This is one of the hardest managerial task,yet it is criticl in order to develop the leadership gene pool in an organization.
Performance ranking is the process of ranking all employees from top to bottom. It is hard, but it is a critical process for these reasons:
- It is important to performance rank all employees
- Unranked, everyone is average – which is most unfair to the high performers and rewards low performers
- Adopting a ranking process – forces management and managers to think about performance criteria
- With an accepted and known performance criteria, people will be managed to that criteria
- If criteria has strong cause & effect relationship to P&L, performance will change dramatically
- You only do performance ranking if you are prepared to:
- Actively manage for performance over the course of a year
- Be absolutely transparent
- Coach and give feedback
- Develop clear KPI’s and performance measures
- Enforce performance standards
- Follow through with development programs to close the gaps
A critical role for the folks in HR is to be able to understand the business – what we do, and the business of the business – how we make money and then to tease out the appropriate performance criteria which can be correlated to performance. It is their job to keep on analyzing the results of the ranking process to company performance to ensure the right criteria are being measured.
Yet performance ranking is a most despised process in any organization that is just trying to embark on it. To a large extent, it is because many organizations use the ranking process not as a tool to manage for performance but to manage rewards especially merit increases and bonuses. The people who resent performance ranking the most are usually managers and supervisors:
- People will resent it, people will say it is unfair and people will work hard to reject it… so don’t be surprised
- The biggest challenge is not to the people being assessed but to the managers and supervisors who have to adopt it as a management tool and do the assessment
- And this is only to be expected as it changes the status quo – taking us from comfort into discomfort:
- Initially everyone is average, now everyone will be differentiated
- Managers can’t play the popularity game anymore – although they will skew the systems to manage poplarity..
- Managers can be held accountable for the performance of their people
Organizations need to come to term with a simple fact: the goal of management is to ensure that the organization meet or exceed performance which is not just profit but profitable growth. Performance ranking is a tool that helps organizations achieve that goal. Now even if an organization exceeded target year after year – people till need to be ranked. In the ranking process 2 critical factors need to be monitored, is the mean of the bell curve getting bigger and is the standard deviation getting smaller. And we want a yes and yes answer for both.
The positive movement of the mean indicates average performance has gone up. A shrinking standard deviation indicates the gap between best and worst is getting smaller.
We must performance rank for the prime purpose of developing talent and performance. The reward side of the equation must never be the objective. We will deal with paying for performance in a later post.
To hear more on the subject of leadership development, please register now for the Leadership Conference of the year – September 11 and 12, 2007. See upper right corner for details