Upfront: Connecting the Employee-Performance Dots

As companies make inroads in the development of business performance metrics that further corporate goals, managers continue to struggle to find ways of aligning employee performance with those objectives.

A recent study by Sibson Consulting shows that most employees and managers understand the concept of performance management, yet they fail to execute it well. Some companies are constantly tweaking the categories on their performance evaluation forms in an effort to find the right combination. But other actions are more likely to lead to effective performance management. Sibson has identified five of these:

1. Create a performance culture. When stretch goals are the norm in a corporate culture, performance management becomes a critical part of how the business operates. Companies with easy-to-achieve goals have less need for strong performance management. Rather than tweaking the performance evaluation form, companies may be better off setting goals focused on their performance relative to their competitors'.
2. Use the right measures. To improve performance measures, some companies are using "value tree" analyses to determine how each role in the company can best contribute to business success. The value tree breaks down corporate goals into the discrete actions that contribute value and identifies measures for each job that really drive value for the organization.
3. Calibrate ratings among managers. A system for rating employee performance can enhance reward and career decisions, but any rating technique requires proper management to succeed. Many companies that do a good job of rating employee performance use talent-review meetings to compare and calibrate the ratings given by different managers. These meetings improve the quality of the assessments and increase the chance that managers deliver the right performance message.
4. Improve delivery of performance messages. Any effort in performance management is useless if the employees don't get the message. But giving performance messages can be uncomfortable for managers, and employees sometimes make it difficult. Training on how to deliver and receive performance messages can lessen the pain.
5. Differentiate rewards. Performance management is frequently used to determine base pay increases and bonuses, but when the range of money is small, it may seem pointless to put effort into these decisions. Rather than trying to figure out how to make minute distinctions, some companies are creating fewer levels among employees but giving them greater distinctions in pay increases depending on performance, which makes it likely that the most significant differences in performance will be recognized.