1
Performance
Management
Cor Faling
November/December 2011
ALL RIGHTS RESERVED COPYRIGHT
The views expressed in this document are not necessarily those of the Seta’s.
Performance Management – November / December 2011
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Table of contents
1. CRITICAL SUCCESS FACTORS
4
1.2 Definition of performance management
5
1.3 The basis of performance management
5
1.4 Incorporating a balanced scorecard
8
2. PERFORMANCE MANAGEMENT PROCEDURES
13
2.1 Organisational readiness
13
2.2 The performance management cycle
16
2.3 Competencies
28
2.4 Key performance indicators
33
3. PERFORMANCE CONTRACTING
37
3.1 The need for a policy
37
3.2 Policy statements
37
3.3 Performance contracting paperwork
39
4. TRACKING PERFORMANCE AND TAKING CORRECTIVE ACTION
45
4.1 Tracking results against objectives and renegotiating outputs
45
4.2 Performance improvement planning
51
Template: Performance Improvement Plan
53
4.3 Career Development Plans (CDP)
55
Template: Career Development Plan
57
4.4 Disciplinary Action
62
4.5 The concept of 360 degree feedback
73
5. REWARD, REMUNERATION AND COMMUNICATION
76
5.1 Reward strategy
76
5.2 Remuneration model
78
5.3 Performance communication
79
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6. CHALLENGES AND LIMITATIONS OF PERFORMANCE MANAGEMENT
87
6.1 Introduction
87
6.2 Potential Challenges of implementation
87
7. TRENDS IN PERFORMANCE MANAGEMENT
91
8. THE ROLE OF TECHNOLOGY IN AUTOMATING PAPERWORK*
93
8.1 Introduction
93
8.2 Improving administrative efficiency and reducing risk
93
8.3 Making performance reviews relevant
94
8.4 Maximising productivity and paying for performance
95
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1. CRITICAL SUCCESS FACTORS
1.1 Introduction
“Performance management is about having everyone succeed and improve.”
Discussion: Identify the groups that would fit the description of “everyone” in the context of performance
management
This definition stands in stark contrast to the way management and staff of an organisation tend to perceive
performance management. It mostly conjures up a picture of onerous paperwork, the dreaded annual appraisal
meeting, subjective judgments, and often, lasting animosity between employees and boss. For these reasons
and others SMMEs in particular tend not to implement a performance management system, considering it a
waste of time and resources.
Yet, world-wide businesses of all sizes are re-committing themselves to performance management, embracing
affordable technology to implement and run real-time systems as part of their talent management. They have
come to recognise performance management as a user friendly process of creating a work environment in which
management and staff are enabled to perform to the best of their abilities.
An integrated performance management system has as objective the creation of a working environment in which
the employee (and manager) can achieve incremental self-actualisation by developing his/her expertise while
delivering maximum results for the organisation in line with its objectives.
A well structured performance management system will start with the development of clear job descriptions and
conclude with an exit interview. It will have processes in place that cater for appropriate staff selection;
accomplishment-based performance standards and measurements; orientation, education and training; ongoing
coaching and feedback; performance development; an effective compensation and recognition system based on
individual and team contributions and the creation of promotion/career development opportunities.
Performance Management – November / December 2011
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It will provide managers and employees the confidence and competence to set goals, observe performance, give
and receive feedback, deliver and digest tough messages (including grievances and disciplinary actions), and
will help to create development plans.
1.2 Definition of performance management
Since this toolkit is about the management of performance a realistic definition of performance management
must be the departure point that guides the development and implementation of a performance management
system and process.
“Performance management is a business process that links what individuals and teams do on a daily basis with
the larger goals, values and cultural practices of the organisation and the needs of its customers; it is a process
for establishing a shared understanding about what is to be achieved and how it is to be achieved; it is an
approach to managing people that when done well, contributes to an enduring and healthy organisation.”
1.3 The basis of performance management
1.3.1
It is a business process
It is about the everyday actions and behaviours people use to deliver the goals of the organisation to meet
customer needs, improve performance and themselves. It cannot be divorced from the management and
business processes of the organisation. Performance management is not about a set of forms, the annual
appraisal ritual, or the merit or bonus scheme.
1.3.2
It creates a shared understanding about what is to be achieved and how it is achieved
Individuals and teams need to have a common understanding of how their roles connect to the business mission
and goals of the organisation. To improve performance they also need to know what superior performance looks
like, and how to achieve it. Performance can be described as a set of tasks, goals, behaviours or results or any
combination of these elements. The goals and tasks must be formalized into a performance agreement.
1.3.3
It is an approach to managing people
The focus of performance management is on connecting people to one another and to the larger organisation
and its values. The main emphasis is on how to get people to work together and support one another to achieve
shared aims. In particular it puts the responsibility on managers to work effectively (through coaching and
motivating) with those for whom they are accountable.
1.3.4
It increases the probability of organisation health and durability
Performance management has a clear purpose. It is about delivering success for individuals, teams, and the
organisation. By establishing a continuous management process that delivers clarity, support, feedback, and
Performance Management – November / December 2011
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recognition to all, leaders take a major step in sustaining performance, the performance management process,
and organisational life span.
1.3.5
It is driven by competencies
There are as many definitions of competency as there are competency authors. The term as used here refers to
the key personal skills and knowledge that enable individuals to perform their work.
The reason why competencies have been included as a key element in a proposed performance management
system is that competencies are the only common denominator that can be used across human resource
systems consistently. This assists both line managers and human resource professionals to measure and
manage jobs and performance in an integrated way. What this means in practice is that a set of competencies
used to define any (specific) job would be applied consistently to all individuals in that specific job or job category
for all human resource applications such as performance management, training, selection, remuneration and so
on. This makes comparisons and measurements of individual (performance) consistent, reliable, and legal.
1.3.6
Focus areas of performance management
Best practice organisations see performance management as a dynamic, ongoing process that helps them
achieve business goals and helps individuals focus on high-payoff activities that improve performance. Their
focus is on three areas:

Structuring the performance management system for success

Building commitment to the system

Assessing results
Focus Area 1: Structuring for success
Actively align work unit, team, and individual goals with organisation goals. The starting point is always the
organisation’s strategic goals. Establish and reinforce the importance of core competencies and job
competencies. Support line managers to use performance management across a variety of people applications
i.e. to reward high performing groups and individuals, to target poor performers for improvement and/or
termination and to steer special development initiatives such as employment equity planning. Use performance
management to ‘encourage’ line managers to take responsibility for both the technical and people component of
their role, i.e. consolidate their primary role and deliver their people management responsibilities
Use electronic and information technology based systems in the administration of performance management.
Administer a performance management process that is reliable, objective, and fair with performance ratings.
Focus Area 2: Building commitment to the process to assure proper execution
Actively transfer the responsibility for the initial development and ongoing administration of the system from the
human resource function to the line organisation. The role of Human Resources becomes one of maintaining
Performance Management – November / December 2011
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policy and quality standards for the system. The demand for effectiveness now comes from line and not the
Human Resource function.
Increase the amount of employee involvement in the operation and administration of the performance
management process, particularly at the beginning and end of organisational cycles such as planning, budgeting,
and programme evaluation. Provide ongoing training support for executives, managers, and employees to
implement and maintain the performance management process.
Focus Area 3: Assessing results
Take a balanced view of measuring the benefits that flow from the use of performance management as a
contributor to organisational effectiveness. Use a ‘balanced’ scorecard of criteria to monitor and fine-tune
performance management processes. Involve all relevant stakeholders in the evaluation process. Best practices
studies clearly support the view expressed above that performance management is more than an administrative
process that revolves around a single event at performance appraisal time. Performance management is an
approach to managing people and performance that recognises the fluid, dynamic and ever changing nature of
the world of work. Organisations have to rapidly respond to the multiple pressures from various stakeholder
groups who may or may not be customers.
The assumptions that guide the use of performance management are that customers, stakeholders and context
are the chief drivers of performance management practices. The word practice is the operative word here.
Practices can and must be adapted to suite a particular context at a particular time. Practices can also be more
rapidly changed than can systems, which rely on mandates and precedent. Businesses will in future have to
rapidly deliver service to customer segments who have conflicting needs and ‘wants’, with reduced resources
and where ‘innovation’ is called for. Performance management in this scenario is very much an ongoing
communication process, co-determined and undertaken in partnership between employees, managers,
supervisors, customers and other stakeholders
.
1.3.7
The role of HR and SDF in performance management
Performance management is the process of creating a work environment or setting in which people are enabled
to perform to the best of their abilities. Performance management is a whole work system that begins when a job
is defined as needed. It ends when an employee leaves your organisation. The involvement of HR and SDF lies
in guiding line management to:

Develop clear job descriptions

Select appropriate people with an appropriate selection process

Negotiate requirements and accomplishment-based performance standards, outcomes, and measures

Provide effective orientation, education, and training
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
Provide on-going coaching and feedback

Conduct quarterly performance development discussions

Design effective compensation and recognition systems that reward people for their contributions

Provide promotional/career development opportunities for staff

Assist with exit interviews to understand WHY valued employees leave the organisation.
Discussion: One of the biggest challenges in performance management from an HR perspective is to obtain
commitment from line management. What is your experience?
1.4 Incorporating a balanced scorecard
1.4.1
Creating a balance in performance
Balancing measures is a strategic management system for achieving long-term goals. Senior executives in
industries from banking and oil to insurance and retailing use balanced measures to guide current performance
and plan future performance. They use measures in four categories—financial performance, customer
knowledge, internal business processes, and learning and growth—to align individual, organisational, and crossdepartmental initiatives and to identify processes for meeting customer and shareholder objectives. Their
experience has shown that balancing a family of performance measures works. This means that in each phase
of performance planning, management, and measurement, the customer, stakeholder, and employee are
considered in balance with the need to achieve a specific mission or result.
1.4.2
The need for a balanced approach
A balanced approach allows all the important operational measures to be considered at the same time, showing
whether improvement in one area is achieved at the expense of another. Key indicators should tell how the
organisation is doing. They will probably change over time to reflect shifting organisational goals. Performance
levels can be reported on a monthly or quarterly basis. All levels of management, including field personnel, can
participate in the reporting process; together, they provide a good idea of the health of the organisation from a
variety of perspectives. It is only with a balanced approach that leaders can create success throughout their
organisations.
This proven approach to strategic management imbeds long-term strategy into the management system through
the mechanism of measurement. It translates vision and strategy into a tool that effectively communicates
Performance Management – November / December 2011
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strategic intent, and motivates and tracks performance against established goals. A strategy is a shared
understanding about how a goal is to be reached. Balancing measures allows management to translate the
strategy into a clear set of objectives. These objectives are then further translated into a system of performance
measurements that effectively communicates a powerful, forward-looking, strategic focus to the entire
organisation. In contrast with traditional, financially based measurement systems, the balanced measures
approach solidifies an organization’s focus on future success by setting objectives and measuring performance
from distinct perspectives. The old method of management, which focused only on the bottom line, no longer
works. If the customer, stakeholder, and employee are not part of the solution, they will forever be part of the
problem.
1.4.3
The perspectives in performance management
Performance management is viewed from three perspectives: employee, customer, and business.
The employee perspective focuses attention on the performance of the key internal processes that drive the
organisation. This perspective directs attention to the basis of all future success — the organisation’s staff and
infrastructure. Adequate investment in these areas is critical to all long-term success. Without employee buy-in,
an organisation’s achievements will be minimal. Employees must be part of the team. How does one get
employees to see the business as an employer of choice? It needs focus on issues such as employee
development and retention.
The customer perspective considers the organisation’s performance through the eyes of a customer, so that
the business retains a careful focus on customer needs and satisfaction. It therefore makes the customer the
driver of performance. Questions to ask are

How do you want your customers to view you?

Who are your customers? Is there more than one target market

Are measures based on external customer input?

Do your measures reflect the characteristics of good service (accessible, accurate, clear, closure,
timely, respectful)?
The business perspective looks at the organisational efficiency and effectiveness. Questions to ask are

How do you want your stakeholders and/or customers to view you?

Are your measures results-based?

Are the results something customers care about?

Do you have real-time data for reporting purposes?
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Together, these perspectives provide a balanced view of the present and future performance of the organisation.
A balanced set of measures allows leaders to think of their organisation in its totality. There is no one "right"
family of measures. The measures must reflect the overall mission and strategy of the organisation. They have to
be the measures that drive the organisation. In most cases, they are developed through an iterative, evolutionary
process. There can be several categories but the idea is to keep it as simple as possible so that measurements
can be global and quick.
1.4.4
Best Practices in Balancing Measures
There is no generic set of balanced measures that can be applied as best practice to all functions of the
business. Certain conditions, however, need to exist within an organisation for a balanced approach to
performance management to be successful:

strong leadership that supports the adoption of balanced measures as a feature of organisational
management and accountability;

the capability to communicate effectively throughout the organisation and the organisation’s ability to
communicate to decision makers; and

the knowledge that customers, employees, and stakeholders are fully informed and that they
understand and support the initiatives of the organisation.
While an attempt to find a one-size-fits-all approach will not work, there are some generic principles that remain
constant across all organisations:

Good product or service: Does the organisation meet the consumer’s need for goods or services or
rectify a perceived wrong?

Good image: How does public opinion view the organisation? Are employees enthused by the public’s
perception of them?

Good availability: Can customers get easy access and satisfaction? Is the organisation ready and able
to respond immediately to any reasonable challenge?

Good employer: Are there high levels of staff retention, staff morale, and job satisfaction?

Continuous improvement: Is there a continuous evaluation process to identify and implement
improvements? Do the improvements benefit the product to the community?
1.4.5
Establishing a results-oriented set of measures
Creating a family of measures is the most crucial part of the strategic planning process. And a most crucial part
of this creation process is for businesses to consult with their customers (to find out what they really want) and
with your employees (to find out what they need to achieve success). This consultation has a significant impact
on how the organisation’s overall performance is managed. If customers and employees are part of the planning
process, they then become part of the achievement as well, building an environment of trust and openness that
Performance Management – November / December 2011
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can really turn things around. Trust and openness stimulate buy-in, and buy-in is what unifies a business around
a strategic mission. The critical areas of practice in the establishment of measures are the following:

Define what measures mean the most to your customers, stakeholders, and employees
The following are some best practices of our partners. They are offered as ideas for use in an
organisation’s strategic and performance planning.

Have customers, stakeholders, and employees work together
The strategic planning process, from establishment to performance reporting, should be collaborative
and interactive at all levels.

Create an easily recognised body of measures
It could be customer satisfaction, expertise, innovation, employee commitment, return on investment,
productivity/efficiency, internal processes, protection of the environment.

Commit to Initial Change
One of the biggest challenges of the balanced scorecard approach is the culture change needed to
realise that employees and customers matter, and that employees are accountable for results.
Changing the culture and getting that initial buy-in from everyone in the organisation is of tremendous
importance. Without it, there can be no sustainability: the strategic performance framework will cease to
exist with any change in the organisational structure. While leadership is a strong factor in this there are
some things an organisation can do to help ensure that buy-in occurs.

Use expertise wherever you find it
Ideally the business has an employee with experience in the area of performance benchmarking. If not,
a consultant may have to be retained. Often a vendor of an integrated digital performance management
system can provide the expertise as a member of a team to set up initial benchmarking in establishing a
family of measures.

Involve everyone in the process.
It is wise to invite all employees to participate in workshops to establish the organization’s performance
measures. It will contribute greatly to future buy-in.

Make the system non-punitive
Implementing a balanced set of measures system can be more difficult than it is first expected.
Therefore it is important to develop challenging, but achievable, stretch targets and placing them in a
non-punitive context. Leaders recognise that buy-in and commitment from employees will be
compromised if the system is initially structured to put budgets at risk if a performance target is not met.
During these initial phases of culture change, they feel it is best to leave the employees with some
breathing room—to let them know that they and the business are struggling through this together, rather
than this being some sort of "us versus them" situation.

Bring in the unions
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It may be necessary to hold focus group meetings with employees and unions. A business with a large
staff complement may want to publish its intent and process in a booklet to communicate its balanced
set of measures to employees—and thus ensure understanding and buy-in.

Provide clear, concise guidance
Consider publishing a Planning Guidance Document which describes the planning framework, guides
development and management of operational plans, provides a consistent process to follow, and
identifies accountable points of contact. There is a certain comfort in having a document such as this: it
eases transition by giving managers a frame of reference from which to work.

Maintain Flexibility
It is more than likely that sets of performance measures will be revised from time to time. In most cases,
the number of performance measures will need to be reduced to simplify the overall system. This
supports the fact that a balanced set of measures cannot be established overnight. It must be given
time to develop, and the organisation must be given time to adapt. Flexibility is the watchword here.
While it is true that smaller organisations—almost by definition—can be more flexible than large, the
latter can, and must, incorporate flexibility in their approach to performance measurement. Change will
be slower and more incremental in larger organisations, but it can nevertheless be steady and
progressive.

Limit the number of measures.
It offers a real opportunity to reduce the reporting burden and focus management on an organisation’s
most important issues.

Recognise that this is a living process
Performance measures may have to be adjusted in response to new market conditions, the effect of
new legislation, technological innovation and improved staff expertise.
Discussion: To what extent is the Balanced Scorecard practically in operation in your organisation?
Performance Management – November / December 2011
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2. PERFORMANCE MANAGEMENT PROCEDURES
2.1 Organisational readiness
2.1.1
Change readiness
Implementing an integrated and competency driven Performance Management system represents a substantial
investment in time and money for organisations big and small. Managing the implementation of such a
programme involves managing the process of workplace change in a business environment and transitioning
people to meet performance targets rapidly and effectively.
One of the first steps in implementing a Performance Management system is to evaluate your company’s
readiness for change – a combination of willingness and ability to undertake the journey. Successful change
management starts with an assessment of your organisation's change readiness along three dimensions:

Creating the Pull. Do key stakeholders understand the need and feel motivated to implement an
integrated Performance Management system?

Supporting the People. Are company stakeholder goals (including unions) aligned and on-board to
enable successful movement towards the change?

Managing the Process. Can you leverage project and programme management tools to plan, execute
and monitor the implementation of the process/change?
By assessing and understanding your company’s readiness to implement a Performance Management system,
leaders can identify potential roadblocks, as well as strengths and best practices. Use the following assessment
tool to determine the organisations readiness to change.
2.1.2
Exercise: Determine organisational readiness in your business.
Instructions
Assessing readiness to implement a performance management system:
The change readiness assessment includes three sections. Select the score that best matches your assessment
of the situation: 1 represents weak/low, and a score of 6 represents strong/high with the remaining numbers
being degrees of weak or strong.
Current Readiness
Weak/low
1
Strong/high
2
3
4
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6
14
Step 1: Creating the pull: Do key stakeholders understand the need and feel motivated to change?
Strategy and business goals: Is there a clear link between the business strategy & goals and
how performance management is used to support the strategy and goals?
Weak/low
1
Strong/high
2
3
4
5
6
Leadership & Sponsorship: Has senior management made a public commitment to act as a
sponsor of the launch of a performance management system?
Weak/low
1
Strong/high
2
3
4
5
6
Creating Measures: Have the leaders in the organisation provided a balanced scorecard of
measures / goals / targets against which performance will be measured?
Weak/low
1
Strong/high
2
3
4
5
6
Stakeholder Identification & Assessment: Have all affected stakeholders been identified and
the degree of impact of the change on the operation of their work unit was assessed?
Weak/low
1
Strong/high
2
3
4
5
6
Step 2: Supporting the people: are company and stakeholder goals aligned to enable successful
movement towards the change?
Cultural Alignment: Will the launch of a performance management system be consistent with
the current organisational culture?
Weak/low
1
Strong/high
2
3
4
5
6
Business & People Practices Alignment: Will HR policies, practices and processes (e.g.,
compensation, benefits, performance) support the launch of a performance management
system?
Weak/low
1
Strong/high
2
3
4
5
6
Employee Training & Development: Does the infrastructure exist to build competence and
confidence at all levels to implement the launch of a performance management system: i.e.,
provide them with the appropriate tools and training?
Weak/low
1
Strong/high
2
3
4
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5
6
15
Leadership Transition: Is there a history of adequately helping managers and key employees
to implement HR and business process changes?
Weak/low
1
Strong/high
2
3
4
5
6
Step 3: Managing the process: can you leverage project and programme management tools to plan,
execute and monitor the launch of performance management system?
Programme & Project Management: Are programme and project management practices and
tools institutionalised?
Weak/low
1
Strong/high
2
3
4
5
6
Conflict Management: Is there a process in place for managing (identifying, addressing,
resolving) conflict associated with the launch of a Performance Management system)?
Weak/low
1
Strong/high
2
3
4
5
6
Performance Measurement: Is there a framework and process for measuring the contribution
performance management will contribute to organisational performance and effectiveness?
Weak/low
1
Strong/high
2
3
4
5
6
Evaluation and Debrief: Has the company successfully captured and institutionalised past
lessons learned when similar changes have been introduced?
Weak/low
1
2.1.3
Strong/high
2
3
4
5
6
Interpretation of the scores:
Scores of mostly 1's and 2's: Very low readiness, high risk.
Need to develop "pull" so that stakeholders understand the change and feel motivated to participate. Employee
"support" needs to be aligned, so that employees will have the ability to participate and will not encounter
obstacles. Strong program and project "management" are required to continue to move the change forward and
achieve results.
Scores of mostly 3's & 4's: Moderate readiness, moderate risk.
Moderate "pull" could build momentum, and moderate alignment means that employees will not encounter too
many obstacles. But strong program and project "management" are required to continue to move the change
forward and achieve results.
Performance Management – November / December 2011
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Scores of mostly 5's & 6's: Strong readiness, low risk.
The strong "pull" will build momentum and the strong "support" will provide employees with the ability to
participate. However, the moderate "management" could result in the program overall not moving forward.
2.2 The performance management cycle
Performance management has a clear purpose. It is about delivering success for individuals, teams, and the
company. By establishing a continuous management process that delivers clarity, support, feedback, and
recognition to all, leaders, managers, and supervisors are to take a proactive step in sustaining performance, the
performance management process, and life span of the business. Below is a diagram that lists the key elements
of the company performance management system.
Diagram 1: Performance Management Elements
Business Strategic Plan
Operating Plans and Role Clarifications
Team Planning and Role Clarification
Individual Goals
Day to day Management and Communication About Performance
Formal Performance Reviews
Efficient, Effective, Enduring Organisation
Performance Management – November / December 2011
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The process steps that follow for the implementation of a performance management system are shown below.
Discussion: Identify the groups that would fit the description of “everyone” in the context of performance
management
Figure 1: Performance Management Model
Three Year Performance Cycle
Balanced Score Card
(Critical Few for Each
Year)
Training for Managers
and Employees
1
Business Planning
(Strategic Priorities)
Second Review 4
for Performance
& Development
Update for
Team and
Individuals
5
Third Review
Individual
Appraisal
Discussion
6
Compensation
and Reward
Plans for
Individual
Performance
and
Development
Individual
Performance
Contracting
NEXT YEAR/S
PLANNING - EVALUATING - FEEDBACK - COACHING
Performance Management – November / December 2011
2
First Review 3
Performance &
Development
Update for
Team and
Individuals
18
Discussion: Internationally it is estimated that 95% of staff are unaware of the organisation’s strategic
objectives and/or can not relate to them in the execution of their daily tasks. What is the situation in your
business?
2.2.1
Step 1: Balanced scorecard/measures
The starting point for performance management is to gather the information to create meaningful and
measurable performance agreements with each team as a whole, and each employee within the team. The
definition of ‘employee’ in the Labour Relations Act (1997) now extends to everyone: executives, managers, and
workers.
The following is a list of the information and planning processes that executive management will need to have in
place to support managers and employees with the management of performance:

Strategic plan with at least a three year time frame

Strategic priorities for each year of the 3 annual performance cycles

Balanced measures for three years and the ‘critical few’ for the first year of a three year performance
cycle (including unit/team measures for line and staff units)

Business and operations plan for one year for each major function/division/unit; these plans provide the
basis for senior management performance contracts

Competency profiles/job descriptions/performance profiles/unit standards which are updated annually
for each job family or each unique job at employee level.
2.2.2
Step 2 (a): Plans for individual performance and development
Planning is the next important step in the process of managing performance.
INFORMATION: In this context, planning is first and foremost an exploration of what the work group, as a whole
and each member within the work group needs to know to perform at a level of excellence determined in
consultation with external and/or internal customers.
BUDGETING: Writing a realistic budget forms a critical part of the performance planning process. All budgets
require various assumptions, and the planners (usually managers) need to make these assumptions explicit
(through effective performance communication) to those who will implement the plan and be responsible for
expenditure.
Performance Management – November / December 2011
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2.2.3
Step 2 (b1): Team and Individual performance and development contracting, communication,
and ongoing performance tracking
Managers and employees meet as a group to create a common understanding about the performance
requirements for the upcoming performance period. This meeting serves to empower work group members to
create meaningful performance agreements that teams and individuals can take shared responsibility for
achieving.
The next step begins with a manager conducting a work expectation and performance contracting session with
the team as a whole, and each employee individually. Together they discuss and assess the employee’s job in
light of the work unit and customers’ needs. The discussion should cover seven areas:

What the person in the work position currently does

How the work is done (processes used)

What assistance is needed to perform the job well (information, equipment, support)

What the expected work outputs (performance objectives) are

What competencies (knowledge, skills and style/attributes) are required for the job?

What the skill gaps are that can be closed by means of training, coaching, and on-the-job learning

What the process improvement and learning goals for this job are.
The overall purpose of this discussion is to conclude a mutually acceptable set of performance and development
expectations. Expectations – whether they are called ‘objectives’, ‘goals’, or ‘accountabilities’, should be clear,
mutually agreed on, and be (re) negotiated when necessary. The major role of a manager/supervisor is to
negotiate, and renegotiate sound performance objectives, and agreements and to clear obstacles for employees
to perform without undue distractions or anxiety.
Guidelines for performance contracting:
Four critical steps are at the heart of solid performance planning and contracting:

Define goals which consist of outputs, quality criteria, and indicators (the what of performance)

Define competencies (the how of performance)

Create a development plan

Renegotiate goals and competencies as needed
The criteria for well-written goals are as follows:

Measurable: A measurable objective defines the appropriate mix (for each goal) of performance
dimensions/standards. These dimensions can be prescribed in some cases and in other case the
employee may be able to negotiate the measurement standards and dimensions.
Performance Management – November / December 2011
20

Within one’s sphere of influence: Employees might not be in complete control of the objectives they
agree to. However, they must have significant influence/authority to achieve them.

Realistic: Goals must be within employees’ reach if motivation and commitment to quality is to be
maintained.

Observable: The results of employees’ efforts need to be evident to the people who provide feedback
(peers, manager, customers).
The criteria for selecting competencies that are required to achieve performance and development goals are as
follows:

Support business’ values: Values can be translated into competencies that employees can focus on
in their performance agreement. This brings values alive and begins the process of defining a culture in
concrete and achievable terms.

Relate to objectives: Competencies must relate directly to the objectives employees have agreed to
commit to. This ensures that time and resources spent on developing these competencies are well
spent.

Observable: Competencies need to be spelled out as observable (or deducible) behaviours that can be
observed. This is crucial if employees are to receive feedback that is useful and relates to objectives
and values that they can act upon.

Understandable: Competencies if well described/defined creates a common language for the
organisation to be able to communicate to and with the organisation as a whole. This makes the job of
employees and managers easier as everyone has a common frame of reference when communicating
about performance and development.
Discussion: What constitutes superior performance in your organisation?

The concept of superior performance
Superior performance is customer driven. Staff that deliver superior performance possess the attributes
(competencies) of passion, imagination, and persistence to deliver service to internal and external
customers, “exceeding expectations.” It requires identifying customer needs, delivering on specification
and taking personal accountability when service falters. They are inclined to volunteer for tasks others
consider beneath their dignity which later turn out to be a stealth opportunity. They are motivated by the
intrinsic value of work and are keen to receive remuneration based largely on performance.
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2.2.4
Performance development planning
Managers and employees must conclude a development plan for a 1 year performance period, and up to a
3-year career development period. Development planning and continuous learning follows a three-stage
process that employees use intentionally. The stages are:

Assess current skills and knowledge: Here the manager and employee assess current strengths
and development needs as they relate to achieve work objectives, support organisational values, and
the employee’s career goals.

Acquire skills and knowledge: Here the employee and manager discuss the various options available
to gain the required skills and knowledge. These options may involve any combination of formal training
or ‘shadowing’ a co-worker, reading a how-to-do book, using the Internet or company intranet.

Apply skill and knowledge to the job: This requires practice and obtaining feedback about skill
mastery.

Figure 2 below is a basic form to create a development plan and is used in conjunction with the
objective setting worksheet.
Performance Management – November / December 2011
22
Figure 2: Development Plan
Learning Need
Development
Activities
Key Actions
By When
Status
Competencies
No1
No2
No 3
etc
2.2.5
Performance agreement
Managers and employees must conclude a written performance agreement which is updated as and when
circumstances dictate that a change is required; contracts are not cast in stone. The agreement should include a
summary of the performance improvement, and personal development goals. It should also (where applicable)
indicate how goal attainment and performance affect career advancement, development opportunities and
pay/merit increases. Figure 3 below is a model performance agreement that supports a balanced scorecard
approach to total performance management.
Discussion: If a similar performance agreement exists in your organisation, is it operational and regularly
reviewed?
Performance Management – November / December 2011
23
Figure 3: Performance Agreement
PERFORMANCE AGREEMENT/CONTRACT
Within the next performance period from:
I understand that our team/work unit's:
to:
1. Priorities are:
2. Balanced measures are:
3. The objectives for our work unit are:
4. The balanced measures for our work unit are:
5. My key internal/external customers are:
6. Their needs and expectations are:
To make my contribution towards attaining the goals stated above, I understand that I am expected to
do the following:
7. My individual performance objectives are:
8. My objectives for improving work methods (process) are:
9. My development objectives and competencies I wish to develop are:
10. I believe these goals are acceptable and attainable. I understand that my performance will be
reviewed with input from (tick whichever is agreed):
1. Manager/supervisor
2. Co-workers/team members
3. Peers/functional colleagues
4. Internal customers
5. If appropriate, external customers
Compensation for my work performance will be based on whether my performance was (1)
exceptional, (2) commendable, (3) competent or (4) unsatisfactory. I understand that the following
forms of compensation will be considered: (1) merit award for my individual performance/ goal
attainment, (2) enhancement and utilisation of my skills, (3) my work unit's or team's performance,
and (4) our contribution to our function's/organisation's success performance.
Employee signature:
Performance Management – November / December 2011
Manager signature:
24
2.2.6
Re-negotiate goals and competencies as needed
Outputs and quality criteria may need to be renegotiated in these situations:

When organisation or work unit priorities change

When external conditions change – this includes budgetary, legislative and technology driven change
are out of employee’s control

When support expected from others does not occur

When unforeseen problems or opportunities arise.
When this occurs, it is up to employees to recognise the potential effect these changes may have on his/her
ability to deliver an output at an agreed level of quality. This situation requires that employees take the initiative
to renegotiate their performance agreement. The employee is responsible for taking the initiative to renegotiate,
as he/she is accountable for monitoring the work and the situation. It is not a valid excuse for letting go of this
responsibility. When a higher level of authority is needed to achieve a goal it is the employee’s responsibility to
ask for it. It is the manager’s/supervisor’s job to provide support to overcome the obstacle. Work is at all times a
shared responsibility. Managers and employees communicate formally and informally throughout a performance
cycle.
2.2.7
Step 2 (b2): Continuous communication
The performance management cycle of events starts with planning and ends with appraisal or review. What
makes performance management a dynamic process in addition to a series of events is the processes of
ongoing performance communication. Take out communication and all you have left is planning and appraisal.
Ongoing performance communication is the process by which managers and employees work together to share
information about work progress, potential barriers and problems, possible solutions to problems, and how
managers/supervisors can provide ongoing support to the group to achieve its goals. This dialogue links
planning and appraisal and creates a living process by which to manage performance. Managers and employees
formally and informally monitor and track performance.
Discussion: How does performance management shift the emphasis of managing and supervising?
Performance Management – November / December 2011
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2.2.8
Step 2 (b3): Performance tracking: keeping performance and development on course
Performance management is essentially a business process whereby employees and managers produce results
for customers. Like any well managed businesses, tracking, and monitoring progress by the business partners
(managers, employees, and customers) towards achieving goals just makes good business sense. All partners
need to monitor their business situation in order to take action based on good information to keep performance
and development on course or to change course if needed. Decisions about giving and receiving feedback and
asking for and receiving coaching for improved performance relies on observing, tracking and recording
performance information.
2.2.9
Guidelines for performance tracking
The following are actions that employees and managers can take to gather and record information in preparation
for formal and informal performance discussions (ongoing communications and formal and informal reviews and
appraisals).
Performance tracking is also vitally important to ensure that formal individual and group
performance reviews are conducted on business lines using quality information gathered over time.

Track outputs

Track competency development

Track work style
Managers and employees commit to undertake interim team and individual performance reviews every three
months, and an overall evaluation annually.
2.2.10 Step 3: Reviewing performance
2.2.10.1 Documentation
Prior to all review discussions both the manager and each team member complete the performance planning and
review documentation independently. Formal group and/or 1:1 reviews must occur every three months. The final
performance discussion is a private 1:1 performance appraisal between the manager and employee only.
2.2.10.2 Type and frequency of evaluation

Individual formal performance appraisal needs to occur preferably four times a year to keep their
immediate manager/supervisor and functional counterparts in the picture about any effect their
performance may have on work unit success

Team and individual review go hand in hand – preferably four times a year. Before formal appraisal time
teams meet to review team performance and adjust employee performance contracts

Customer review(s) refer to the regular and formal reviews that customers are invited to participate
twice per performance period to assess work unit and/or individual performance; information from
Performance Management – November / December 2011
26
customer reviews must be incorporated into individual and team formal reviews and contribute to overall
ratings.
2.2.10.3 Procedural support and fairness

Review and appraisal checks and balances must exist by means of sign-offs at a higher level or an
appeal process

Consistency of ratings across work units must be maintained (using a consistency checking process
and committee)

Review and confirmation of ratings may occur at least one level higher in the work unit; multiple inputs
from customers and project leaders must be obtained if individuals are working in any project and/or
matrix structures.
2.2.10. 4 Administrative support and efficiency to line management

Training is essential to overcome the many forms of appraiser bias and to develop the interpersonal
skills required to give and receive candid feedback, undertake performance and development planning
and follow-through

Instruments and forms are merely to be used as recording devices for comments and ratings; space for
all parties to record their judgments must be available for each instrument used

Electronic support systems need to be used wherever possible to reduce the administrative burden.
Discussion: Is a three-month review cycle feasible in your business?
2.2.11 Step 4: Compensating and rewarding performance
The company will follow a balanced approach to paying for superior performance in combination with reaching
superior development targets and supported by a structured wage and benefits system that is market related.
An effective compensation and reward system can have a positive impact on shaping desired work behaviours
and performance. The goals of the pay system should be to motivate teams and individuals to make optimum
use of their abilities, skills and knowledge, and to attract and retain high performing employees. Each employee
should be rated according to the terms established in the job expectation agreement. The review and appraisal
form should use a 4 or 5 point rating scale.
Performance Management – November / December 2011
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The structure of the reward system needs to consider three variables:
1. Individual performance
2. Team performance
3. Organisation performance
1. At the individual level, the organisation can use a merit-based pay system based on their performance
agreement to reward performance. In addition to the standard across the board increases negotiated with
unions the top performers are paid a percentage over and above minimum increases.
2. Team rewards or bonuses can also be factored into the pay package.
This is a very powerful mechanism to use peer pressure to perform to gain an additional once off payment for
meeting agreed team-based goals in addition to individual goals. This approach can be introduced as a second
phase to a revised reward system.
3. A third component that can be introduced once a Balanced Scorecard process is in place is to negotiate
organisation-wide process improvement goals, which everyone contributes to and for which people receive
periodic and additional once-off payment.
There is no single best compensation system. However, a combination of all three compensation approaches
will meet the goals of compensation better than the traditional merit raise system. Skill-based pay, gain sharing
for savings achieved combined with merit increases can strengthen the link between pay and performance. The
above system and practices are the formal side of rewarding employees and is often perceived as a constraint in
the public sector due to funds allocation being outside the control of most managers. The other side of the coin
is recognition on an ongoing and day-to-day basis. This is within a manager's scope of authority and must be
used to complement the formal pay system.
Discussion: Globally a distinct shift towards meritorious compensation is manifesting itself. Has it become a
reality in your organisation? What are the limitations for application?
Performance Management – November / December 2011
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2.3 Competencies
2.3.1
Definition
A competency is a written description of the knowledge, skills, abilities, motives, drives and attitudes causally
related to effective performance of a job or position within an organisation or possessed by an individual.
Competencies may be defined organisationally or on an individual basis. Recruiting and developing staff in line
with organisational competencies provide the basis for creating a competitive advantage. Such competencies are
aligned to the organisation’s vision. mission, values and strategic objectives. Individual competencies are those
attributes that each employee brings to the workplace for his/her particular function. Individual and team
competencies are critical components of the organisational competencies.
A business should create a competency framework to provide management and staff with a common
understanding of the set of competencies and behaviours that are vital to the organisation’s success.
Competencies are developed based on information collected by studying what top performers do in a defined job
context. They focus on the attributes that distinguish the high performers from the rest of the workforce and in
their industry.
Creating a competency framework is an effective method to assess, maintain, and monitor the knowledge, skills,
and attributes of people in your organisation. The framework allows management to measure current
competency levels to make sure their staff members have the expertise needed to add value to the business. It
also helps managers make informed decisions about talent recruitment, retention, and succession strategies.
And, by identifying the specific behaviours and skills needed for each role, it enables HR to budget and plan for
the training and development the company really needs.
The process of creating a competency framework is long and complex. To ensure a successful outcome, involve
people actually doing carrying out the roles to evaluate real jobs, and describe real behaviours. The increased
level of understanding and linkage between individual roles and organizational performance makes the effort well
worth it.
Naturally, competencies required in the workplace vary from business to business and from profession to
profession. Below is a list of competencies which an ICT market leader defined for its entry level leaders and
more senior leaders:
Performance Management – November / December 2011
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Core competencies for entry-level leadership positions
Functional technical skills
Business acumen
Integrity and trust
Command skills
Intellectual horsepower
The following competencies are required as success factors for leaders:
Priority setting
Problem solving
Drive for results
Building effective teams
Developing direct reports
Customer focus
Organisation agility
Continuous learning
Model company values
Anticipate change and prepare
for the future
Implement with quality speed
and value
Achieve results with people
Share knowledge and experience
Effective communication
Dealing with ambiguity
Diversity Management
Performance Management – November / December 2011
30
Another example: Competencies required for an HR Manager
MANAGING THE JOB
Analysis
Ability to secure relevant information and identifying key issues and relationships
from a base of information; relating and comparing data from different sources;
identifying cause-effect relationships.
Business approach
The ability to apply management principles and techniques to the management of
all organizational resources. This involves translating management strategies into
clear and practical operational realities. It is demonstrated by using management
information to support cost effective and timely decisions and the willingness to
take calculated risks in the pursuit of organizational goals.
Judgment / decision making
Make decisions that reflect sound judgment. Use creative problem-solving
methods to analyse problems, generate alternatives and determine a course of
action that moves the organisation toward its goals.
Managing complexity
Ability to manage continually changing and challenging circumstances in an
organised, efficient and calm manner whilst attaining objectives. Organised to
make the best use of time and able to handle a number of competing priorities.
Able to move from one task to another.
MANAGING SELF
Contracting
Negotiating, organizing, preparing, monitoring, and evaluating work performed by
vendors and consultants.
Flexibility
Adapt readily to changing situations. Open to new ideas and new ways of doing
things. Patient with changing circumstances.
Initiative
Ability to assert one’s influence over events in order to achieve goals; self starting
rather that accepting passively; taking action to achieve goals beyond what is
required; being proactive.
Integrity
Ethical, honest and trustworthy. Take responsibility for own actions and treat
others honestly and fairly. High personal standards and values.
Performance Management – November / December 2011
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MANAGING OTHERS
Conflict management
Ability to identify, manage and resolve potential and actual conflict through
effective communication and relationship building skills. Maintain a sense of
composure and credibility that reflects well on the organisation.
Customer service
Ability to make an effort to listen to and understand both internal and external
customers; anticipating customer needs; gives high priority to customer
satisfaction.
Developing people
Ability to develop an individual’s skills and competencies by planning effective
developmental activities related to current and future jobs. Setting goals, providing
timely feedback and coaching employees at all performance levels from the model
employee to the troubled team member.
Impact
Ability to create a good first impression; commanding attention and respect;
showing an air of confidence displays confidence and a commanding presence.
Negotiation
Ability to effectively explore alternatives and positions to reach outcomes that gain
all parties’ support and acceptance.
KNOWLEDGE, SKILLS AND ABILITIES REQUIRED
People management
Use appropriate methods and processes to attract, retain, manage, develop and
reward staff to achieve strategic objectives.
Recruitment and Selection
Organizational practices, decisions, and processes that affect (a) the capability of
an organization to make hiring, promotion, and other personnel decisions, and (b)
the number or types of individuals who are willing to apply for or accept a given
vacancy.
Training and Development
The systematic acquisition of attitudes, concepts, knowledge, roles, or skills that
result in improved performance at work.
Reward System
Monetary compensation and monetary and non-monetary benefits organizations
provide to their employees.
Performance Management – November / December 2011
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Exercise
Considering the above, compile a list of the required competencies in your organisation
Grow the business
Lead people to perform
Performance Management – November / December 2011
Drive implementation
33
2.4 Key performance indicators
2.4.1
Introduction
In performance management the key question asked is, "How well is an employee applying his or her current
skills, and to what extent is he or she achieving the outcomes desired?" The answer has traditionally been found
in the performance evaluation process, where managers look for hard data to tell how well an employee has
performed his or her duties. What is often missing from this evaluation, however, is the part about making sure
that the employee is doing the right thing. After all, you may have a very hard-working and dedicated team
member, but if he or she is not working on things that advance the organisation's purpose, what is the point?
This is where key performance indicators (KPIs) come into play, and they apply both at the organisational and
individual levels. At an organisational level, a (KPI) is a quantifiable metric that reflects how well an organisation
is achieving its stated goals and objectives. For example, if the business’s vision includes providing superior
customer service, then a KPI may target the number of customer support requests that remain unsatisfied by the
end of a week. By monitoring this, management can directly measure how well the organisation is meeting its
long-term goal of providing outstanding customer service.
If the KPI is inappropriate or naive, however, the resulting behaviors may be counterproductive. For example,
using the same goal of providing superior customer service, the first KPI that often comes to mind is the number
of customer complaints received. Intuitively, it is considered that the fewer complaints received, the higher the
customer service being offered. This is not necessarily true: The business may be getting fewer complaints
because they have fewer customers, or because customers are not able to access the firm’s support services.
Taking this a step further, while it is important for organisations to choose the correct KPIs for business
performance, it is equally useful if managers and employees define KPIs for members of their teams. In fact, an
ideal situation is where KPIs cascade from level to level in the organisation. This helps management and staff
work in such a way that their activities are aligned with corporate strategy.
2.4.2
Employee Goals and KPIs
So part of performance management is setting goals with members of a team. This may be done within the
formal appraisal process, but it does n ot have to be. The important factor is that the goals that are set are
aligned with the department's strategy, which in turn is aligned with the overall strategy of the organisation. This
follows the common adage in management that says, "What is measured gets done." If a goal around a certain
outcome is set, the chances of that outcome occurring are much higher, simply because there is a commitment
to managing and measuring the results. When an employee's goal is defined in terms of an organisational KPI, it
ensures that what the employee is doing is well aligned with the goals of the organisation. This is the critical link
between employee performance and organisational success.
Performance Management – November / December 2011
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Here is an example of how an individual employee's goal is linked to organisational strategy:

Organisational Vision – To be known for superior customer service and satisfaction.

Organisational Objective – To reduce the number of dissatisfied customers by 25%.

Organisational KPI – The number of customer complaints that remain unresolved at the end of a week.

Team Member's Goal – To increase the number of satisfactory complaint resolutions by 15% this
period. Taken to the next level, each employee goal should have at least one associated KPI. A metric
must be designed to specifically measure, on a regular basis, whether or not this person is meeting his
or her goal.

Team Member KPI – The weekly percentage difference in complaints handled that result in satisfied
customers versus unsatisfied customers.
2.4.3
Starting point for effective KPI formulation
Understanding the context

What is the vision for the future?

What is the strategy? How will the strategic vision be accomplished?

What are the organisation's objectives? What needs to be done to keep moving in the strategic
direction?

What are the Critical Success Factors? Where should the focus be to achieve the vision?
Defining KPIs

Which metrics will indicate that the correct vision and strategy are being pursued?

How many metrics should there be? (Enough, but not too many!)

How often should they be measured?

Who is accountable for the metric?

How complex should the metric be?

What should be used as a benchmark?

How is it ensured that the metrics reflect strategic drivers for organisational success?

How could the metrics be cheated, and what will guard against this?

What negative, perverse incentives would be set up if this metric was used, and how will it be
prevented?
2.4.4
KPIs and Rewards, Recognition, and Development
Once meaningful metrics for measuring organisational or employee performance have been established
employee performance needs to be aligned as well. Just as what gets measured, gets done; so does what gets
rewarded! In the process of establishing rewards and recognition practices, it must be ensured that rewards tie
Performance Management – November / December 2011
35
directly to the KPIs. For example, if measuring staff on how well they deal with customer complaints, then
rewarding them for lowering numbers of complaints confuses the message being sent. Conversely, if the
business wants to attract new customers, then a suitable KPI is one that measures how many new customers
are attracted each week. Depending on the situation, a well-aligned performance system may reward employees
based on the number of new customers they personally help to attract.
2.4.5
Examples of KPI measures
2.4.5.1 Insurance industry
Sales staff

Number of new insurance policies

Average size of insurance policies sold for the period

Policy renewal rates

Gross premium income forecast vs actual
Operations staff

Percentage of overdue claims

Percentage overdue premium

Average handling cost per insurance claim

Average handling time of insurance claims

Percentage of claims handled first time correctly

Percentage of insurance claims handled within agreed-upon time frame

Percentage of escalated insurance claims

Average closure duration of insurance claims

Backlog of insurance claims

Percentage of re-opened insurance claims

Queue rate of insurance claims

Number of days open of insurance claims
Management

Loss ratio: claims to premiums

Claims solvency

Percentage of fraudulent claims

Percentage of claims where initial liability decision is not made within statutory timeframe.

Policy premium to staff costs

Combined cost and claims ratio
Performance Management – November / December 2011
36

Number of policies in force relative to headcount

Claim reserves
2.4.5.2 Finance and accounting

Typical accounting ratios

Accounts payable and accounts receivable processes:

Percentage overdue invoices

Percentage of invoices disputed

Debtor’s days.

Accounts payable days

Percentage of bad debts against invoiced revenue

Cycle time to resolve an invoice error

Cycle time to process payroll.

Percentage of invoices under query
Discussion: Designing KPIs and measures have been highlighted as the most challenging part of designing
and implementing a performance management system. What is your experience?
Exercise: Please draft a list of KPIs for your position How would you measure them?
in the organisation.
Please note: Excellent resources on the topic of KPIs:
www.kpilibrary.com and Measures and More: www.staceybarr.com
Performance Management – November / December 2011
37
3. PERFORMANCE CONTRACTING
3.1 The need for a policy
To facilitate the shift to a strategic and integrated approach to the management of performance it is necessary to
share the rules of the game. This is best done by means of a policy which determines and communicates how
performance management will be used by managers and employees as a business process. This will encourage
and empower managers and employees to see performance as an integrated and dynamic, real-time feature of
work life. It will clearly illustrate that performance management is not a separate stand-alone process but
integrates with the organisation’s and work units’ business, operational plans and budgets.
3.2 Policy statements
Our performance management system is driven by the following principles:
Policy statement 1: it is a business process
Policy statement 2: it is used to create a shared understanding about what is to be achieved and how it is
achieved
Policy statement 3: it is an approach, and at the same time it is a system to manage people and performance
Policy statement 4: managers and employees are required to use performance management for the health, and
long-term growth of the business
Policy statement 5: competencies are used to drive the process of achieving performance, results, and
development
Policy statement 6: judgment is recognised to be the most important factor in determining competency ratings,
and mathematical calculations cannot be a substitute for the use of judgement
Policy statement 7: clear, consistent, and visible involvement by senior executives and managers is a mandatory
part of successful performance measurement and management
Policy statement 8: effective and open communication by all levels of management and employees is mandatory
Policy statement 9: accountability for results will be clearly assigned and well understood by everyone
Policy statement 10: business performance measures/indicators must link to performance planning and appraisal
for teams and individuals
Policy statement 11: targets will be linked to appraisals
Policy statement 12: compensation, rewards, and recognition will link to performance measures
Policy statement 13: progress toward achieving outputs and results must be openly shared/communicated with
employees, customers, and stakeholders
Policy statement 14: performance measurement results should be used to effect continuous performance change
and improvement
Performance Management – November / December 2011
38
Policy statement 15: “Figure 1” is the system to follow for managing total performance (strategically and
operationally) for a three- year period is mandatory.
Policy statement 16: managers and supervisors will be sufficiently well briefed and trained to take responsibility
to implement a formal performance management system.
Policy statement 17: managers and employees must conclude a development plan for a one-year performance
period, and up to a three-year career development period.
Policy statement 18: managers and employees must conclude a written performance agreement which is
updated as and when circumstances dictate that a change is required; contracts are not cast in stone.
Policy statement 19: managers and employees communicate formally and informally throughout a performance
cycle.
Policy statement 20: the company will follow a balanced approach to paying managers and employees for
achieving superior performance and development targets; performance based pay will be supported by a
structured wage and benefits system that is market related.
3.2.2 Progress test
Study the above statements. Mark those statements that you perceive to be already operating in your
organisation. Out of a score of 20, judge the progress that your organisation has been making towards an
integrated performance management system. If not already implemented, which of the above would be most
challenging to implement and why?
Score out of 20:
Most challenging to implement
Performance Management – November / December 2011
Reasons
39
3.3 Performance contracting paperwork
3.3.1.
Goal setting
3.3.1.1. Work unit outputs and job priorities sheet: Helps to clarify work expectations between managers and
direct reports in relation to business strategy and goals.
Step 1:
As manager, review your business plan, strategic priorities, and goals for your work unit. Decide which priorities
each team member will manage, and which are team priorities.
Tip
Consider each employee’s current skill profile (i.e. decide what each person is capable of delivering at an
excellent level). Consider what development and stretch each employee requires when assigning priorities.
Step 2:
Distribute a Work Unit Outputs - Priorities Worksheet with a cover memo to each team member.
Tip
For each person list all the outputs the unit is responsible for. This provides everyone with a common picture of
the total commitments of the work unit. Each job/job family is unique. It is important to convey this uniqueness to
each team member prior to negotiating a job model/profile. For each player list the priority issues their job
model/profile and objectives should address.
Performance Management – November / December 2011
40
Memo sent out by manager
Memo: Work Unit Outputs and Job Priorities
To:
[Employee name]
From:
[Manager name]
Subject:
[Year 1/2/3 Objectives]
Date:
[Date]
Attached is a list of all the outputs we need to produce this year. I have also indicated the priorities you will be
personally responsible for taking care of.
On [insert date], we will have a unit team meeting to discuss our work unit outputs, and the priorities each team
player will take care of. These job priorities will form the basis for you to formulate a job model/profile for the next
quarter.
The job model/profile form will also be distributed at the meeting. Here, you will have an opportunity to develop a
draft copy in preparation for a 1: 1 discussion with me.
Within three days following our team meeting, I would like you to have a draft of your job model/profile of your
objectives available for discussion and negotiation.
Please feel free to contact me before our meeting if you have questions.
cc: [Manager's Manager]
Attachment: Work Unit Outputs – Job Priorities Worksheet
Performance Management – November / December 2011
41
Worksheet to be completed by staff member
Assignment
Worksheet: Work Unit Outputs – Job Priorities
Collect information (see objective setting worksheet)
Good objectives are based on good information. By completing the first step before the team meeting you will be
prepared for a successful objective setting discussion, since such data will be your rationale in establishing
objectives. You need to collect two sets of information from your manager/supervisor. Make an appointment and
discuss the following:
Outputs of work unit/group
Priority issues which your objectives should address
Fill in the blanks as you discuss the information with your manager/supervisor. During your discussion make sure
you understand:

Why each unit output is important to your manager/supervisor

Why your manager/supervisor has selected the specific priority issues for your job; what is negotiable
and what is non-negotiable
Your role is to gain a clear understanding of what to concentrate on when developing your objectives.
After the discussion, you will formulate a set of objectives/job model, which will form the basis of a negotiated
and agreed performance contract.
Performance Management – November / December 2011
42
3.3.1.1.2 Objective setting worksheet: (Electronic) memos and guides to help managers and teams to (a) set
measurable goals/objectives, and (b) evaluate results against objectives/track results.
Step 1
Once you have received the feedback from “Worksheet: Work Unit Outputs – Job Priorities” and had discussions
with individual staff and teams you should familiarise yourself with each team member’s job requirements/job
priorities. Assign non-negotiable outputs, and list those outputs that you want the team player to consider
incorporating into their job model/profile.
Step 2
Distribute the Objective Setting Worksheet to each team player with a cover memo setting a date for a personal
objective setting discussion/negotiation. This step requires that employees have been trained/have the
competence and confidence to write a job model/profile, and negotiate a performance contract.
Step 3

Meet with each employee to discuss and clarify his or her work goals.

Be sure to confirm the outputs, quality criteria, and indicators for each output/objective assigned

Negotiate the performance levels for the other objectives.

Ensure that for each objective assigned or negotiated each team player will:
o
Define results in terms of measurable outcomes, not activities that are the means to those
results.
o
Incorporate the individual goals into larger business objectives. Focusing on higher-level
results is more effective.
This removes excuses and encourages dialogue between team members to achieve the results. Furthermore,
because these results are "higher level” they are also more frequently shared by members of a department. Be
sure the employee checks out such shared objectives with the others involved avoiding working at crosspurposes.
Make sure the objective is achievable, given the employee's resources and skills. To avoid setting an
unachievable objective, help employees identify potential obstacles they need to consider. If an employee
hesitates to accept a challenging objective, show that person a clear path to success.
Clarify a time frame and the priority for each objective.
Not all objectives are equally important for the overall success of the work unit, and the employee. Be sure to
focus each team players attention as to what is critical and what is important. Help the employee develop a
realistic and achievable time lines for producing completed work on time and on budget.
Performance Management – November / December 2011
43
Step 4
Keep a copy of the agreed-upon job model/profile on each employee’s personal file and that you give one to
each team player.
MEMO SENT BY MANAGER
Memo: Objective setting memo (discussing and negotiating objectives)
To:
[Employee name]
From:
[Manager name]
Subject:
[Year 1/2/3 Objectives]
Date:
[Date]
Over the next week, I would like you to think about your objectives for [insert time period, e.g. the second
quarter]. My own objectives are not finalised, but the attached draft may help you form your objectives. I've also
attached our overall business goals for [insert year] and an "Objectives Worksheet" to assist you.
On [insert date], we can discuss the department goals and your individual objectives. Within three days following
our meeting, I would like you to complete your objectives. Completing this early in the year will get us off to a
good start in [year].
Please feel free to contact me before our meeting if you have questions.
cc: [Manager's Manager]
Attachment: [Insert year 1/2/3 Business Goals]
Discussion: The performance contracting process described in this manual appears very “democratic”. Does
this not compromise the setting of challenging performance criteria?
Performance Management – November / December 2011
44
Objective Setting Worksheet
Job title
Process for establishing objectives
1. Collect information
1.
2.
3.
4.
5.
6.
7.
2. Mission statement:
WHY DOES THIS JOB EXIST? What products, services or
information are provided? To whom? What is unique about this job?
Why are these products, services or information provided? What
would be missing if this job did not exist?
(3) CUSTOMER/KEY
RECEIVER
WHO IS THE
CUSTOMER?
 Is the customer
external or internal?
 Is the customer critical
for the success of the
job?
 Is the customer the
next person in the
process?
(4) OUTPUT
(5) QUALITY CRITERIA
WHAT DOES THE
WHAT ARE THE
CUSTOMER WANT?
CUSTOMER’S
REQUIREMENTS?
 What does the
customer receive?  Do they describe
quality, not minimum
 What products,
standards (i.e. filter
services or
purpose and user
information are
conformance to
provided?
requirements)?
 Do you have the
authority to produce  Do they reflect the
customer’s point of
the output?
view?
 Do they include
qualitative and
quantitative criteria?
Performance Management – November / December 2011
Collect information
Define mission statement
Identify customers/key receivers
Identify outputs
Determine quality criteria
Determine indicators
Negotiate a performance contract
(6) INDICATORS
WHAT EVIDENCE OR CLUES
WILL TELL YOU WHETHER THE
OUTPUT HAS BEEN PRODUCED
AS SPECIFIED IN THE QUALITY
CRITERIA?
 Are indicators appropriate for the
output being measured
(qualitative or quantitative)?
 What documents/reports will
provide the evidence that
outputs were produced?
 What visible indicators can be
used for assessment?
 Whose judgement is important
to obtain?
45
4. TRACKING PERFORMANCE AND TAKING CORRECTIVE ACTION
4.1 Tracking results against objectives and renegotiating outputs
Performance management would be incomplete without systematically tracking performance on a regular basis,
preferably once every quarter. The purpose of tracking and review is to determine progress on the extent that the
team and individual are meeting the objectives of the company and those they set for themselves. The outcome
of tracking and discussions with their managers trigger a process of corrective action should the employee be
found to under-perform. This may include giving additional training, providing resources such as computer
equipment, ensuring team integration, resolving of conflict and other aspects which may have hindered the staff
member in doing his or her daily work. Vitally important, it also makes provision for renegotiating the outputs and
objectives. Performance criteria are not cast in concrete.
Each periodic performance review is meant to trigger a process of corrective action bringing the staff member
back on track in the short term and creating a performance development path ensuring that competencies are
fully developed and exploited for the growth of the individual and success of the business.
As with the performance contracting process the employee and his team are given ample opportunity to review
their own performance and prepare themselves for a discussion with their manager. Two-way communication is
the umbilical cord that keeps the performance management system alive.
Discussion: Doesn’t this approach provide an opportunity for the employee to come up with a list of excuses
and shift the blame for poor performance?
4.1.1
Review Process
Step 1
Send this memo together with a performance planning and review document periodically to direct reports as a
means to maintain an ongoing dialogue about objectives setting and performance standards. Request each
employee to schedule a 45 minute discussion to review progress, and renegotiate outputs and objectives where
needed.
Performance Management – November / December 2011
46
Step 2
During the discussion ask the employee to review progress for each output/objective, noting key events and
contributions by others. If the result was not achieved, ask for detailed reasons. Placing the goal achievement in
the context of the overall mission of the business increases the value of the achievement.
When all employees contributed to an objective, but individual differences in contribution were great, it is
advisable to highlight special efforts or accomplishments. For team goal accomplishment, focus on the
individual’s contribution (or lack of contribution) that had an impact on results and performance.
Look at the next performance period, and focus on what has not changed, namely, primary business values and
principles. Reinforce the primary business values and principles. Repeating these often will eventually instill them
into employees' minds.
Step 3
Introduce the reason for new business goals, or discuss the fact that the old goals are still pertinent. Provide
opportunities for discussion. Be sure that all decisions and pertinent facts are noted on the review document. Be
sure to let the employee know that the rating will form part of an overall assessment of performance at the end of
the year/review period.
Step 4
Keep a copy of the revised job model/profile on each employee’s personal file; be sure to keep a signed copy of
the review document on the each employee’s personal file.
Performance Management – November / December 2011
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MEMO SENT BY MANAGER
Tracking Results against objectives and renegotiating outputs/objectives
To:
[Employee name]
From:
[Manager name]
Subject:
Results against Objectives
Date:
[Date]
We are nearly at the end of [insert time period, e.g. the year, the quarter]. Please schedule a 45-minute
performance planning and review discussion with me at a convenient and quiet area/office. Be prepared to:

Review progress for each output/objective, noting key events and contributions by others.

Review team goal accomplishment, and your contribution (or lack of contribution) that had an impact on
results and performance.

Look at the next performance period, and decide which outputs and objectives should stay the same and
which need to change.
Attached is a copy of the Evaluation of Outputs Worksheet, and a Performance Planning for Next Period
Worksheet, both of which should be completed before the review discussion. Photocopy/print as many pages of
these worksheets as you need.
I appreciate the work you have done this [insert time period] and look forward to the review discussion that you
will lead.
cc: [Manager's Manager]
Attachment: Performance Review Worksheet, and Performance Planning Worksheet
Performance Management – November / December 2011
48
WORKSHEET
EVALUATION OF OUTPUTS
Assess your performance for the prescribed items.
Refer to your performance contract and review all
outputs with their own quality criteria and indicators in
mind.
First/
Second/
Third
Review:
Comments:
From:
Write the number that represents your level of
performance for each output.
Review the entire list and circle the rating for this
period.
To:
Rating
Key objective 1
3
Key objective 2
2
Key objective 3
2
/ /
Employee
Signature
Date
/ /
Mgr/Sup
Signature
Recommended
Priorities
Performance Management – November / December 2011
Date
/ /
Approval
Signature
Competencies
Date
Rating
1
2
3
4
49
PERFORMANCE PLANNING FOR NEXT PERIOD
 Complete this section at the end of a performance cycle in preparation for the next one.
 Request your manager/supervisor to provide tentative priorities for the next performance cycle.
 Prepare a draft job output model for discussion/negotiation
PRIORITY ISSUES/PROPOSED OUTPUTS
Performance Management – November / December 2011
50
THE PROCESS IN BRIEF
Performance review and planning is aimed at
moving the organisation towards a meritocracy in
which advancement and reward is based primarily
on merit. Reviews and evaluation form part of the
existing management process of objective setting,
planning, implementation, evaluation and
replanning. The essence of effective reviews and
evaluation is to provide team members with a clear
indication of how they are performing in terms of
agreed outputs and objectives.
The process:
 Consists of ongoing assessments and formal
reviews, which lead to a surprise-free overall
evaluation.
 Helps you to evaluate your progress towards
meeting the commitments contained in your
performance contract.
 Provides you and your manager with the
opportunity to discuss and where necessary replan
your performance contract and renegotiate
performance priorities.
 Takes into account your accomplishments, your
implementation of the organisation’s Mission,
Strategy and Philosophy and those strategic
priorities applicable to your job.
 Assists you to develop and maintain a strategic
vision of your job.
This document serves as a record for the reviews and
an overall evaluation of performance. For each review,
you and your manager should assess and discuss
your performance on a cumulative basis for that
period. Both of you independently complete the
relevant part of each copy of this form and then
discuss and assess your performance. Finally, your
manager discusses your assessment with his/her
manager and consolidates the discussion data on
his/her copy. This will be shared with you at a followup discussion in order to reach agreement on your
overall rating/evaluation.
Performance Management – November / December 2011
There are four levels of performance, each represented by a
number. The primary consideration in assessing performance
is the agreed objectives based on your job model. The
numbers and their headings are as follows:
1 Exceptional
2 Commendable
3 Competent
4 Unsatisfactory
The numbers and headings are offered as
guidelines to assist you in making fair and
consistent performance assessments. The
success of this process depends on your skill in
applying judgement to review and evaluate
performance accurately.
Please note:
 Filling in this form is not performance management
– it is a tool to guide you in the process.
 Communication about objectives, performance,
performance change and development is essential
for achieving excellence.
 Regular, quality communication about objectives,
performance, problems and improvement needs is
a key asset in producing a high performance
organisation.
 Communication about performance must be direct,
focus on long and short-range effects of which
subordinates and units are doing, and is the shared
responsibility of managers and subordinates.
 Both day-to-day and periodic formal review
discussions are important forms of performance
management.
Follow the instructions at the top of each page.
51
4.2 Performance improvement planning
This type of plan is used to address performance issues that have been identified by the manager and/or
employee and communicated in an appraisal/performance-related memo or in conversation. The following guide
takes the employee and manager through the two-part process of completing a Performance Development Plan.
Part 1 leads the employee through a first draft, while Part 2 covers the manager's review, the manager-employee
discussion, and an agreement to action.
4.2.1
Guide to writing a performance improvement plan (PIP) Part 1: Employee Instructions
Step 1
Before beginning the plan, review the sections in the performance appraisal (or other document) where potential
improvement areas have been identified. It is important that you understand and agree with the basic issues and
expectations before setting up developmental activities, so be sure to get clarification from your manager if you
have any questions.
Step 2
Write down 1-3 developmental goals related to areas you want to improve or performance issues identified by
your manager.
Step 3
List 2-3 activities that will help you reach each goal. Be sure to specify how and when you will start and complete
each activity.
Step 4
List any resources you will need to complete your development activities. Resources may include other people's
time or expertise, funds for training materials and activities, or time away from your usual responsibilities.
Step 5
Indicate how you will measure the accomplishment of each developmental goal, using 2-3 different indicators
when possible.
Step 6
Identify ways in which your manager will support your development activities. Manager support often includes
personal guidance (advice, review of progress) and some type of influence (e.g., introducing you to key people in
the company, putting you in charge of the next team meeting, or giving you additional resources).
Step 7
Describe when and how progress checkpoints will occur (e.g., memos, phone calls, meetings, etc.) and what
developmental activities will be completed or discussed at each checkpoint.
Performance Management – November / December 2011
52
4.2.2
Guide to writing a performance improvement plan (PIP) Part 1: Part 2: Manager Review
Review the employee's suggested improvement plan before the performance plan meeting. This plan is a good
indicator of how well the employee understood the performance issues you had identified. Validate the
employee's assessment and plan by providing comments and activity suggestions. Identify any development
areas the employee may not have recognised.
Questions to ask

How well do you think the employee understands the performance issues and expectations for
improvement? Do the developmental goals and activities connect directly to the performance issues you
identified?

If the employee misunderstands or disagrees with your assessment of their developmental needs, try
the following steps:
 Review the facts - the behaviour you observed, the results they achieved, and the impact on
the organisation- and make sure that the employee acknowledges them as facts,
 Describe why that behaviour or those results need to change
 Identify suggested changes and describe how they will help the employee contribute to meeting
team or organisational needs.

Are the developmental activities detailed and action-oriented? Are they realistic given the available time
and resources? What is your confidence level that the employee can complete the activities?

Do you know of other activities that would help the employee reach developmental goals? What has
helped you in the past in this area?

Can you provide the resources identified? What is the chance (%) that resource needs have been
underestimated?

Are you comfortable with the measurement criteria for each developmental goal? Can you make them
more quantifiable?

Are you genuinely committed to delivering the help that your employee is requesting? Or, are you
promising more than you can deliver in the given time frame?

Have you and the employee agreed on dates for checking progress, how progress will be measured,
and what changes will be made if progress is behind schedule?
Discussion: Would you agree that by taking the above process seriously we are starting to manage our
organisations better; i.e. shift from ”process” to “people”?
Performance Management – November / December 2011
53
Template: Performance Improvement Plan
Step 1
Write down 1-3 developmental goals related to areas you want to improve or performance issues that have been
identified by your manager.
Development goals
Step 2
List 2-3 activities that will help you reach each goal. Be sure to specify how and when you will start and complete
each activity.
Goal
Activity
How to accomplish
Starting date
Date of completion
Goal
Activity
How to accomplish
Starting date
Date of completion
Print/photocopy additional pages as required
Performance Management – November / December 2011
54
Step 3:
List any resources you will need to complete your development activities. (May include other people's time or
expertise, funds for training materials and activities, or time away from your usual responsibilities).
Resources
1.
2.
3.
Step 4:
Indicate how you will measure the accomplishment of each developmental goal, using 2-3 different indicators
when possible.
Measurement Criteria
1.
2.
3.
Step 5
Identify ways that your manager will support your development activities.
Management Support
1.
2.
3.
Step 6:
Describe when and how progress checkpoints will occur (e.g., memos, phone calls, meetings, etc.) and what
developmental activities will be completed or discussed at each checkpoint.
Progress Checkpoints
Checkpoint 1.
Date
Time
Type of Follow Up (i.e. meetings)
Progress Expected
Activity Change / Addition (if needed)
Performance Management – November / December 2011
55
4.3 Career Development Plans (CDP)
A career development plan is a tool to keep individual's skills and interests aligned with organisational needs, and
to build employee commitment to the organisation. When the employee and manager complete it cooperatively, it
can have a major impact on an employee's motivation, personal growth, and overall contribution to the company.
Employee career development can make the difference between watching the best people move up in the
organisation and watching them move on to a new career or to your competitors. Career development plans may
be written with the following objectives in mind:

Growth in the current job. Expanding skills and job satisfaction for employees who are at the top of their
career path or who do not have a desire to move beyond their current position.

Promotion and succession planning. Preparing an employee for a promotion, including the replacement
of the employee's manager.
4.3.1
Guide to writing a career development plan - Part 1: Employee Instructions
Step 1
Write down your primary career interest. A primary career interest is usually described in terms of a general
vocation. For example, "My primary career interest is marketing within the insurance industry."
Step 2
Identify long-term professional goals (including positions desired within the company). Long-term professional
goals are often conveyed in terms of specific positions ("become a marketing manager") or major
accomplishments ("rewrite a policy document in plain English"). List any lateral/sideways moves or promotions
that will help you meet your long-term professional goals. For example, "I want to move from sales executive to
product manager, and finally to marketing manager."
Step 3
Identify the short-term goals that contribute to long-term interests and the challenges that must be overcome in
order to reach these goals. Identify barriers, both personal and external, that prevent you from accomplishing
your short-term goals, and then create ways to overcome them.
Step 4
List 2-3 activities that will help you reach each goal. Be sure to specify how you will accomplish the activity,
including any resources you might need, and when you will start and finish it. (Resources may include other
people's time/expertise, funds for training materials and activities, or time away from your other responsibilities).
Step 5
Describe tasks in your current job that are contributing to long-term goals and that you would like to emphasise or
perform more frequently.
Step 6
Describe tasks in your current job that are not contributing to your long-term goals. Suggest ways to minimise,
remove, or delegate them to others.
Performance Management – November / December 2011
56
Step 7
Write down any additional skills, knowledge or experience you would like to acquire that may directly or indirectly
help you in your current job or future positions.
Step 8
Describe when and how progress checkpoints will occur (e.g., memos, phone calls, meetings) and what
developmental activities will be completed or discussed at these times.
4.3.2
Guide to writing a career development plan - Part 2: Manager Review
Questions to ask

Are you aware of your employee's career interests and values? Do you know which of your employee's
strengths contribute to these career goals and what areas need to be developed?

Do you feel that the short-term goals your employee has suggested are unrealistic, given the employee's
abilities or other external factors? Is there anything standing in the way of the desired goals?

Convey what you know about organisational realities to help the employee set short-term goals. If you
think there are outside barriers, which will inhibit the attainment of their goals, describe them and help
the employee work around them.

Do you know of other activities that would help the employee reach the developmental goals? What has
helped you in the past in this area? Help the employee select at least one development activity for each
short-term goal.

Are there people you know who could help your employee meet their career development goals? Can
you provide the resources identified? Help the employee meet their goals by offering your ideas,
contacts with people, and resources. Think of at least one person who could help the employee in a
mentor or advisor role.

Can you make changes to the employee's job to replace routine tasks with new work that is more closely
aligned with the employee's goals?

If you agree with the employee's suggestions for expanding their responsibilities, work with them to
define any additional knowledge or experience they will need to meet the new set of expectations. Also
take a close look at how their workload will be affected, and discuss any responsibilities they will need to
give up.

When employees mention tasks they no longer want to be involved with, ask them for specific
suggestions on how to get the same result without their involvement, e.g. delegate, eliminate, or find
more efficient ways of accomplishing the tasks.

Have you and the employee agreed on dates for progress checkpoints and what will be measured at
each one?
Performance Management – November / December 2011
57
Template: Career Development Plan
Primary Career Interest
Step 1:
Write down your primary career interest.
1.
2.
3.
4.
Step 2
Identify long-term professional goals (including positions desired within the company).
1.
2.
3.
4.
Step 3
Identify the short-term goals that will contribute to long-term interests and the challenges that must be overcome
to reach these goals.
1.
2.
3.
4.
Step 4
List 2-3 activities that will help you reach each goal. Be sure to specify how you will accomplish the activity,
including any resources you might need, and when you will start and finish it.
Career Development Activities
Short Term Goal
Activity
How to Accomplish
Performance Management – November / December 2011
58
Starting Date
Date of Completion
Short Term Goal
Activity
How to Accomplish
Starting Date
Date of Completion
Print/photocopy additional pages as required
Step 5
Describe tasks in your current job that are contributing to long-term goals and that you would like to emphasise or
perform more frequently.
1.
2.
Step 6
Describe tasks in your current job that are not contributing to your long-term goals. Suggest ways to minimize,
remove, or delegate them to others.
1.
2.
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59
Step 7
Write down any additional skills, knowledge or experience you would like to acquire that may directly or indirectly
help you in your current job or future positions.
1.
2.
3.
Step 8
Describe when and how progress checkpoints will occur (e.g., memos, phone calls, meetings, etc.) and what
developmental activities will be completed or discussed at these times.
Progress Checkpoint
Date and Time of Checkpoint
Progress
Secondary Career Interest:
Step 1:
Write down your secondary career interest.
1.
2.
3.
4.
Step 2
Identify long-term professional goals (including positions desired within the company).
1.
2.
3.
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60
Step 3
Identify the short-term goals that will contribute to long-term interests and the challenges that must be overcome
to reach these goals.
1.
2.
3.
Step 4
List 2-3 activities that will help you reach each goal. Be sure to specify how you will accomplish the activity,
including any resources you might need, and when you will start and finish it.
Career Development Activities
Short Term Goal
Activity
How to Accomplish
Starting Date
Date of Completion
Career Development Activities
Short Term Goal
Activity
How to Accomplish
Starting Date
Date of Completion
Print/photocopy additional pages as required
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Step 5
Describe tasks in your current job that are contributing to long-term goals and that you would like to emphasise or
perform more frequently.
1.
2.
Step 6
Describe tasks in your current job that are not contributing to your long-term goals. Suggest ways to minimize,
remove, or delegate them to others.
1.
2.
Step 7
Write down any additional skills, knowledge or experience you would like to acquire that may directly or indirectly
help you in your current job or future positions.
1.
2.
3.
Step 8
Describe when and how progress checkpoints will occur (e.g., memos, phone calls, meetings, etc.) and what
developmental activities will be completed or discussed at these times.
Progress Checkpoint
Date and Time of Checkpoint
Progress
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62
Discussion: This concept of career development planning looks great on paper. But what is the scope of CDP
in an SMME?
4.4 Disciplinary Action
4.4.1
Policy
The management of performance does not always go smoothly and at times poor performance can be become a
disciplinary issue. This section includes a simple and legally defensible corrective action/disciplinary policy
supported by a line-manager friendly procedure and supporting paperwork to record the process at all stages.
Causes for dismissal are as follows:
4.4.1.1. Competence
Incompetence must relate to the kind of work the employee was required to do. This is not easy to define,
especially with more senior employees and executives whose job functions and goals may be hard to describe
and explain. Where targets and performance goals have been identified by the employer and clearly
communicated to the employee, such targets and goals and any subsequent changes in them must be
reasonable. Once they are reasonable and the company offers the employee all necessary assistance to achieve
them, then a continued failure by the employee would constitute good grounds for a dismissal. As mentioned
above, this requires the employer to provide adequate assistance, resources and training.
Where an employee has been informed that his/her work is not of an acceptable standard, he/she must be given
reasonable time within which to improve. The work environment must also be conducive to such improvements.
4.4.1.2. ''Qualifications'' for the job
When an employee does not have the required competence or qualifications to perform the work for which he/she
was employed, a dismissal may be deemed fair. This is especially so where the competence or qualifications are
required in terms of legislation, e.g. the Companies Act, Municipal Finance and Management Act and others.
However where a dismissal is due to alleged incompetence an employer will be expected to have provided
assistance to the employee to achieve the required standard, e.g. training necessary to perform the job.
Equally, when an employer is in business to provide professional services such as accountants, attorneys
auditors, investment advisors; etc., qualified personnel are a legal prerequisite. Employees are hired as qualified
Performance Management – November / December 2011
63
personnel and if later it is discovered that they do not, in fact, hold the relevant qualifications, their dismissal
would be based on grounds that they did not hold the qualifications claimed and that they are essential
requirements to job performance. Should an employer hire an employee on the basis that he/she will obtain a
certain qualification and this is not achieved within a reasonable time period, the employee could be fairly
dismissed.
If an employer dismisses an employee for lack of appropriate qualifications or incompetence, then it will need to
show that a particular qualification or standard is essential to the job. Therefore the relevant job descriptions and
specifications need to be updated. As a precaution, all job descriptions and specifications should be reviewed at
least once a year to ensure their relevance. If a job description or specification exists that is found to be out of
date, this may be considered evidence that the required qualifications are not essential.
Best practice would indicate that to avoid dismissals based on lack of qualifications, employers should request a
copy of the originals of any certification at the recruitment stage, that is, prior to commencement of employment.
4.4.1.3. Capacity
An employee's incapacity to do the job for which he/she was hired can result in dismissal. Attendance problems
are a common cause of incapacity e.g. failure to attend work regularly or persistent lateness. Frequent short term
absences can be justified as reasons for dismissal where:

The absences occurred over a significant period.

There was reason to conclude that this pattern would not improve in the foreseeable future. Allowing the
absences to continue was unacceptable as it established the wrong precedent for other employees.

Appropriate disciplinary action had been taken, i.e. the employee had received warnings of the
consequences of failure to improve the attendance record.
Other forms of short-term absence can include a variety of illnesses or regular absences on Fridays and Mondays
or after a long weekend. This is not acceptable and as long as the employer exercises reasonableness and
observes due procedures and warnings, dismissal may follow.
In the case of absence as a result of alcohol or substance abuse, the employer should in the first instance treat
these as it would an illness. The employer should make every effort to elicit the cause and refer the employee to
the appropriate treatment facility to try and combat the dependence. If the absences continue after treatment, or if
the employee refuses to seek help, the usual Disciplinary Procedure should be used. If the problem persists, it
may result in dismissal.
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While there is no legal requirement for medical report/ test results affirming the incapacity, it is always wise to
have all relevant information available before making a decision to dismiss. Equally, there are no legal definitions
of an unacceptable length of absence. If an employer has exercised reasonableness and made the necessary
enquiries about possible return to work and forms the view that no solution is likely, then he/she will have no real
option but to dismiss and argue the reasonableness of the decision before the CCMA. There will always be some
uncertainty as to whether an employer is entitled to dismiss.
Some employees believe that if they are on 'sick leave' indefinitely and have submitted the required medical
certificates, they cannot be dismissed. This is not the case. Lengthy absences with no foreseeable return to work
date can justify a dismissal on grounds of incapacity. Employment contracts or handbooks should allow for
examination of the employee by the company doctor in order to examine the employee's fitness for work or
otherwise.
4.4.1.4 Ensure following the right procedures
The processes and paperwork presented so far in the workbook will help to ensure that the correct procedure will
have been followed. In summary the process is as follows:
Evaluate performance against the

Job description

Key performance areas

Work standards

Performance targets

Standard operating procedures

Extraneous factors (e.g. economic slump)

Performance improvement plan
Follow up to review whether there is improvement; if not

Poor performance review

Final counselling

Dismissal
4.4.2
Rights of employees facing dismissal:

The right to a fair and impartial hearing

The right to know the case against you

The right to have and the opportunity to use representation

The right to reply to the accusations

The right to have the case investigated and heard without prejudice
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
The right to appeal

Constructive Dismissal

Employee Assistance Programme
Discussion: It is becoming increasingly difficult to dismiss non-performing staff in our labour law dispensation.
Yet, would you agree that dismissal due to non-performance is a neglected option in performance
management?
4.4.2
Overview of documentation
4.4.2.1 Verbal Warning:
The Verbal Warning Guide helps the manager prepare for a discussion with an employee whose performance is
beginning to fall below guidelines or expectations. The Verbal Warning Worksheet provides a structure for the
manager to write down key concerns and develop a strategy to ensure a productive discussion.
4.4.2.2 Informal Warning: The Informal Warning Memo is used to remind the employee of standards they need
to meet and alert them to the consequences of continued non-compliance. It demonstrates a manager's desire to
see improvement, and is appropriate when an employee's performance is not meeting guidelines or expectations,
either due to a chronic problem or short-term error.
4.4.2.3 Formal Warning: Use a Formal Warning Letter as a stronger impetus toward improvement on the part
of the warned employee, and to take formal action towards termination in the case of no improvement. It should
be used when an employee has been given an informal warning and performance continues to fall below
guidelines or expectations established in the earlier memo.
4.4.2.4 Final Warning: Use the Final Warning Letter to notify an employee that if their performance does not
improve, they will be fired. It is to be used after the employee has been given a Formal Warning and has
continued to perform below guidelines or expectations established in the earlier memo. It can also be used when
a single action is sufficiently negligent to warrant this level of warning (but not severe enough to warrant
immediate termination).
4.4.3
Checklist - when to take corrective action
Talk to the employee before taking corrective action if the:

Employee's behavioural problem can easily be corrected.
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
Employee has not complied with previous corrective discussions.

Problem behaviour is in the early stages and needs to be redirected.

Problem or behaviour can be positively corrected outside of the progressive disciplinary process.
Take immediate corrective action if:

The employee disregards previous corrective discussions and agreements.

Negative behaviour patterns are affecting key work results.

Individual/group performance has declined due to disruptive behaviour.

The individual's behaviour threatens the well being or safety of others.

The employee deliberately or repeatedly violates company policies.
4.4.4
Guide to the corrective discussion
By having a corrective discussion with an employee before moving into the progressive disciplinary process, you
can stay focused on improvement and maintain a cooperative atmosphere. Following are some basic guidelines
for an informal performance discussion.
Step 1
Select an appropriate time and place. Provide a time for discussion that is private and uninterrupted. Have the
discussion as soon as possible following the occurrence(s) so the employee clearly understands the event and
the need for improvement.
Step 2
Specify the events, actions and behaviours that concern you. Use supporting facts. Explain why you are
concerned. Describe the impact of the employee's behaviour on the team and organisation.
Step 3
Ask for the employee's perspective of the situation. Keep the employee focused on the event or behaviour.
Listen to the employee's reasons, perceptions, and feelings.
Step 4
Look for solutions and employee commitment. Ask the employee for realistic solutions; if they cannot think of any,
offer suggestions. Get the employee's commitment to a solution. Make reference to the potential positive effects
of the commitment.
Step 5
Support the employee's solutions. Recognise your employee's strengths and ability to make needed changes.
Follow-up shortly after your discussion to offer support for progress and identify additional actions for the
employee to take.
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4.4.5
Verbal Warning Worksheet
Describe the problem (how does the action or behaviour differ from standards)
Is the employee aware of standards? Yes / No
Is there any written documentation, which shows the employee, is aware of the standards (signed agreements,
job description, objectives, etc.)? Yes / No
Are there any mitigating factors (e.g., business conditions, conflicting directions, time pressures)? Yes / No
Review employee file for prior documentation (Performance Appraisals, Other documentation
4.4.6
Informal Written Warning
The Informal Warning Memo is used to remind the employee of standards they need to meet and alert them to
the consequences of continued non-compliance. It demonstrates a manager's desire to see improvement, and is
appropriate when a non-exempt employee's performance is not meeting guidelines or expectations, either due to
a chronic problem or short-term error.
4.4.7
Guide to writing an informal warning memo
Step 1
Express concern over performance deficiencies and their impact on unit goal attainment or on company values
Be specific about extent of problem (e.g., what, how often and when, impact on unit productivity)
Refer to prior conversations or other events, which would increase employee's awareness of expectations or the
problem itself (e.g., performance appraisal or interim appraisal, company handbook statements, unit agreements
about mission or values)
Be specific about any coaching or management support already given (e.g., classroom training, on-the-job
training, formal or informal coaching sessions).
Step 2
Explain specific expectations for performance in the future.
Step 3
If your company has an Employee Assistance Program, mention it.
Step 4
Reiterate your willingness to support the employee's improvement efforts.
Step 5
Inform the employee of your grievance review procedure.
Step 6
Obtain the employee's signature and date.
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MEMO FROM MANAGER
Informal Warning - Performance Issue
To:
[Employee name]
From:
[Manager name]
Subject:
Informal Warning – Performance Issue
Date:
[Date]
(Mention performance standards not being met and if applicable any previous informal discussions about them).
I want to remind you of our standards regarding [performance issue, e.g. work quality].
When we
negotiated/discussed these standards on [insert date], you indicated that you were aware of them by signing the
[document, e.g. performance contract/job model/job profile] (attached).
(Describe performance problem)
[Insert name of employee], you are an important member of our team, and we cannot reach our goals if you don't
meet the [performance standards/expectations]. During [time period, e.g. the last three months] you [list the
quality standards not being met etc].
Stress the need for improvement, and offer your support
[Insert name of employee] you need to take this issue seriously and should strive to improve your [performance in
specific area]. During the [time frame, e.g. next three months], I will be monitoring your [performance, e.g.
attendance]. Please let me know if there are any obstacles preventing you from [meeting expectations, e.g.
getting to work on time]. I am ready and able to assist you.
Offer 3rd party involvement, obtain signature
Name:
[Insert Name]
Date:
[Insert Date]
Signature:
cc:
___________________________________
[Manager's manager, Managers in related areas]
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4.4.8
Guide to writing a formal warning memo
Use a Formal Warning Letter as a stronger impetus toward improvement on the part of the warned employee,
and to take formal action towards termination in the case of no improvement. It should be used when a nonexempt employee has been given an informal warning and performance continues to fall below guidelines or
expectations established in the earlier memo.
Step 1
Provide historical background
"Informal warning was given," etc. State what happened despite the warning, describe how often and when,
discuss continuing impact on personal/unit productivity. Be specific about any coaching or management support
given during the Informal Warning period e.g., classroom training, on-the-job training, positive or instructive
coaching sessions.
Step 2
Explain specific expectations for performance in the future
Step 3
State that your company has an Employee Assistance Program, and advise that use can be made of the
programme. For example: "If problems outside work are contributing to these performance issues, you should
feel free to contact our Employee Assistance Program, at [give number]. This is a confidential and free service
available to all employees."
Step 4
Give the employee a chance to give their opinions. For example: "If you disagree with this memo or would like to
discuss it further, you should contact [manager's manager, or Human Resources Manager].
Step 5
Reiterate your willingness to support the employee's improvement efforts. For example: "I am available to
discuss with you any factors that may be affecting your performance." However, make sure that you do not
compromise your expectations.
Step 6
Inform the employee of your grievance review procedure. If your company has any grievance review procedure,
(e.g., peer review boards, ombudsman, etc.), let the employee know that he or she can bring up the issue in that
forum.
Step 7
Obtain the employee's signature and date. The employee may add comments if they wish. If they refuse to sign,
write, "refused to sign", date it, and make copies for your manager, the employee, and the employee's personnel
file.
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MEMO FROM MANAGER
Formal Warning - Performance Issue
To:
[Employee name]
From:
[Manager name]
Subject:
Formal Warning – Performance Issue
Date:
[Date]
(Mention previous performance discussions and cite continued problems)
On [Insert date] you were placed on Informal Warning due to [state problem]. At that time, you were clearly told
of my expectations for your performance and your need to improve. Despite the informal warning, [state event 1,
2, 3 have continued to occur]. We previously discussed the negative effects that [state problem] are likely to have
on the departmental productivity.
(Describe consequences)
As a result of [state event 1, 2, 3] you are now being placed on a Formal Warning. During the [next period, e.g.
next three months] you will be ineligible for any salary increases, promotions or transfers. You will be expected to
maintain standards [re-state standards/expectations], and should be aware that failure to do so could result in
further corrective action or termination.
(Offer support)
In our prior discussion, we identified ways to meet [insert standards required] and I am willing to assist you
further. Please let me know if there are any obstacles preventing you from [required performance].
(Offer 3rd party involvement, obtain signature)
If you would like to discuss this memo with [help, e.g. Personnel], please contact [person's name]. Please sign
below to indicate that you have received this memo and understand the company's expectations.
Name:
[Insert Name]
Date:
[Insert Date]
Signature:
cc:
___________________________________
[Manager's manager, Managers in related areas]
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4.4.9
Guide to writing a final warning memo
Use the Final Warning Letter to notify an employee that if their performance does not improve, they will be fired.
It is to be used after the employee has been given a Formal Warning and has continued to perform below
guidelines or expectations established in the earlier memo. It can also be used when a single action is sufficiently
negligent to warrant this level of warning (but not severe enough to warrant immediate termination).
Step 1
Provide historical background. "Informal and Formal warnings were given," etc. (e.g., state what happened
despite the warning, describe how often and when, discuss continuing impact on personal/unit productivity). Be
specific about any coaching or management support given during the Informal and Formal Warning periods (e.g.,
classroom training, on-the-job training, formal or informal coaching sessions).
Step 2
Explain specific expectations for performance in the future.
Step 3
State that "there must be immediate and sustained improvement on the issue," and that "failure to improve may
lead to immediate termination."
Step 4
If your company has an Employee Assistance Program, state this and advise that use be made of the programme
For example: "If problems outside work are contributing to these performance issues, you should feel free to
contact our Employee Assistance Program, at [give number]. This is a confidential and free service available to
all employees."
Step 5
Give the employee a chance to give their opinions. For example: "If you disagree with this memo or would like to
discuss it further, you should contact [manager's manager, or Human Resources Manager]."
Step 6:
Reiterate your willingness to support the employee in their improvement efforts. For example: "I am available to
discuss with you any factors that may be affecting your performance." However, make sure that you do not
compromise your expectations.
Step 7
Inform the employee of your grievance review procedure. If your company has any grievance review procedure,
(e.g., peer review boards, ombudsman, etc.), let the employee know that he or she can bring up the issue in that
forum.
Step 8
Obtain the employee's signature and date
The employee may add comments if they wish. If they refuse to sign, write "refused to sign," date it, and make
copies for your manager, the employee, and the employee's personnel file.
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MEMO FROM MANAGER
Final Warning - Performance Issue
To:
[Employee name]
From:
[Manager name]
Subject:
Final Warning – Performance Issue
Date:
[Date]
(Mention previous performance discussions and cite continued problems)
On [Insert date] you were placed on a Formal Warning due to [state problem]. At that time, you were clearly told
of my expectations for your performance and your need to improve. Despite the warning, [state event 1, 2, 3 have
continued to occur]. We previously discussed the negative effects that [state problem] are likely to have on
departmental productivity.
(Describe consequences)
As a result of [state event 1, 2, 3] you are now being placed on a Final Formal Warning. During the [next period,
e.g. next three months] you will be ineligible for any salary increases, promotions or transfers. You will be
expected to maintain standards [re-state standards/expectations], and should be aware that failure to do so could
result in further corrective action or termination.
(Offer support)
In our prior discussion, we identified ways to meet [insert standards required] and I am willing to assist you
further. Please let me know if there are any obstacles preventing you from [required performance]. Offer 3rd
party involvement, obtain signature.
If you would like to discuss this memo with [help, e.g. HR, please contact [person's name]. Please sign below to
indicate that you have received this memo and understand the company's expectations.
Name:
[Insert Name]
Date:
[Insert Date]
Signature:
cc:
___________________________________
[Manager's manager
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Discussion: The warning process appears to take an extensive period of time. What challenge does this
present to an SMME?
4.5 The concept of 360 degree feedback
4.5.1
Introduction
Implemented with care and training to enable people to better serve customers and develop their own careers,
360 degree (multirater) feedback is a positive addition to a performance management system. Three hundred
sixty degree feedback is a method and a tool that provides each employee the opportunity to receive
performance feedback from his or her supervisor and four to eight peers, reporting staff members, co-workers
and customers. Most 360 degree feedback tools are also responded to by each individual in a self assessment.
Three hundred sixty degree feedback allows each individual to understand how his effectiveness as an
employee, team member, or staff member is viewed by others. The most effective 360 degree feedback
processes provide feedback that is based on behaviours that other employees can see. The feedback provides
insight about the skills and behaviours desired in the organisation to accomplish the mission, vision, and goals
and live the values. The feedback is firmly planted in behaviours needed to exceed customer expectations.
People who are chosen as raters generally interact routinely with the person receiving feedback. The purpose of
the 360 degree feedback is to assist each individual to understand his or her strengths and weaknesses, and to
contribute insights into aspects of his or her work needing professional development. These features will manifest
themselves in well-managed, well-integrated 360 degree feedback processes.
4.5.2

Positive factors of 360 degree feedback
Improved feedback from more sources: It provides well-rounded feedback from peers, reporting staff,
colleagues, and supervisors. This can be a definite improvement over feedback from a single individual.
Three hundred sixty degree feedback can also save managers’ time in that they can spend less energy
providing feedback as more people participate in the process. Co-worker perception is important and the
process helps people understand how other employees view their work.

Team Development: Helps team members learn to work more effectively together. Teams know more
about how team members are performing than their supervisor. Multirater feedback makes team
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74
members more accountable to each other as they share the knowledge that they will provide input on
each member’s performance. A well-planned process can improve communication and team
development.

Personal and Organisational Performance Development: 360 degree feedback is one of the best
methods for understanding personal and organisational developmental needs.

Responsibility for Career Development: For many reasons, organisations are no longer responsible
for developing the careers of their employees. Multirater feedback can provide excellent information to
an
individual
about
what
they
need
to
do
to
enhance
their
career.
Additionally, many employees feel 360 degree feedback is more accurate, more reflective of their
performance, and more validating than prior feedback from the supervisor alone. This makes the
information more useful for both career and personal development.

Reduced Discrimination Risk: When feedback comes from a number of individuals in various job
functions, discrimination because of race, age, gender, and so on, is reduced. The effect of a supervisor
rating performance based on her most recent interactions with the employee, is also minimised.

Improved Customer Service: Especially in feedback processes that involve the internal or external
customer, each person receives valuable feedback about the quality of his product or services. This
feedback should enable the individual to improve the quality, reliability, promptness, and
comprehensiveness of these products and services.

Training Needs Assessment: 360 degree feedback provides comprehensive information about
organisation training needs and thus allows planning for classes, cross-functional responsibilities, and
cross-training.
4.5.3

Negative factors of a 360 degree feedback system
Inadequate design process: Often, a 360 degree feedback process arrives as a recommendation from
the HR department or is shepherded in by an executive who learned about the process at a seminar or
in a book. Just as an organisation implements any planned change, the implementation of 360 degree
feedback should follow effective change management guidelines. A cross-section of the people who will
have to live with and utilise the process should explore and develop the process for the organisation.

Failure to Connect the Process: For a 360 feedback process to work, it must be connected with the
overall strategic aims of the business. Once competencies have been identified and/or comprehensive
job descriptions defined, feedback must be given on their performance of the expected competencies.
The system will fail if it is an add-on rather than a supporter of your organisation’s fundamental direction
and requirements.

Insufficient Information: Since 360 degree feedback processes are currently usually anonymous, staff
receiving feedback has no recourse if they want to further understand the feedback. They have no one
to ask for clarification of unclear comments or more information about particular ratings and their basis.
Performance Management – November / December 2011
75

Focus on negatives and weaknesses: Good managers focus on employee strengths, not
weaknesses.

Rater inexperience and ineffectiveness: In addition to the insufficient training organizations provide
both people receiving feedback and people providing feedback, there are numerous ways raters go
wrong. They may inflate ratings to make an employee look good. They may deflate ratings to make an
individual look bad. They may informally band together to make the system artificially inflate everyone’s
performance. Checks and balances must prevent these pitfalls.

Paperwork/Computer Data Entry Overload: Traditional evaluations require two people and one form.
Multirater feedback ups the sheer number of people participating in the process and the consequent
organisation time invested.
Discussion: The trend towards 360 degree feedback is becoming increasingly prevalent. How practical is
this process in an SMME?
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5. REWARD, REMUNERATION AND COMMUNICATION
5.1 Reward strategy
5.1.1
Introduction
Reward and recognition of performance are the single most powerful instruments management has with which to
change, establish and reinforce those outputs and behaviours of employees through which strategic business
objectives and results are achieved. The key is not money itself. Rather, it is viewing money and all forms of
reward as the language of the business: it is the use of reward in all forms to communicate what is important in
terms of high performance. The more visibly this is demonstrated, the more effective the communication. The
overall objective of the reward strategy is to improve company and work unit performance through staff by
enabling line managers to integrate the management of performance and reward through the application of
variable reward, thereby increasing productivity and performance, whilst decreasing overall company risk.
Building a pay-for-performance culture may seem like an abstract vision for some companies; however, it’s
considered a top tool by senior executives for achieving better financial results. And for good reason: a strong
pay-for-performance culture has the ability to unlock employee performance potential, keep your “superstars”
happy, and ultimately drive a healthier bottom line.
5.1.2
The key business benefits of pay-for-performance
Goal Alignment
Pay-for-performance is a key mechanism to align employees’ goals with business objectives because it inks
rewards to performance which is most critical to your company. Communicating and tracking each
employee’s progress against company objectives is imperative and delivers a host of positive results:

Employees are more productive and focused on achieving key company goals

A shared responsibility between employees emerges by cascading goals with others in the company

Managers can stay in touch with employees’ progress throughout the year and offer immediate
reinforcement or coaching to keep performance on track
Most employees become more engaged and motivated by understanding how their daily activities help drive
overall business health; this unquestionably results in both individual and company-wide success.
Increased Motivation
Another overarching benefit to pay-for-performance is developing a culture in which employees are energised to
perform at maximum levels. Jack Welch, former CEO of GE and a leading expert on driving performance,
Performance Management – November / December 2011
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believed the ultimate goal of managing is not to get an employee to perform as expected, but to have them
willingly go beyond the call of duty because they want to.
A pay-for-performance system is a key element in getting employees to excel at maximum (and beyond) levels.
How? By combining clear direction, quality feedback and tangible rewards, workers also receive recognition — a
key component to job satisfaction and employee dedication. This builds a more satisfying relationship where
employees are inspired by knowing management truly values their efforts.
Improved Retention
It’s no secret that the key to retaining the best and brightest is recognising and compensating top performers.
According to Giga Information Group, retention can be improved by meritocratic management — or pay-forperformance — by up to 27%. In a well-planned pay-for-performance system, managers have easy access to all
the information they need to reward individuals for actual performance. This allows them to track employee’s
progress against performance goals and reward efforts according to defined expectations. Employees are, in
essence, empowered to be in control of their financial situation, which many HR experts site as a key to
maintaining the tenure of top-performers. In addition, overcompensation of underperformers is avoided — a
mistake that frequently leads to “superstar” workers leaving with complaints of unfair treatment.
Cost Savings
Finally, a pay-for-performance culture can help your company save money in a way you may not think of:
avoiding overcompensation. Companies can waste literally thousands of rands a year by rewarding individuals
whose performance doesn’t help achieve key business objectives. The ongoing accountability developed in a
pay-for-performance culture helps avoid this pitfall.
5.1.2
Ensuring Pay-For-Performance will be successful
It’s important to realise that there is no one-size-fits-all approach to developing a pay-for-performance culture. To
be successful, one has to “think custom” and tailor a system to your unique business needs and existing HR
processes. The HR professionals who contributed to this guide have said answers to the following questions
provided invaluable feedback in setting expectations and shaping a meaningful pay-for-performance culture:

Are the tasks that people are working on driving the business? How can you tell?

Are managers engaged with their employees throughout the year to make sure they execute their
objectives?

Are individuals executing against what is expected? Who is and who isn’t executing?

Are managers objectively ensuring that bonuses, raises, and promotions are given to those high
performing individuals that they can't afford to lose?
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Another note on ensuring success: pay-for-performance is not a one-way street where management sets up a
system and employees simply follow suit; there are key psychological and emotional realities that have to be in
place. In fact, it is common for companies to ask the right questions and build the right system without thinking
about the “human side” of pay-for-performance. For a successful performance-driven culture to be adopted, it is
important to gauge the attitude of employees. In general, employees have to:

Desire higher pay

Have the skills and capabilities to improve performance

Trust the company to administer the plan fairly, and pay if they improve performance
Think of this as employee “buyoff” into a pay-for-performance system — a factor regarded as mandatory by
companies that have successfully implemented pay-for-performance.
Discussion: What is the scope for pay-for-performance in your profession/organisation?
5.2 Remuneration model
The following factors are taken into account in determining remuneration levels:
Job value
Job evaluation is a process whereby the relative worth of various jobs within an organisation is determined
objectively, and jobs are ranked so as to make it possible to achieve internal and external parity, by applying a
recognised job evaluation system. The job content determines whether a specific job is placed on a job band
within the general structure or within the professional structure.
Market value
In order to achieve external parity, comparisons with specific markets are continuously drawn, thereby comparing
individual packages and developing remuneration scales for the respective job bands. These remuneration
scales establish a realistic and competitive price for labour. During the annual review of package scales, a
strategic decision is made with regard to the position the organisation wishes to occupy in respect of the market.
During the annual remuneration review exercise remuneration information is made available to enable decisionmakers to determine the market-relatedness and internal parity of their subordinates' packages.
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Individual value
In order to compare individual packages and where necessary achieve employee parity, the worth of each
employee must be determined within the specific job as well as other jobs so that employees can be remunerated
equitably and differences in the remuneration of individuals can be explained factually. The worth of an employee
determines what his/her position on the remuneration scale of a specific job band should be. The following
factors are taken into account:

Performance/Outputs/Measures: The individual's outputs, measured by the performance management
process, carry the most weight in determining individual remuneration levels.
Consistently high
performance with achievement of outputs over a long term should ensure high remuneration.
Employees' potential is also taken into account and is the product of estimated ability as well as
competence. Estimated ability refers to conceptual and management skills which have not yet been
demonstrated whilst competence refers to knowledge and expertise gained, which can be deduced from
previous outputs/experience. These factors will also be considered, but are of a secondary nature in
determining individual remuneration levels.

Specific occupation and skills: Where there is a shortage of specific occupations or skills in the company
and the market, a market premium in temporary remuneration may be considered to attract and/or retain
these skills.
5.3 Performance communication
5.3.1
Foundation of performance management
Performance communication refers to direct, shared responsibility, output focused communication in the
workplace. It is communication that is open, above board, honest, respectful and deliberate. Performance
communication occurs when the managers and employees commit to and take responsibility for working out
performance problems together and understanding each other, and use communication skills necessary to do so
through purposeful discussion.
5.3.2
Principles of performance communication
The following performance communication principles act as the glue that holds all performance systems together.
These are:
Don’t wait to be asked: Performance communication that is direct, deliberate, shared responsibility, output
focused communication is central to business success. This is especially true in an information and service
economy where people and not machines get the work done. When someone has something to say, or when
someone has a need to know, it is critical that each person states his/her views or questions directly and as soon
as possible.
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Performance communication is a two - way street: When information is on the table, problems can be solved
and choices about future assignments or development actions, even disciplinary actions, can be made in good
faith. Some information and feedback may be hard to deal with, but nothing drains energy and trust like half-truths
and avoidance. Direct communication is an employee right and a management responsibility. It is also an
employee responsibility and a management right.
Judgment calls: Judgment and subjectivity are a reality of business life and are reflected in communication.
Manager and the employee must be able to formulate and express valid judgments and opinions based on
sufficient, accurate information. In the context of communicating about performance, however, people must also
become aware of their biases and acknowledge them as they affect their own judgments and opinions.
Performance communication is a human process: No form, policy, or procedure can ensure performance
communication that works. Nor can a form, policy, or procedure interfere with it, if all parties understand and are
committed to a performance culture and attitude that is not reliant on blindly following ‘rules’ and procedures at
the expense of delivering superior performance.
5.3.3
Communicating at formal and informal performance reviews
Performance reviews and feedback discussions are an intense form of communication for both managers and
employees. On the one hand, managers need to communicate conclusions about performance –about outputs,
competencies, and style. In order to do this, he/she must observe behaviour, draw conclusions from
observations, prepare to support conclusions with data, and then communicate the feedback constructively and
without game playing. The employee, on the other hand, wants to know where he/she stands, but may find some
or all of the feedback hard to take. Employees need to listen, clarify the feedback, observe his/her own behaviour,
describe the observations, and then make a commitment to appropriate actions.
Feedback discussions are necessary for successful performance reviews. When effective, these feedback
conversations, evolve out of shared responsibility, employ the deliberate use of communication skills, are output
focused, and direct. When not managed well, these discussions can damage the communication climate and
make it even more difficult to communicate in the future.
5.3.4
Action ideas for giving and receiving feedback/reviewing performance
Organise your thoughts
Those giving feedback often have difficulty organising their thoughts. And the person receiving feedback may be
confused by what the feedback giver is saying, especially when the feedback is given in a manner that is difficult
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to follow. Both the person giving feedback, as well as the person receiving it, can benefit from having a structure
to follow while giving or actively listening to feedback.
As a feedback giver, you can make your feedback more effective and more useful to the receiver - if you structure
it. A feedback receiver can make sure that the feedback giver is relaying all the important messages by listening
for key information and asking questions if that information is missing or confusing.
As a feedback GIVER, structure your feedback so that it answers the following questions. As a feedback
RECEIVER, listen for the following information:

What did the feedback giver observe in the situation that prompted a decision to give some feedback?

Why is this information important for the receiver to know?

What does the feedback giver think would improve the situation in the future?
Once this information is on the table, the feedback receiver and giver have substantial issues to discuss, and their
conversation can be a productive problem-solving session that gets at important issues and works toward their
resolution.
Keep the human touch
Feedback communication occurs between two people. This means that it is always a partially subjective process
that can't be automated, or substituted by a form or a computer. In order to work, feedback communication must
involve judgment, questioning, empathy, and personal commitment. It is important to be as objective as possible
when trying to describe and assess performance. It's also essential to recognise and stop communication games.
But, these efforts will be only as effective as the level of trust that exists between managers and employees. Both
must talk about their concerns, opinions, and reactions -they must include the human element in their
discussions. And they need the skills of giving and receiving feedback communication.
Managers:

Clarify how you feel about discussing outputs, competencies, and style. What do you look forward to?
What pitfalls do you want to avoid? What concerns you most about how you or your employees may
approach a discussion?

In a meeting or in individual discussions with employees, communicate that you want performance
reviews to follow the principles of quality performance discussions.

Don't expect performance feedback discussions to be perfect or to proceed according to the book. Do
expect the skills both you and your employees bring to review discussions to steadily improve.
Conducting a performance review is a human and complex process. If you or your employees make a
mistake, slip into a game, or talk when listening is required, forgive them and yourself and move on.
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Avoiding the issue won't help improve the quality of feedback discussions. Acknowledging and accepting
the human component will.
Employees:

Clarify how you feel about participating in performance review discussions. What do you look forward
to? What pitfalls do you want to avoid? What concerns you most about how you or your manager may
approach the discussion?

Talk with your manager about the concerns, and express yourself in the first person.

Do not expect performance review discussions to be perfect or your manager's skills to be flawless. Do
expect, however, that both of you will steadily improve your communication skills as you develop a
broader perspective and as you become more familiar with each other's communication style.
Focus on outputs, competencies, and style
Discussing and evaluating performance is a complex task because the things that individuals do from day-to-day
have both short- and long-term implications. This means you must discuss not only what the employee has
accomplished, but also how the accomplishments were achieved and what impact they had on others in and
outside the organisation/work unit. It also means discussing the knowledge and skills the employee used, or
should have used, in situations where his/her competencies were key factors. The way to discuss
accomplishments and their impact is to focus performance reviews on the three dimensions of performance:
outputs, competencies, and style.
Managers:

Initiate formal review discussions when your company requires them. Encourage employees to ask for
performance reviews

Prepare to discuss the employee's performance by answering these questions: To what extent has the
employee accomplished his/her goals and carried out the job's responsibilities? What skills and
knowledge are strengths for the employee in the current job? What needs development? How does the
employee's style aid and/or inhibit the ability to get work done with and through others? What specific
examples from his/her performance can you cite to support your conclusions about outputs,
competencies, and style?

Effectively use communication skills. Listen, support, and ask questions so that you thoroughly
understand how the employee sees his/her own performance. Be willing to change your conclusions if
the employee's feedback warrants it. But also be ready to assert your conclusions and retain them if you
feel your judgment is sound. Remember, you are paid to draw conclusions about performance.

Never punish responsible, honest, open communication. The breach of trust that such action can cause
can haunt you far into the future.
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Employees:

Initiate a formal performance review when you want to discuss your manager's and your own overall
view of your performance. Don't feel you have to wait for your manager to decide to have a review

Prepare for your performance review discussion. Draw conclusions about the quality of your own
performance: To what extent have you accomplished your goals and carried out your job
responsibilities? What skills and knowledge are strengths for you in your current job? What needs
development? How does your style aid and/or inhibit your ability to get work done with and through
others? What specific examples from your performance will you cite to support your conclusions about
your outputs, competencies, and style?

Effectively use communication skills when you discuss your performance. Listen, empathize, and ask
questions so that you thoroughly understand your manager's feedback. Accept your manager's feedback
about how he/she sees your performance. If you disagree with your manager's conclusions or have
additional perspectives, state them and support them with specific examples from your performance
5.3.5
Delivering and digesting tough messages
Many managers and employees say the hardest part of their job is delivering and digesting messages about
performance problems or other issues that could lead to termination or other serious consequences if not
addressed. Difficult as it is, when performance problems exist, tough messages must be delivered and digested
directly, clearly, and immediately. Sidestepping, avoiding, and game playing may delay the confrontation, but they
inevitably make a problem situation worse.
Do not wait to address performance problems: Discuss performance problems before they become crises.
One of the most common ways of dealing with performance problems - for manager and employee alike is to
avoid them and hope they go away. Addressing performance problems is a key part of a manager's role. A
manager's failure to confront employee performance issues is itself a performance problem. Whether the
manager is comfortable with it or not, confronting problems is part of the manager's job. This does not mean that
employees are not accountable for their performance. Ideally, the employee should be the first to raise problems
for discussion and feedback. Also, employees are likely to be more receptive to, and to act on, feedback and
problem solutions if they have initiated the discussion.
Managers:

Don't wait. Set a time to discuss and resolve the issues as soon as you become aware of behaviour or
results that may jeopardise ( I) performance rating; (2) your willingness to delegate to the employee and
involve him/her in more challenging work; (3) how you talk about the employee with third parties; and (4)
the employee's career options.
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
Encourage the people who work with you to recognise problems. If your employees cannot manage a
problem themselves, let them know it's appropriate to discuss situations with you - before they become
serious issues. Then, be sure you do not punish their initiative.
Employees:

Keep a watchful eye on your own performance – your outputs, competencies, and style. When you
detect problems, decide to do something about them immediately and do not wait.

Initiate discussions about performance problems. If you raise the problem first, your manager will likely
be less anxious about being direct. You will probably get more support and will not need to be defensive
as if the manager raised the issue.
Focus on solving the problem:
Even when performance problems appear to be related to style, it is unrealistic to make broad, unsubstantiated
negative statements about an individual and hope that improvement will occur. The feedback you give and
statements you make about the performance problem must be firm, fair and strong. This is especially true when
the problem is very serious and when major changes must be made in a short time. However, when feedback
contains a tough message, it is especially important that it be focused on the problem and be as specific and well
substantiated as possible.
It is the responsibility of the discussion initiator to establish the initial focus of the discussion. Throughout the
conversation, however, both manager and employee must work together to assure the results will be
constructive.
Managers:

Spend the first few minutes of the meeting describing your concerns, talking about the consequences
you feel may occur if the problem persists or worsens, and laying out your evidence that a problem
exists.

Listen to the employee's concerns, conclusions, and evidence. Ask questions. Be sure you understand
his/her views before you draw formal conclusions.

By the end of the discussion, be sure you and the employee have the same understanding of how you
view the problem and its potential consequences.
Employees:

Spend the first few minutes of the meeting describing your concerns, making your concerns about future
consequences you feel may occur if the problem continues, and laying out evidence that a problem
exists.
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
Listen and ask questions to be sure to understand the manager’s concerns, conclusions, and evidence.
Be sure you understand his/her views before you draw formal conclusions.

By the end of the discussion, be sure you and the manager have the same understanding of how you
view the problem and its potential consequences.
Obtain a commitment from the employee to change:
Although it's the manager's responsibility to be clear about his/her view of the problem and the consequences of
not resolving it, it's the employee's job to plan and implement actions for improvement and development. The
point is, the employee's commitment to action and ability to act are key to solving the problem. If the employee
doesn't personally commit to changing his/her behaviour and its results, or if the employee can't carry out action
plans because he/she lacks the skills or resources, then improvement plans will be useless.
The employee's commitment can come from fear of consequence, from wanting to do the job better, from having
participated in solving the problem and making an agreement to improve, or from just being clearer about the
issues to address and situations to change. Whatever its source, the commitments and actions must be the
employee's.
At the end of a discussion of performance problems, a manager and employee should check out the employee's
current awareness of the problem, its consequences, and his/her intentions to act. One possible outcome of an
effective discussion of performance problems is that the employee will claim ownership of the problem and
commit to working to solve it (if, in fact, it is the employee's problem). Another possible outcome is that the
employee will decide not to improve or change - a decision that is his/her right to make.
When this happens, the manager, representing the organisation, can take the actions that result from the
employee's decision.
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Exercise: Role play
Equipped with the aforementioned techniques of feedback, stage an annual review session in your group.
Compile a scenario of performance indicators against which the staff member will be evaluated. Choose a
“victim” and the “boss” from among your group. The remainder of the group must evaluate the process of giving
and receiving feedback that transpired.
Discussion:
General challenges and limitations experienced by delegates in creating, implementing and monitoring a
performance management system.
Methods found by particularly SMMEs to overcome such challenges
The trends being witnessed by delegates in the advances of performance management in their respective
professions/businesses
Affordability of digitally driven performance management systems, e.g. cloud computing, software as a service
(SaaS) and similar systems provided by international vendors.
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6. CHALLENGES AND LIMITATIONS OF PERFORMANCE MANAGEMENT
6.1 Introduction
Invariably, the topic of performance management on the agendas of board and executive committee meetings
throughout commerce, industry and the public sector is greeted with enthusiasm. The decision is unanimous: “we
must have it.” An ad hoc committee gets appointed to investigate the implementation of such a system and a
proposal is expected at the next meeting. In a large organisation with a substantial talent management budget,
the committee members obtain proposals from two or three vendors that are not shy to quote a Rm or so. In
smaller organisations the HR manager mobilises a few colleagues and staff to find ways of converting the current
annual review process into a performance management system of sorts.
Soon the board discovers that designing, implementing and keeping a performance management system running
require a considerable investment in time and money. From the outset it is complicated to calculate a return on
investment (ROI). Few executives are willing to take the responsibility for managing the system; it becomes a
debate as to the level in the organisation at which the system should become operational. The question arises
what the attitude of the unions is going to be and whether supervisors are sufficiently literate to deal with the
documentation. As the ad hoc committee reports back to the board, enthusiasm for the whole project starts to
wane and a simplified version of the initial grand design gets implemented with little or no success. What follows
is a list of potential challenges that the ad hoc committee must be aware of.
6.2 Potential Challenges of implementation
6.2.1
Lack of buy–in from CEO
This speaks for itself. If the CEO is not the “champion” of the performance management system it has no chance
of success.
Solution:
As a project team keep the CEO and executive committee informed and motivated by communicating early and
regular successes.
6.2.2
Line management inertia
Line managers are generally reluctant to become involved in implementing and running a performance
management system. .Often it is a lack of understanding due to the perceived complexity of the system. It
requires a new approach to managing staff, with the emphasis on consultation in goal setting and work output
negotiation and frequent feedback and daily communication about performance.
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Solution:

Put line managers through change management programme

Keep the performance documentation simple such as that exemplified in the workbook

Ensure a gradual take on of the system; e.g. selecting one or two teams at a time; initial performance
contracting followed by tracking; followed by corrective action; etc.
6.2.3
Alignment of goals
It will require considerable effort at the outset to align team and individual work output units, KPIs and
competencies to the overall strategic objectives of the organisation. In several international research reports a
percentage as high as 95% is being quoted as indicating the degree to which the rank and file in a business are
unaware of that organisation’s vision, mission and strategic objectives.
Solution:

Follow the performance contracting and tracking procedures and paperwork described in the workbook
diligently.

6.2.4
Ongoing performance communication.
Defining KPIs and measures
This process is somewhat of an art and requires an analytical mind. It is a time consuming process but is
fundamental to the success of the performance management system. Particularly important is to find the correct
measures for the KPIs to ensure that they are indeed the evidence of the result that you are measuring. Also
ensure that the KPIs are related to the overall goals and strategic objectives of the business.
Solution:

Get staff involved to formulate their own KPIs and measures as part of the performance contracting
process

Make certain that KPIs are non-punitive as staff will not give their support if they perceive that measures
will be detrimental to their bonus, pay, self-worth or status.

Ensure that job descriptions and job specifications are up to date.

Consult websites such as www.kpilibrary.com and www.staceybarr.com for meaningful guidelines
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6.2.5
Defining competencies
What has been said about KPI formulation applies to defining and evaluating competencies.
Solution:
It is vital to remember that the evaluation of competencies is subject to human judgement; see policy statement
no 6.
6.2.6
Over-ambitious system design
This particularly applies to fully integrated digital systems which have many functions to offer almost on an off the
shelf basis. Running on full functionality from the word go is courting disaster. The multitude of inputs required
and reports delivered will bewilder the novice user to the extent that he/she will leave it unused.
Solution:

The correct approach is to take on one business process at a time. For instance, choose one strategic
goal and set accurate KPIs and measures and monitor achievement

6.2.7
Ensure that lower level skills staff possess sufficient computer literacy.
Alienation
Once management and staff have been involved of setting up the bare bones of a system they expect to receive
meaningful information from the outset. This does not necessarily materialise in the short term. It will start
delivering management information over an extended period of time as more departments start contributing and
more strategic goals are loaded on the system. Early contributors may start losing interest.
Solution:

6.2.8
Frequent information about progress being made must be communicated to all role players.
Pay for performance
Expect considerable reluctance from chronically underperforming staff and outright resistance from trade unions.
Staff pulling their weight will find the concept highly motivating as for once they will be compensated for their
effort and stop having to “cross-subsidise” their less productive colleagues. However many jobs do not have
easily measurable performance outputs on which reward can be based.
Solution:

Start implementing with jobs where reward can easily be aligned to performance: i.e. sales, production
output

Find appropriate non-monetary rewards for other types of superior performance delivery.
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6.2.9
SMME take on
The above challenges apply to all sizes and types of organisations. The question is are SMMEs better off or
worse off when implementing and running a performance management system. Naturally an SMME must have a
minimum size in terms of manpower, clientele, asset base and financial resources to warrant a performance
management system. Once it has the critical mass it would be at an advantage compared to the larger
organisation. “Line of sight” between staff and the CEO is shorter and alignment of personal goals, competencies,
KPIs a greater reality. Implementation and full functionality will take place in a shorter period of time. However,
manpower resources are at a premium in the smaller organisation and it would be difficult to second a person full
time to project manage a complete performance management system in one go.
Solution:

Gradual take on

Maximum involvement of peers and staff

Volunteering
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7. TRENDS IN PERFORMANCE MANAGEMENT
In every conceivable industry internationally performance management is driven by the quest for

Greater productivity

Lower cost

Superior product

Customer service excellence

Scarcity of talent
to name just a few business management imperatives.
In South Africa in the public sector, “service delivery” is the operative word. Legislation in the form of the Public
Finance and Management Act and the Municipal Systems Act makes the implementation of a performance
management system mandatory. In the private sector maximum effort is expanded on survival, growth, return on
investment, corporate social responsibility, job creation and other socio-economic factors. This takes place in a
low growth economy and in competition with global market players active in South Africa.
Hence boosting the performance of all factors of production in an organisation is vital and the implementation of
performance management systems has become a priority in management intent.
The philosophy and operating mechanisms of the performance management system advocated in this learner
guide make it possible to engage staff maximally. They become partners in formulating the strategic objectives of
the organisation, setting goals for their own job achievement and career development and measuring
achievement and receiving reward in line with their performance. According to a leading international analyst in
the human capital industry, Josh Bersin (2009), the business impact of a consistent, company-wide performance
management process is significant. He has found that “organisations with a performance management system in
place have experienced less downsizing, lower turnover among high performers and have obtained nearly twice
the revenue per employee as organisations with no formal or consistent performance management practices.”
The system becomes the means to self-management and self-actualisation of management and staff at all levels,
creating a learning organisation aimed at continually improving itself for the benefit of its customers, communities,
employees and other stakeholders. It gradually evolves into a system that produces vital metrics by which
management can keep the organisation on track and steer it on the road to sustainability.
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Information and communication technology vendors recognised the inherent benefits of the manually driven
performance management system and took it to the next level of its evolution. They managed to integrate several
management information sub-systems into a seamless performance management system providing real time
information on human resource performance by company/division/department/work unit/individual.
The benefit of and need for this information has become entrenched in management thinking. Now, globally
performance management systems are becoming part of the armory of management in organisations of all types
and sis. The adoption of performance management as a vital management tool is equally growing in South Africa,
both in the private and public sectors.
Bersin, Josh. Talent Management Factbook 2009, Bersin & Associates.
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8. THE ROLE OF TECHNOLOGY IN AUTOMATING PAPERWORK*
8.1 Introduction
While many large organisations have already moved to adopt technology to support the performance
management process, small and medium sized businesses are less likely to have done the same. Performance
processes can be significantly streamlined by making use of software platforms. Yet, for most companies in the
SMME segment, paper-based performance management processes are still the norm.
Performance management technology solutions are not just for large organisations; these tools can also help
small to medium-size companies with the following aspects:

Improving efficiency and compliance: Automation helps managers to provide constructive feedback
to employees on a more frequent basis, in less time. Manual processes are error prone, and errors could
lead to serious compliance issues.

Making performance reviews relevant: Technology can transform performance management from a
once a year event into an ongoing process that also includes development plans and learning
opportunities.

Maximising productivity and paying for performance: Top performing employees are valuable
assets. Technology solutions can nurture better performance, focus individual efforts on key business
strategies, and make it easier to recognise and reward superior performance.
8.2 Improving administrative efficiency and reducing risk
Technology can reduce the administrative inefficiencies and headaches that are part of manual performance
management process. Research shows that automating the performance management process can reduce
operational costs by one fifth. Where do these cost savings come from?

Reducing errors: Some of this efficiency is the result of reducing errors inherent in the manual process,
including data entry errors and appraisal forms that become lost in interoffice mail or in desk drawers.

Saving a manager’s time: When managers sit down to develop a performance review key points about
the performance and behaviour from months past can be difficult to remember. A centralised repository
for managers to log confidential notes on an ongoing basis can reduce the time it takes to finish an
appraisal. Writing assistants built into the tool can make it easy to draft an appraisal filled with accurate,
objective information about performance, not subjective manager opinions.

Consistency: A consistent framework for performance scores and measurement for employees within
similar job functions reduces the likelihood of discrimination. Automation makes it easier to create an
appraisal process that is fair and equitable to everyone.
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
Creating a paper trail: Having easy access to historical reviews that poor performers have signed off
can be used as due diligence information to support employee separation and limit legal exposure. With
a paper-based process the organisation may not have the right records available. Automation can
provide access to these appraisals and also serve as a communications archive between managers and
employees.

Providing writing help: Sometimes managers write things in reviews that make HR staff cringe.
Performance reference software prevents such problems by including writing tips and legal word filters
that prevent managers from including words that are inappropriate and that expose the company to legal
liability.
8.3 Making performance reviews relevant
Technology can make employee development an ongoing process and not a once a year event. Although the
formal annual review is still very much a standard, researchers found that organisations with technology driven
performance management processes are 47% more likely to reinforce the formal annual reviews with informal
reviews at least once per quarter.
Most organisations would find it impossible to support a performance management process with multiple reviews
throughout the year with a paper-based process, especially if the review is based on manager observation and
subjective opinion. However, true performance management should be more than a manager's subjective opinion
of an employee’s work over the past year. Instead, it should be a multifaceted continuous process that includes
the following components:

Metrics-based performance evaluation: Automated performance management with evaluation driven
by KPIs not only aligns employee effort with organisational strategy, it measures performance against
quantifiable data. Establishing KPIs that are relevant to both high-level goals and operational priorities
allows an organisation to measure individual performance relative to these goals. Research shows that
metrics matter. Companies that use KPIs to draft performance management are twice as likely to
achieve best in-class results from performance management. Best in-class companies are also 1,7
times more likely to incorporate daily performance metrics into the day-to-day operations of the
business. Technology turns performance management into an everyday event by:

Giving both employees and managers needed insight: Both employees and managers can
monitor individual performance relative to goals throughout the year and modify effort if needed.
Giving employees the tools to get the information they need throughout the year, is also an
excellent way to improve employee engagement and retention.

Automating goal tracking and reporting: With this level of insight, businesses will not wonder
who the top, middle and bottom performers are - they will be able to tell at a glance. Businesses can
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also ensure cross company goal alignment and measure performance across different departments
and locations.

Driving accountability at all levels: business leaders can benefit from real-time insight into how
employees are executing strategy and can improve organisational agility in an uncertain economy.

Development plans: Employees should have an opportunity to close the gaps in knowledge and skills
or develop strengths.

Learning opportunities: An organisation should connect development programmes to training
opportunities and then track and prove a measurable correlation between training programs and
increased employee performance.
8.4 Maximising productivity and paying for performance
Top performing employees are valuable assets to an organisation. Although it may seem obvious to say so, some
organisations underestimate the value of their best employees. However, top performers almost always exceed
the performance of average workers by at least 25%. A technology driven performance management system will
help identify the top performers at a glance.
For businesses in the small to medium-sized market identifying and retaining top performers is essential,
especially in hard to fill professional and leadership positions. Performance management technology not only
makes it easier to recognise the superstars in an organisation, it provides a process to improve the performance
of average and low performers. Benefits include:

Paying the people who are driving success: Identifying top performers makes it easy to single out
employees who have earned bonuses and raises. However, it also provides managers with a valuable
tool to have specific constructive conversations with average performers that want to know what it takes
to succeed.

Minimising salary misallocation and misunderstandings: In business today, organisations are under
pressure to make every rand count. Pay for performance reduces misallocation of budget to employees
that did not achieve goals and reduces misunderstandings by clearly explaining performance standards.

Identifying talent gaps: Identifying top performers not only allows you to recognise and reward
outstanding performance, it also allows business leaders to identify knowledge and skill gaps.
Businesses can then address these deficiencies in critical business roles through mobility, development
or recruiting
* Extracted from “Performance Management Solutions for the Midmarket Organisation: Why Bother?”
Authored by performance management systems technology vendor Cornerstone on Demand and made available
by its South African representative Kalleo Learning of Randburg.
Performance Management – November / December 2011