“Finding Value in an Old Corporate Process ” Revised Aug 4th, 2016

-Dean Cantrill

It’s become my opinion over the years that 99% of U.S. businesses delegate the personal performance process to Human Resources. I’m not suggesting that the manager on record gets to delegate the painstaking job of filling out the performance review paperwork and when required, sit face to face with the subordinate to deliver the good or bad news, but the actual strategy behind the process belongs to HR. After 30 years of working for traditional manufacturers in the Aerospace and Defense market and several years of consulting, I’ve yet to see performance management owned and embraced by all functional areas. If my assumption is correct and if we wish to use performance information to move our organizations from traditional to world-class, then we will need to convert from a backward looking behavioral report card into a forward looking, value adding enabler in support of our lean manufacturing journey.

In traditional business, the most common implementation of performance assessment takes two forms:

1) Personal Performance Programs: Established to document how well the employee interacts with subordinates, peers and superiors, as well as, document how the employee has performed his or her job duties. Documentation is typically used to support disciplinary actions and rarely does it drive personal development.

2) Incentive Programs: Programs put in place to reward the upper-management team for meeting or exceeding their yearly budget. These incentive programs often remain a secret from a majority of the employees.

Both performance and incentive programs have short-term influences on the business. It is the short-term nature of these monthly, quarterly and yearly programs that cause these practices to be categorized as traditional, not world-class. For example, in cases in which we are documenting poor performance for staff reductions, or incentivizing the management team through sizable bonuses to make year-end projections, we are rewarding the results of short-term decisions rather than their effectiveness for long-term sustained value.

In comparison, a world-class organization uses personal performance programs to support the continuous improvement culture by setting goals and objectives linked to the company’s commitment to “what the customer values.” Additionally, world-class organizations use the personal performance process to emphasize talent and skill building in support of a robust workforce. For example, each job function has SMART (Specific, Meaningful, Attainable, Relevant, Timely) goals that cascade down from the top of the organization. At all times, these SMART goals tie to measurable business objectives. The achievement of these goals by a specified due date is rewarded through a challenging incentive program that does not allow “gaming” by the individual or team for personal benefit. Data collection to support the reporting of these objectives is simple and standardized, typically called Key Performance Indicators or KPIs. Every employee performance review in a world-class organization has an individual development plan and a succession plan that are well documented and relevant. Development plans are communicated to the individual and/or team via a skills matrix, where training gaps are clearly identified, benefiting both the organization and the individual. Typically, this appraisal process is simple and includes a 360 degree perspective.

World-class performance evaluation is hard work and can be in conflict with legacy personal performance review and incentive programs. Making the transition to a new method includes driving managers to understanding and exhibiting a strong continuous improvement mindset. Managers must emphasize accountability by establishing clear expectations and consequences. Training and execution problems on the shop floor can be identified using Root Cause Problem Solving (RCPS) techniques, which immediately loop back to the skills matrix. Once visible to the team, skill building can be addressed and verified. Documenting each role’s standard work (STD Work) is key for creating a baseline to measure from and improve on. World-class organizations work to keep STD Work from becoming stagnate and meaningless.

Integrating an ongoing personal performance process is better than the dreaded yearly performance review process because transparency in the process creates clarity and facilitates communication about each individual’s role in the organization. Consider the alternative: I remember my days in manufacturing when a handful of managers would have to hide in their offices for a week, filling out boilerplate performance reviews before the deadline. They couldn’t be reached regardless of what the problem was. One time, the HR Leadership threatened to withhold pay or shut off email and phone service to managers until they finished their outstanding performance evaluations! In contrast, the world-class organization sees performance evaluation as an interactive, yearlong process that adapts to the needs of the customer and the organization. It’s transparent, yet demanding, holding each team member accountable for their role in achieving success for their organization, measured by something that really matters, customer satisfaction.

“Finding Value in an Old Corporate Process” was originally published Dec 4th, 2012