Analysis: Searching for honest performance ratings

Everyone it seems is looking for the secret to performance management. A labor-management committee at the Defense Department recently released its recommendations for a new performance management system. The assessment was mandated by the 2010 National Defense Authorization Act after the department's previous attempt at reform -- the National Security Personnel System -- failed.

At the Office of Personnel Management another group is developing recommendations on performance management, this one led by chief human capital officers. And an interagency group is looking at the same problem at the Senior Executive Service level.

Perhaps surprisingly, these groups agree that the system is not the primary problem. There are more important concerns, such as the need to build a culture where managers focus on staff performance and leaders make it a priority. The Defense committee concluded, "Although senior leaders may believe performance management is a priority, it is rarely translated or communicated down through the organization to employees." That says it all.

The 'A Players'

The Defense Department committee recommended scrapping performance ratings in lieu of a pass/fail system. Presumably, the panel members see this as the answer for workers at all levels, from newly hired wage-grade employees to GS-15 managers. The justification is that the existing rating schemes have lost credibility and a pass/fail process will take less time. They also argue that a two-level rating system would facilitate more productive dialogue, but they offer no evidence to support that view.

It's true that current ratings serve no real purpose. OPM no longer reports on ratings issued to employees below the SES level, but it's well-known that those assessments are vastly inflated. At the SES level agencies report 60 percent to 70 percent of their executives perform at the highest level. That should be a red flag.

For comparison, companies that have adopted a forced distribution policy limit the highest rating to 20 percent of their workforce. That is not a viable policy for government, but it does reflect research findings that top performers are limited in number.

The key point is that employers have to identify their top performers. In human resources jargon, these are the "A players" who stand out in every work group. Managers must develop strategies to take full advantage of their staffs' capabilities. And bosses should be able to defend their decisions linking performance to rewards such as promotions, bonuses and special recognition.

At the same time, employers have to identify the employees whose performance is unacceptable. They also stand out, and ignoring them is like letting a cancer grow. Needless to say, personnel actions for poor performers must be solidly defensible as well.

These imperatives suggest the need for a three-level rating policy in which employees succeed, don't succeed or exceed expectations. It satisfies the needs of the organization and is easier to administer. A number of prominent companies have adopted this type of system, and OPM Director John Berry has voiced his support for the idea.

Reliable Ratings

People are rated throughout their lives -- in school, job interviews, credit applications. We do it informally when we meet someone. Government leaders are rated in polls and in elections. And we frequently use ratings to assess movies, hospitals, cars, almost everything we buy.

Employers have an obvious need to plan and monitor the work of their people. Studies of employee engagement highlight the importance of knowing what's expected. Each year performance planning is integral to defining expectations. And reviews are a natural final step in the performance cycle.

Individual performance goals are basic to that process and central to accountability. The practice is routine in virtually all organizations and at all levels. Well-defined goals answer the concerns of the critics. To make goals solidly defensible, the best practice is to define expectations, along with the outstanding and unacceptable performance levels. Then the year-end evaluations won't come as a surprise.

The National Security Personnel System was undermined by general standards that were both vague and complex. For example, "critical thinking" was defined as six work behaviors, including "makes sound and timely decisions or recommendations." Sound and timely were not defined, nor was the impact of the decisions. Only HR wonks could dream that up.

The NSPS rating factors essentially were competencies that are widely used in performance management. When standards are occupation-specific, they provide a meaningful basis for discussing strengths and weaknesses. Supervisors and employees can focus on issues that both know are important, and they can agree on how performance will be evaluated. When the standards are generic, ratings are impossible to defend.

Football teams effectively illustrate best practices in performance management. They have clearly defined, shared goals. Progress in achieving those goals is measured and reported frequently, and rewards are tied to both team and individual performance. Despite the importance of teamwork and leadership, those vague concepts are not used to evaluate performance. Coaches focus on winning and on helping players do their best -- performance and development. The same is true for the best managers.

Somehow the secret got out. The way managers handle employee performance is far more important than the system. But the answer is not simply better training. The guidance and skills are essential, but often quickly forgotten if new behaviors are not reinforced. Managers should know that demonstrated supervisory skills are important to their careers. Those who are ineffective should be moved to nonsupervisory roles. That will send a powerful message.

The best rating systems facilitate managers in performance planning and feedback discussions with subordinates, as well as provide a basis for year-end evaluations. This is a solid foundation for honest performance ratings.

Howard Risher is an independent compensation and performance management consultant. He was the managing consultant for the studies leading to the 1990 Federal Employees Pay Comparability Act. He is the author or co-author of five books, including Planning Wage and Salary Programs WorldatWork Press, 2009).