendation,” you’re in trouble.  Because employees tend to pay closer attention to career counseling and next performance steps after the raise for past performance has been resolved.

When an employee expects a performance appraisal discussion to include a reference (at least) to a likely pay raise, and you don’t cover that topic, the meeting will go rapidly downhill from there.

• They won’t be hearing your thoughts for the future, as they’ve stopped listening.  You’re not talking about what they want to hear.

• Frustration and lost engagement are going to seep into body language, tone and perhaps even conversation, with the recognition that pay-for-performance is somehow not viewed as a primary concern by management (by you).

• To make the assessment process work employees need to be engaged in the  conversation.  Otherwise what you’re left with is delivering a lecture, a boring monologue to a half-interested party who only hears bla-bla-bla.

What do I think?

I like to connect rewards with performance, because performance rewarded is performance repeated.

I like to acknowledge the elephant in the room, that employees want and expect that their performance appraisal meeting would cover reward determination as a key component, even if senior management approval remains pending.

I don’t like to artificially separate performance from reward, as if somehow the two aren’t connected.  The employee considers it a solid, direct line connection.

Go ahead and disagree, if you like.  There are many valid points of view on the subject, and no single answer works every time, for every organization.

But now you have my two cents.

I’ve never been particularly good at mathematics, and yet have made for myself a successful career in Compensation.  Now, why is that?  One would think that all us comp folks are strictly numbers people, focused on statistics, surveys and regression formulae.  On the other hand, math experts often fail to rise to the top of my profession.  Counterintuitive?  Another quandary to ponder over.

Why is it that some compensation people manage to succeed (climb the specialist ladder into management ranks) while others don’t?  There may be several reasons for this, but I think a person’s persona has a lot to do with it.

Changing View of Compensation

Effectiveness as a professional in Compensation isn’t (or shouldn’t be) all about the numbers, but equally as much about the people affected by those numbers.  A successful practitioner should be able to understand their organization’s business as well as minding the pulse of employees; those who should be treated better than figures on a spreadsheet.   When you consider the human factor as little more than tiny boxes on an organization chart, then your ability to relate to and solve human factor problems will be limited by your ignorance of the employee relations impact that naturally follows your recommendations.  Effective compensation is more than simply adding up the numbers.

Do you remember seeing the HR analyst with the pocket protector and a bunch of pens in the shirt pocket?  That would be the one walking the hallway laden down with surveys and statistical analyses.  That vision personifies the traditional view of “the comp guy.”  This was the master technician who lived with the charts, graphs and regression formulae, but who failed to understand the people impact of their work.

Today, those who lead the application of best reward practices are cut from a different cloth, at least in most companies.  Compensation people are no longer confined to a cubicle or an out-of-the-way office, but increasingly are stepping out among the employees, developing an understanding of how the business operates, as well as their ability to effectively partner with internal business clients.

Sensitized practitioners know that the process of compensating employees should be about the opportunity for rewards, and about how those rewards can influence employee behavior, for good or ill.  Therefore the success of the solutions provider lies in being able to creatively assist managers in achieving their objectives, while at the same time adhering to equitable and consistent policies and procedures.  It’s not about quoting policy with a shrug of the shoulders.

What’s the Color of Your Hat?

Something else to think about; what role does the Compensation function play in your organization?  How is the Compensation practitioner viewed both by employees and by management?

• Policeman vs. Gatekeeper: the proper application of responsibilities is not to simply say yes or no, but to encourage an open process of ideas and practices that operate within established policies and procedures.  Nobody likes the fellow who can offer little more in the way of help than quoting from the company policy manual.  That’s not making a contribution.

• Numbers vs. People: are your thought processes employee-oriented, or is the understanding that real people are affected by these policies and procedures lost on you?  A business-only focus that ignores the human factor in driving success is inevitably tripped up by predictably lower morale and the employee disengagement that follow such insensitivity.

• Policy vs. Flexibility: are you one who quotes policy as the supposed answer to every manager’s question, or are you instead open to creative and constructive possibilities?

When you tell a manager that the decision remains with them, that you’re only offering advice, their reaction is often startling.  You’ll be able to actually see their body relax.   No longer feeling challenged, you’ll be able to reach them with helpful suggestions, because their instinctive defensive wall will be down and their minds open to possibilities.

• Analysis Paralysis vs. Solutions-provider: being able to make timely decisions vs. being caught up with a constancy of analysis that never seems to move toward a decision point.  Some call that phenomenon “analysis-paralysis,” while others pin on the label “treadmill management.”  Do you have a reputation as a decision-maker or as an analyzer?

When you consider the compensation people you deal with in your organization, are they the good guys or the bad guys – the white hats or the black?

Which are you?

Really?  Seriously.

Sometimes a warning flag needs to be waved more than once.   Because sometimes the decision-makers out there just don’t get it.   After all, goes the wide-eyed and innocent lament, what’s the big deal if you give an employee a bogus title?  Is anyone being harmed?  It doesn’t cost anything, right?

Some Human Resource advocates even claim that offering an employee a special title is a harmless and inexpensive reward, one that doesn’t raise employer costs.  It’s nothing more than a feel-good gesture.   It also raises the morale of affected employees.

I don’t think so.  So pay attention to the red flag I’m waving.

Why does this happen?

• Managers grant esoteric titles to those for whom they have limited means of reward.  “I can’t give you the increase you deserve, so let’s change your title.”  Like greasing a squeaky wheel for a short term fix they want to do something to keep the employee quiet.

• Employees are given opportunities (titles) where none should exist.  Have you experienced the long serving Secretary / Administrative Assistant promoted to Office Manager, while performing the same job?

• As a salve to employees a “special” title is used because the position (usually clerical) is considered so different from other jobs that it needs to be specifically identified.  Special titles can also be seen as reflecting on the importance of the managers themselves.

You Can Reap A bitter harvest

Let me explain what you can expect from planting these problem “seeds.”

• Role clarity (job duties, business impact, decision-making, etc.) behind questionable titles becomes blurred.  This in turn generates more confusion as the company creates Senior Managers and Group or Area Directors and other in-between titles to differentiate the “real” jobs from inflated titles.

• When attempting to determine market competitiveness the less accurate the title is in relation to the work performed, the more likely your analysis will be skewed.  Benchmarking unique, employee-specific and inflated titles hampers an accurate assessment of your competitiveness.  This could have real cost impact.

• Those with inflated titles will expect the perks or privileges that accompany the title, and their absence could cause difficulties.  What do you think went through the Receptionist’s mind when her title was changed to “First Impressions Manager?”  It’s an awkward conversation when you tell an employee that the import of their new level in the organization is “title only.”

• Inflated titles can be a detriment to incumbents as well, such as the “Director” who now only qualifies for a “Manager” title with a prospective employer.  These employees have limited opportunities outside your company because other employers would be reluctant to hire someone where the title is lateral or even backward to what they currently hold.  The result could be that mediocre performers remain with your company.

• The natural extension of inflated titles is inflated grades / salary ranges, as the bogus “senior” position would be placed in a higher grade than the “intermediate” position.  This practice will gradually increase your fixed costs without a corresponding rise in either performance or capability.

• Employees don’t like giving up inappropriate titles.  Thus employee relations issues will likely develop if you try to correct past practices.  You may have to develop creative “buy out” scenarios or grandfather employees.

What to do

If you are in a situation with inflated, redundant and confusing job titles, what steps can improve your lot?

• Organize a cleaning exercise: start with the low hanging fruit by eliminating all questionable titles that are unoccupied.

• Accompany that initiative by implementing tighter authorization procedures before a “new” title is created.  This would cut off the flow of new problems even as you address the core issue of incumbents.

• The company would need fewer job descriptions if the wording was more generalized.  Standardized titles would clear away much of the role responsibility confusion.

Fewer titles provide greater role clarity for your organization, improved accuracy in assessing pay competitiveness, more control of labor costs and higher morale as employees know where they stand and what they must do to succeed in your organization.

A final caution: be careful of setting up titles without occupants, ”in case we want to promote someone down the road.”  Guess what?  You will.