We have been following a hypothetical corporation undergoing a major “turn up,” not turnaround. The organizational structure has been changed from a hierarchy of commanded and controlled people into a lowerarchy of empowered people. Managerial layers and functional departments have been replaced by self-managed, cross-functional teams and core processes. The corporate culture is being changed to one that will further, not hinder the journey to greatness. In this final part we take a look at what the corporation needs to do in managing the right performance the right way.
Recall in the introductory article that the essence of corporate greatness was defined as both consistently positive behavior and consistently positive results. This is what I called the Gold Standard of performance. Managing the right performance, therefore, means Managing both Behavior and Results, and over the years I have developed different models of MBR for use by various organizations.
Managing performance the right way means managing performance following seven rule-free principles. I emphasize the qualifier because performance management tends to be rule-ridden and excessively structured and inflexible (I once saw a stack of these rules more than an inch high in a bloated, constipated bureaucracy). Let’s take a brief look at each of these principles.
A minimum level of accountability is absolutely necessary for any business, or any society for that matter, to function. Corporate greatness requires the maximum level, that of total accountability. It is the overriding principle for properly managing performance.
For there to be total accountability both behavior and results must be managed diligently throughout each performance period or accountability cycle. It must apply to every corporate member, no double standards allowed. Each cycle must start with great expectations about performance because they are the standard against which actual performance is to be compared. During the cycle performance must be monitored neither too much nor too little. At the close of the cycle performance must be validly appraised and where appropriate or necessary, responsively and responsibly rewarded or penalized (penalties, of course, must be imposed in a timely and just fashion independently from the cycle’s schedule).
Because the immediate result of a decision or action may and is often intended to trigger a series of further actions by others, the question arises as to when the initial actor’s accountability stops. “The buck stops here” was President Truman’s famous declaration. In general the more influence a person has over a decision and/or subsequent action or chain of actions that lead to more distant consequences the more that person should be held accountable for them (a lowerarchy, of course, without a president perched umpteen layers above most everyone else has a shorter chain of consequences linked to the original decision maker/actor).
In any organization of cross-functional teams, accountability for results is shared but accountability for behavior ordinarily is not. If a team, for example, fails to meet one or more team objectives, the whole team is accountable for the shortfall. But a team cannot behave. Behavior is an action of an individual. Individuals are accountable for their actions as individuals. However, in cases where any consequential behavior cannot be readily associated with any particular person, the whole team may need to be held accountable for the behavior (e.g., in the classical school room case where no one will tattle on the troublemaker).
A corporation seeking greatness will manage its performance in the “sunlight.” This does not mean giving away proprietary secrets. It does mean not hiding any information detrimental to any stakeholders. Total accountability doesn’t happen behind closed doors.
Self Performance Management
Self performance management is a hallmark of a lowerarchy of empowered people. But there is an obvious caveat. Self-performance management needs to be done responsibly under conditions of transparency and guarded trust and in a network of partnerships among corporate members whose performance is all headed in the same direction.
With apologies to Charles Dickens, behind every great performance is likely to have been a great expectation. Great expectations, especially when self-owned so to speak motivate and guide people toward desired ends and not by using unacceptable means as would be the case with ignoble expectations (e.g., setting unreasonably high goals that knowingly can be met only unscrupulously). Setting great expectations is critical, because a poor start usually ends poorly.
Great expectations proscribe negative behavior and prescribe positive results (recall the definition of positive results in the introductory article). Proscribing rather than prescribing behavior may seem an odd corollary principle, but it is not. It says be flexible about positive behavior and inflexible about negative (i.e., incompetent, unmotivated, and/or unethical) behavior. Positive results can often be met through a variety of positive means, each of which would be acceptable assuming there were no differences among them in terms of their cost and other considerations. Incompetent, unmotivated, and unethical means, on the other hand, should never be tolerated.
But the principle does not preclude being less flexible or more structured about positive behavior when the nature of the work requires it. Obviously, there will be times when precise behavior, as in precision work, for instance, is critical and needs to be expected and to happen.
Tracking performance is necessary to keep it on track and to make adjustments when problems arise. Three variables in the corporation’s performance equation (described in the second article) need to be tracked: the situation, behavior, and progress toward achieving the prescribed results.
Looking out for situational changes that could affect performance requires diligence. Bad changes overlooked or ignored can torpedo performance. Good ones missed are a lost opportunity. An issue arises when monitoring the competition. Just how far should the corporation go? My answer is that it can go as far as possible as long as in doing so it does not fall below the bottom line of ethics.
The monitoring of behavior needs to be between too much and too little. Every person is responsible and irresponsible for countless behavior in their lifetime. Around 30,000 behavioral acts I have guesstimated occur each day on the job. Even heavy-handed watching of a fraction of action-inaction would amount to no productive work from the watchers. Monitoring behavior, therefore, needs to be guided by the notion of guarded trust that I defined in the fourth article.
Monitoring results requires every bit as much diligence as the monitoring of situations and involves keeping tabs on progress toward meeting objectives. Thus, progress indicators and reviews are needed along the way to ensure that performance is on target.
A valid appraisal of performance basically gives an unvarnished, truthful answer to two questions: Were the expected results gotten? Were they gotten in a positive manner? I have spent much of my career on the subject of performance appraisal. Believe me I have seen more nonsense than sense written about it by both practitioners and academics who should know better. The devil is in the details when doing appraisals the right way but the details are not that devilish.
I can’t go into the details here but I can give you a few dos and don’ts based on my years of research and practical experience. Don’t rank people. Rankings not only rankle people they don’t compare a performer’s performance against the expectations of that performance, and it is only such a comparison that constitutes a legitimate appraisal. Don’t rate performance on a rating scale. Ratings are easily fudged. Instead, ask a series of yes-no questions about the performance where giving a dishonest answer requires making a bald-faced lie that is more easily uncovered. Team performance needs to be appraised before the performance of each member is appraised. That the teams are self-managed means the appraisals should be self appraisals, but under conditions of transparency and highly guarded trust especially if performance bonuses are possible (e.g., member appraisals could be verified by other members and team appraisals could be verified by other teams operating in the same core process).
Responsive and Responsible Rewards and Penalties
The general principal to follow here is that if and when rewards and penalties are given they be given responsively and responsibly. That is they must be given in response to the appraised performance and not also to extraneous considerations, and they must be given in a way consistent with the different meanings of success and failure discussed in the introductory article and with the five conditions of organizational justice discussed in the fourth article. The most irresponsible rewards and penalties would be ones that mock the Gold Standard by rewarding negative successes and penalizing positive failures.
Years ago I developed policy suggestions to help steer organizations in their confronting the dozens of issues surrounding the giving of rewards and penalties. Some issues are relatively straightforward. Merit increases are an example. They should absolutely not be given because they are a continuous reward in the form of salary increments whereas the performance on which the increase is based is a time-limited occurrence. Giving performance bonuses to teams and their members, in contrast, is a thorny issue. For instance, if the corporation meets but does not surpass its year-end goals: a) should performance bonuses be awarded, assuming available funds; b) if bonuses are awarded should they be distributed equally among all of the teams; and c) should any MVPs (most valuable performers) be designated and given larger bonuses than their team members get? My policy suggestions provide workable answers to these and all other seemingly endless questions I have ever confronted in my research and consulting. Our hypothetical corporation establishes a corporate-wide taskforce to create policy guidelines and also performance review boards for each business unit to administer the overall monetary reward fund, to allocate a total amount for each eligible team, and to oversee the entire process, including the giving of any penalties.
We have now come to the end of this article and the series that presented and briefly discussed four elements necessary for a corporation to become great: a great board and executive team; a “lowerarchy” of empowered people; a great culture; and a great way to manage performance, not people. As I said in the introductory article, any corporation seeking to become great must also continue to thrive in the marketplace by having the right products and services that sell.
Few corporations will achieve the kind of greatness I have described, but any corporation that stays in business while consistently conducting it in a positive manner has met the Silver Standard and should get a “grand consolation prize” as far as I am concerned. Consistently doing business ethically when the competition operates with brass knuckles represents a quantum leap from doing business as usual.