[Part 1] Performance Management Systems: Needs Improvement

Far too many companies lack proper performance management systems, and try to use “poor performance” as a justification for termination. This is absurd for a number of reasons, with the primary reason being that this is a very easy way for any company with a sub-par performance management system to successfully lose a wrongful termination case.

Many organizations get away with this behavior because employees typically have already endured enough stress and want out, so they accept the severance package and walk away. Another root cause - most employees do not fully understand the protections enforced by the federal, state, and local governments that are meant to protect them against wrongful termination. If you don’t know what can go wrong, how would you know it is wrong when it happens?

Time to unpack what sucks, root-causes, and what strong performance management systems should look like when it comes to performance improvement plans.

What is a Performance Management System?

Performance management is a critical business process in which managers and employees follow a continuous process to communicate and review role responsibilities, performance, expectations, and development opportunities.

The goals of these processes is to ensure employees and management are:

1. Receiving feedback regarding their performance

2. Responsibilities and efforts are aligned with the organizational goals

3. Management is following the proper legal requirements when managing poor performance

What Qualifies as "Bad"

Below is a list of the common and shameful reasons for the majority of performance management systems to be deemed as trash:

1. There is no system 

2. The existing system is full of surprises and/or not communicated

3. Management and leadership lack the essential knowledge regarding compliance in this process

4. The company uses this system as a tool to manage-out employees (PIP processes set unrealistic targets that an employee could never achieve)

5. Meeting the expectations within the set timeframe would require the ability to stop time

6. Management fails to make the distinction between behavioral vs. competency issues

7. Employees receiving positive performance reviews and feedback are still terminated at will due to “performance issues”

8. The company has no continuous feedback system built into day to day management operations, and also has not established frameworks for giving and receiving feedback 

9. Poor performance ratings are frequently unwarranted surprises 

10. After giving a poor performance review rating, the company does not provide steps to exemplify a genuine effort to support improvement 

11. Managers fail to communicate expectations during the onboarding process, therefore making it impossible for direct reports to know what “good” looks like

12. Employee workloads make it impossible to perform well because they are stretched in too many directions, and managers do not have enough insight into how much their direct reports are actually working on. 

    
    

The list can certainly go on, but we will leave it at the most common trends that are being observed today.

Unpacking the Root Causes

A big failure mode is born in the early-stages of company formation. This failure mode is the one that involves the failure to recognize performance management systems as a part of a larger machine (the company). Employing the mental models of systems thinking, first and second order thinking would avoid this issue, and are the keys to success when building and scaling critical company processes.

Now for a little summary of the results of a classic root-cause analysis:

1. Toxic Work Environment 

Maslow’s Hierarchy of Needs exists for a reason - if your employees lack a feeling of security in any of these areas, they will not be motivated to perform. The fault lies with leadership and management on this one.

Strong Business Ethics + Legal Compliance = Healthy Workplaces and Productive Teams

Needs at the bottom must be fulfilled in order to meet the needs at the top.

2. Weak Hiring and Recruiting Processes

   Your process is simply not identifying the right people for the roles you need to fill - you are bringing on the wrong people and setting expectations that they cannot possibly meet with their existing skillsets and competencies. This problem starts with not having frameworks for team members to accurately identify the actual skillsets needed for new roles. Without this, recruiting is painful - your recruiters will consistently be out of alignment with hiring managers, time is wasted interviewing candidates who are the “wrong” fit, and you will be wasting money not only during the hiring process but also during the inevitable termination process.

   The wrong talent will not produce the right results. 

3. Poor Management Practices

    If you cannot clearly define the expectations of managers on your team, then it would be unreasonable to expect them to manage team members in alignment with the unspoken vision in leadership’s mind(s). Management roles are not easy, and if leadership is poor at managing the ones sitting near the top, it is inevitable that these poor practices will trickle down throughout the entire organization. Self-awareness of weak management skills in conjunction with strong intrinsic motivation to develop necessary skills required of great managers is the solution.

4. Employment Law? What’s That?

   If you own a business and/or are an employee, there is no excuse to not understand the laws that govern the business world. My biggest nit about startups is that they believe that “they don’t need to be 100% compliant.” What this actually means is “we don’t fully understand the severity of violating the law, and since we are falling trap to the belief that it would be totally crazy to think we would ever get in trouble, we are not going to care.”

5. Failure to Communicate 

   This includes failing to communicate:

   • Role expectations during the hiring and onboarding processes

   • Consistent positive and constructive feedback

   • What the performance management process even is (if there is one)

   • What satisfactory and unsatisfactory performance looks like

6. Unconscious Bias and Other Illegal Behaviors 

   Performance management is often used as a tool to “manage-out” employees that managers simply do not like. This is especially illegal if the employee has received positive feedback regarding their performance in the past. If there is a PIP system in place, you can gut-check this by analyzing the expectations and outcomes set for the employee, as well as the timeline for improvement. If these are completely unrealistic, then you have a potential lawsuit on your hands that you simply will not win.

7. Under-Resourced and Overworked

   If you cannot provide your team with the tools necessary to complete their work, or workloads are unmanageable, then it would be completely unreasonable to expect peak performance of your team. A lack of honesty around both of these things leads to only bad things, and you cannot place blame on your team members when you have failed to set them up for success. Leadership and management hold the primary duty to provide their teams with ample support to succeed.

8. “Good” is Undefined 

   You cannot simply implement a performance management system if you have not defined the expectations of each employee, specific to the role. If you do not both define and communicate what is expected, then you certainly cannot rate one’s ability to meet these expectations.

   
   

9. Ignoring External Factors and Internal Deficiencies

   In life and in work, there is very little that we can control. Failing to be realistic about how external factors, such as the economy, impact of industry competition, product limitations, etc. are examples of factors commonly overlooked when evaluating performance. Holding employees accountable for things out of their control is unfair and totally unreasonable.

   When it comes to internal deficiencies that just about everyone in the workforce can relate to: poor management/leadership, weak talent, resistance to building processes and systems that work, employees not having adequate resources to do their jobs.

10. Unclear Distinction Between Behavioral vs. Performance Issues

    A behavioral issue can certainly influence performance, but these two are different. Many companies lack a framework for managers to effectively make this distinction. Behavior issues tend to have a different set of root causes, many protected by federal/state laws, and performance issues can be attributed to reasons that fall under general business operations and resource constraints.

That’s enough triggering for now - it’s safe to say that anyone who has existed in the workforce in the past decade has experienced a handful of these failures, but the good news is, they can all be both prevented and improved. 

See part 2 for how to fix your company's performance management systems here.