Next Practices In Performance Management

Businesses are facing unprecedented challenges in the Covid-19 era, and the ramifications of these changes will be felt by organisations for quite a while. The need of the hour is to fundamentally change the way we do business. Work from home has gone from being a perk to an absolute necessity. Performance appraisals may not be the same anymore. At such a time, it is also important to reflect on the best practices followed by organisations and evaluate whether there is a need to update them too.

In a webinar conducted by the NHRD Network’s South Gujarat Chapter, Dr T. V. Rao, Father of Human Resource Management (HRM), Chairman, TVRLS and Founder and First President, NHRDN, talks at length on the topic “Some of the Best Practices in Performance Management for Leaders”. He opines on the assumptions that organisations make about employees, the need to de-link performance with rewards, and why it is time Best Practices make way for Next Practices in organisations in order to align individual goals with organisational goals. Corporate Citizen brings you excerpts from his riveting session

"The job of performance management is to make everyone take an interest in their job and in order to do so, the most important task is to create an environment where people enjoy the work they do"

Human is a Possibility

I now strongly believe that the Human isn’t merely a resource, the Human is a possibility. For several years when people told me this very fact, I didn’t believe them. But in recent years, I have started agreeing with this belief. When I was asked to speak on Performance Management and Best Practices, I wondered for a while whether I should speak of ‘best practices’ or ‘next practices’. My former colleague, C K Prahalad used to say that ‘Best Practices’ only make you secondary to someone else. So you should only talk about ‘Next Practices’.

I want to let out a secret to those born after the 1980s. The seed for Uday Parekh and me to envision HRD was sown by the performance appraisal system. Our assignment with Larsen & Toubro in 1974 was to examine their performance appraisal system and suggest a new better system. When we talked to people and got their inputs, we felt that we shouldn’t merely be talking about performance appraisal but we should be talking about it in the context of Human Recourse Development (HRD). That is where we conceptualised a new department called the HRD Department. From 1975 onwards, the L&T performance management system was called the HRD system. In the last 45 years, a lot of developments have taken place in performance appraisals. I myself have abandoned the term ‘appraisal’. I strongly advocate that we shouldn’t be talking about appraisal but rather be talking about performance management.

Human beings need significance

I want to start with the most important assumptions that are required to make any performance management system work. The first assumption that I want to talk is about why people come to work. As Sadhguru says, human beings are constantly evolving. The most important evolution is that people no longer just come to work to get their salaries. It is not the money which matters. If it was only money that mattered, you wouldn’t have found millions of migrant workers on the road walking all the way on foot along with their families for thousands of kilometres during the lockdown. The most important assumption we must re-examine is the reason why people come to work. Now people come to work because they want to enjoy what they do and they feel significant, not merely to get incentives and rewards. If you treat humans as beings who only work for money then you will see them as resources. But if you treat human beings like human beings, you will understand that a human being needs significance. Money is but a means to attain significance. There are a lot of things we can do to make people feel significant. I am sure most people have heard this story. Two people are laying bricks. On being asked what they were doing, one of them says, “I am laying bricks and my target is to complete a wall by this evening.” The other person when asked the same question says that “I am constructing a temple to bring peace on Earth so that people can live happily”. The second person sees meaning in what he is doing and hence he is likely to work with a lot more devotion than the first who is merely target driven. The conclusion is that people don’t come to work just to achieve their KRAs and get promotions, they come to work because they believe that what they are doing will serve a larger purpose. It is not money or incentives which make people enjoy the work, it is the way you treat them and make them feel.

The second assumption I want to clear is that performance management is not the job of the HR department. Performance management is, in fact, the job of every performer. In other words, every person is the manager of his or her performance.

"People come to work because they want to enjoy what they do and they feel significant, not merely to get incentives and rewards. Money is but a means to attain significance"

Performance is planned every day

The next thing I would like to say is that performance is planned every day, every week, every month, every quarter and every year. Performance planning is not to be limited to quarterly or annual targets, I think it must be planned every day. I plan my day when I go for a walk in the morning. I keep thinking about what I would do in the evening. At the end of the day, I decide the agenda for the upcoming day. There is no fixed system for planning this. Organisations need to develop their own system. We work about 2000 hours in a year. Even if you spend 1% of this time to plan your work, you are likely to do the other 99% extremely well. We do not like the Chinese very much at this point of time (Due to the conflict at our borders) but there is a Chinese proverb that says you should spend 70% of the time sharpening your axe before you cut the tree. If you plan in advance, the results are better.

The next thing I want to say is that we are budgeting every now and then. We are doing daily meetings. We have weekly review meetings. Everything that you do once you are out of your homes till the time you stop thinking of your office is performance. Performance is every second, every minute, every hour.

Performance conversations

The next area I want to talk about is performance conversations. Gone are the days when the boss has to initiate a performance conversation so that the junior can be helped to develop. Nowadays, juniors are already evolved people. It is the seniors who will have to learn from juniors. Performance conversations are upward learning methods. This is the new practice that we have to talk about. When you enter into a performance conversation with your junior, don’t think that you are passing on something to the person so that they can learn something. You are having the conversation to learn something yourself. You are learning about how well the junior is doing, how well he is understanding the environment so that you can understand the environment and the difficulties he faces in it. This way, you become more educated about the realities of what he or she is facing and you work out your own conclusion. So when you have a performance conversation, you aren’t giving a role clarity to your junior, you are the one who receives role clarity.

Another important point I want to mention is Performance Ratings. I started hating performance ratings. In 1974 itself, we had given a performance appraisal system to L&T where we clearly said delink rewards with performance appraisals, because when you link ratings with rewards, it creates emotional problems. Ratings are discussion points and feedback mechanisms. Unfortunately, most organisations didn’t listen. I think performance ratings reduce people to numbers. You must learn to respect people. Ratings aren’t important. It is important to know how well the person is performing and what can be done to help the person to perform better.

There were many researchers who have said that it looks like people work for incentives and they have forgotten how to enjoy work. What a tragedy. I think people should enjoy what they do and we must evaluate them in a way which makes them enjoy the work. The bell curve marks 10% people as outstanding and 90% of people as average performance. Do you want to make 10 people happy at the cost of 90 people or do you want to keep everyone happy? The job of performance management is to make everyone take an interest in their job and in order to do so, the most important task is to create an environment where people enjoy the work they do. I think these are the tenets of performance management that we need to understand.

"HR should realise who the stakeholders are. The primary stakeholders are your employees. The second most important stakeholder is HR, especially during Covid-19 era"

Align individual goals with organisational goals

I would now like to highlight a few purposes and objectives of performance appraisal and the shift that we see in it. The purpose of performance management is to align individual goals with organisational goals. This is why you must define the annual goals of the organisation, break it down into departmental goals, pass it on to the individual, and then set his goals so that whatever the individual does is aligned with organisational goals. These are the best practices. Next Practices is to go beyond organisational goals, to align each individual’s performance with stakeholders’ goals.

I want to take the example of HR itself. HR should realise who the stakeholders are. The primary stakeholders are your employees. The second most important stakeholder is yourself (the HR), especially during this Covid-19 era. Unless you take care of yourself and your family, you won’t be able to conduct your duties with a clear mind. The next important stakeholders are your colleagues. The next stakeholder HR needs to keep in mind is the organisation, the top management and the Board. You also need to consider the organisation’s shareholders. Finally, the most important stakeholder is the customer. Recently, I was working with an IT company, and some of the people working on the project told me that they don’t get an opportunity to meet the customer. They only get information from another department about the customer. I asked them why they don’t make any efforts from their end to meet the customer. They replied that they weren’t allowed. I told them that this was nonsense. Why should someone have to allow you to go to the customer? Why can’t you just go to the customer and see for yourself how your software is working? If your customer is a bank, why don’t you just want in and see the software in action yourself? I want to say that the Next Practice in performance management is to align every individual with stakeholder goals.

Integrate, don’t differentiate

Another traditional best practice is to differentiate people. There is a belief that performance management is about differentiating people. Organisations say that they want an objective system which allows them to differentiate people, label someone as an outstanding performer, somebody as a low performer and evaluate the two. This is a nonsensical belief. This is an extremely outdated approach. I believe that performance management should integrate people. In our country, we are dying of differentiation. There are so many ways in which people are differentiated. We differentiate by religion, caste, department, by schools and colleges. It is high time we should learn to integrate. In fact, the best lesson is that every human being has come from dust and returns to dust. This is common for all. Please help people to integrate with larger societal goals. You are here to serve the larger interests of humanity. Never forget this.

The third best practice is measurement. We came up with behavioural anchored scales, we came up with 360-degree appraisals, and so many other metrics because we wanted to measure people. I want to say that the Next Practice isn’t measurement, it is an improvement. You can bring improvement without measurement. In fact, sometimes, it may be useful not to measure in order to improve.

Acknowledge performance

The next best practice we follow is to reward good performance. This is not a bad practice at all. But I want to take it a step further and say that the next practice is not merely rewarding good performance, but also acknowledge it. Sometimes, it is enough to just acknowledge good performance. And you should acknowledge it every day. Whenever someone does a good job you must acknowledge them. Whenever somebody is not up to the mark, feel free to share your thoughts and help that person improve their performance. Recognise, build on strengths and acknowledge. Utilising talent is the best practice. You must always find out what a person is good at and utilise his talent. The Next Practice is to enhance talent. I have been telling people that Covid-19 has demonstrated that there is going to be a shortage of talent. When there is a shortage of talent, what are you going to do? You will have to multiply talent. HR people will have to do other things too. Suppose you are posted in the Supply Department. You cannot say that you are an HR guy and cannot work in the supply chain. For those of you who want to know what a great next practice is, I want to say that you should move from utilising talent to enhancing talent. Develop versatility in all systems. The next practice in performance management systems should focus on multiplicity and developing versatility of talent.

"Whenever somebody is not up to the mark, feel free to share your thoughts and help that person improve their performance. Recognise, build on strengths and acknowledge"

Work with devotion

The other practice ( I don’t want to call it a best practice) I see being followed is that organisations are doing PMS which is emotion-based. You observe one of your juniors and feel he isn’t doing a good job and you become utterly upset about him. So you show your anger by saying that you want to conduct an appraisal session for him. So whenever you are upset you conduct an appraisal, but you don’t conduct an appraisal when you are elated by the good performance of your employee. So traditionally, you are doing a negative emotion-based performance evaluation. I think quite a few people do this. This is not at all uncommon in several of the banks that I have worked at. I want you to move from this practice to the next practice which is having a devotion-based performance management system. The person should be devoted to the work and devoted to the cause and you should become an instrument in inspiring that person in being devoted to work. I was amazed at the way people work selflessly at the Isha Foundation. They are all volunteers and they aren’t paid anything. But the way they are able to do any task assigned to them is inspiring. This is because they enjoy their work and do it with a kind of devotion. This devotion comes when you appreciate the larger purpose. Robin Sharma has said that the main job of a manager or supervisor is to link paycheque with a purpose. A job of a good manager is to remind the performer what a great thing he is doing and the larger purpose for which he or she is working for. The best practice in the past has been to have a promotion based PMS because we assume that if you tell a person that he may be promoted, he will work better. I think this may be true in the past but promotions have lost their meaning now. I think we are now talking of flat structures, we are talking of leaders without titles, and so on. I think the Next Practice is improvement based performance management, rather than promotion driven performance management. In time, we should be moving towards a culture driven performance management system.

Define roles

In summary, we need to make our Next Practice PMS Stakeholder Driven Performance Management (SHDPM) or Roles Set Based Competency Mapping (RSBPM). What do I mean by this? If you want to make an impact on your performance, first identify your role set members, and decide the stakeholders. This includes your boss, your boss’s boss, direct reports under you, indirect reports, internal customers and suppliers, external customers and suppliers, community, and shareholders. Understand the organisational goals and contributions expected from you through these stakeholders. For this, you need to have periodic conversations. You can have conversations with your boss every day, perhaps every day with your juniors, maybe once in a fortnight with your customers. You decide. One of the most beautiful things I observed in IIM Ahmedabad is that every quarter there used to be a board meeting. Whenever there was a board meeting, there was a faculty lunch with all the board members. Professor Samuel Paul, the former Director of the institute, used to make it a point to introduce all new faculty to board members. The board members knew everyone. I strongly believe it is important to meet your stakeholders. Why can’t you let your employees meet your shareholders? It does wonders. If shareholders can’t meet all employees, some representatives can be selected to meet on their behalf.

I want each individual to have his role set. Plan each individual’s performance to meet the requirements of the role set. In other words, Stakeholder Driven Performance Management (SHDPM) or Roles Set Based Competency Mapping (RSBPM) is going to be the next practice. It follows logically, that role set based performance conversations becomes the next practice. You converse with your boss, your juniors, your colleagues and your customers to get their inputs about your performance, to get support for your performance, to make a difference in the lives of others. You can also have role set based leave and development dialogues and periodically review and discuss the progress with these role set based individuals.

I want to mention about a few more best and next practices. In terms of the next practices, there are no changes in terms of KRAs, KPAs and KPIs, they are good practices so you can retain them. But don’t just be satisfied with reducing them to numbers. You need to discuss what activities you need to do, and with what kind of speed and accuracy must they be done. Activity planning is required and this is the next practice. You have around 2000 hours in a year. You needn’t plan for the entire 2000 hours but can you plan for at least eight hours a day? Can you spend 10 min to decide what you are going to do for the rest of the working day? Can you spend one hour to decide what you are going to do for the 48 hours you will work during the week? What you are going to do is the most important aspect.

In our country, we are notorious for wasting time. We waste our time and then blame our bosses that our KRAs were never specified. It is not the job of the boss to clarify. It is your job to decide how you will be spending your time. If you waste your time, you waste your talent, and you waste your life. Be aware that you are the performer. Your boss will conveniently wash his hands off saying that you are a poor performer and you will then have nowhere to go. Don’t depend on your bosses to improve your performance. You have to depend only on yourself to improve your performance. I suggest that you outline your activities and time them. You are the master of your time.

I would suggest as a next practice that you abolish ratings. Ratings have done enough chaos in our lives and it is high time they are done away with. Throw the bell curve out of the window. It is ratings that have reduced human beings to a number. Human beings are more than the number. The last few months have taught us what we can achieve as human beings in a crisis if we just work together.

"Don’t look for annual increments. It will appear as if you are working for a paltry 5% or 10% increase and you are willing to sacrifice anything to achieve this meagre figure"

Work is the reward

There is no need for rewards. Don’t look for annual increments. It will appear as if you are working for a paltry 5% or 10% increase in pay and you are willing to sacrifice anything to achieve this meagre figure. Be a self-respecting human being. We have a lot to learn from the Japanese. In Japan, even being offered a small keychain or a flower feels like a big reward to the employees. They smile throughout the year even for such a small gesture. I would strongly recommend both the public and private sector to abolish rewards. Work itself should be rewarding. When I visit my bank, I see the same person greeting me who is very happy to see me. I asked him if he was worried about coming to work during this pandemic and he said that if I don’t come to work, who will attend the hundreds of people who need me to manage their accounts. This is a great example of devotion towards your work. You shouldn’t work for rewards, you should work to make a difference in the lives of others. Every role set member should be made a source of energy and happiness through empathy, collaboration and support.