How to Design a Performance Management System - Step 2 (Part 4 of 10 of HRSG’s Guide to Performance Management through Competencies)

In the previous blog post in this series, we discussed the importance of defining the purpose and goals for designing your competency-based performance management system, which in turn can be used to lay down a set of guiding principles for performance management in your organization. We also discussed the importance of engaging stakeholders, like senior managers, employees, unions and others, who are key to the success of your system.

In this blog we discuss parameters you should consider when designing your system.

This is the first in a 10 part series that looks at:

1. What is Performance Management?
2. Linking Performance Management to Corporate Strategy
3. How to Design a Performance Management System - Step 1
4. How to Design a Performance Management System - Step 2
5. The Performance Cycle – How Competencies are Incorporated
6. Stage 1 – Planning for Success
7. Stage 2 – Managing & Feedback for Success
8. Stage 3 – Evaluating Performance
9. Multi-source Feedback
10. Performance Management in Summary

Groups or Types of Jobs
The design of the process will most likely vary with the group or types of jobs. For example,

• Executive / management / professional – typically have a goals / objectives-based system, complemented by assessment of competencies
• Routine / regularized jobs – are often task-based check lists, sometimes with rating scales, complemented by assessment of competencies / skills
• Project-oriented work – are most often goals / objectives-based systems that reflect the project plans, milestones and outcomes, complemented by assessment of competencies
• Level or rank-based groups (e.g., police, military, etc.) – often have key dimensions of performance or competencies required for their level, complemented with job-based goals / objectives

Who Provides Feedback
Determining who provides feedback on employee performance will vary depending on the nature of the job and the goal(s) of the process. Almost all systems incorporate feedback and review by the employee’s immediate supervisor. However, we have developed systems that incorporate feedback from a variety of sources, including: clients or customers, project leaders, peers of team members, employees who report to the target, employee and self-ratings. Ultimately, it is nonetheless the immediate supervisor of the employee who has the final say in the overall evaluation, especially if critical decisions are being made based on the performance review (e.g., salary increase, bonus, etc.)

When and How Often to Appraise
The performance cycle can also vary with the type of work being performed:

• Consistent with the business year for the organization – typically for executive, managerial and professional level jobs where the business goals of the organization are cascaded and assigned according to responsibilities and levels within the organization
• On the anniversary date of hire for the employee – typical where the employee has a routine or regularized job that is tied to standards for the job that do not tend to vary significantly from one cycle to the next (e.g., customer service)
• Project cycle – typical for workers that deliver services / products in keeping with the project plan, with milestones, deliverables and a schedule for completion
• Monthly / quarterly – typical for workers that need to deliver clear results within shorter timeframes – e.g., sales

Performance Constraints
Another consideration that needs to be taken into account is that performance can be constrained by factors beyond employee control. Examples include: shortages of supplies, raw materials, equipment; budget restrictions; shortage of qualified staff; economic conditions, etc. It is Important to identify these, and minimize their impact to the extent possible.

Integration with Other HR Processes
Performance management results can often feed into and support other HR process areas like learning, rewards and recognition, leadership development, promotion, and succession planning. This can not only, create efficiencies for HR, but also provide employees mechanisms to improve performance in a tangible way.  Organizations that use different competency architectures and models to support the different HR functions won't be able to realize these efficiencies or other benefits. In order to have a completely integrated system, it is important to have a common framework, competency dictionary and competency profiles underlying all the HR processes.

Privacy and Confidentiality of Results
Organizations need to set policy with regard to:

• where results are to be stored
• who has access and for what purpose, and 
• how to protect privacy and confidentiality, especially using automated systems. 

Countries often vary with regard privacy legislation; therefore, it is advisable to check this legislation before setting policy.

Training and Instruction
Performance Management is often one of the most difficult processes for managers and employees. Training and instructions on how to participate and gain the best out of the system are essential. This includes:

• Instructions and Guidebooks – targeted to both managers and employees on the steps and stages, roles and responsibilities, and how to participate effectively in the process.
• Training and Information Sessions
• For Managers – to ensure that they understand the process and have the skills to coach and provide fair and accurate feedback to employees.
• For Employees – so that they understand their role in the process and build skills in receiving and gaining the most from the feedback they receive.

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The next blog in this series covers the main stages of the Performance Management cycle and how competencies play a key role at each stage. Sign up to our blog’s mailing list through the form on the right-hand side to receive the rest of the series in your inbox.

HRSG is a leader in competency-based performance management solutions and training. Contact us today to find out how we can help you.