Business and HR Part 2: Never have a PMS process for people

Performance Management System or PMS is believed to be an HR process to evaluate people’s performance in order to reward people, decide on increments, variable pay and promotions.  Therefore,  line managers see it as additional work.  One hears a usual rhetoric, “Should I do my business or should I spend time on completing PMS on the HRMS or discuss performance with team”. I would strongly suggest that line managers should not waste time if PMS is for people.  They should stay focused on business. 

However, imagine a situation where an organization employs 5000 people.  Can a CEO do everything to achieve his Objectives?  Or can the ten people in the leadership team do everything to achieve their or CEO’s objectives?  On the contrary while the leadership can provide direction, the real work is done by 4500 people at the bottom of the pyramid – salesmen, production engineer, maintenance engineer, bank teller etc.  Unless their objectives are aligned with objectives of the CEO, CEO cannot deliver on the expectations of shareholder.

A.      How does an organization align the entire organization with the objective of a CEO?

PMS is the tool to align the organization with the objectives of the CEO.  Therefore PMS is primarily a business tool and it may also provide inputs for various HR processes.

B.  How does business leadership effectively use PMS to help CEO deliver on his objective?

1.       Own: Business leadership should own and drive PMS process.

2.       Cascade: While everyone knows the importance of cascading the CEO objective through PMS, it is usually executed well in sales driven organizations.  The other businesses struggle quite a lot to effectively cascade the objectives.

3.       Helping people deliver:  Having set the goals, aligned with organization, line managers have to constantly help their team members deliver by:

                                                         i.            Providing Constant feedback

                                                       ii.            Coaching them on course correction

                                                     iii.            Demonstrating how to execute, where needed

Obviously this is again something line managers, who know their job, can do the best.

C.      What should HR do in the PMS process?

1.       Custodial Service: HR should provide the custodial service to line managers by program managing the process. In addition, it should be the eyes and ears of leaders to ensure their objectives are met.

2.       Capability Building of people managers:

HR should focus on capability building of people managers to help:

                                                               i.      Cascade the objectives seamlessly

                                                             ii.      Coach their team

                                                           iii.      Provide constructive feedback

                                                           iv.      Train team through demonstration

D.      What is their in PMS process for people?

Primarily a PMS process helps people to deliver on organization objectives, which in turn helps people, learn and grow.  The learning is based on what they do, manager’s feedback and his coaching and guidance.  This is the biggest source of learning for people.

By the way, PMS also provides input for:

1.       Learning and development

2.       Compensation

3.       Career Growth through lateral and vertical opportunities

So PMS is the mother of all HR processes. But PMS itself is a business process.

Most PMS processes that fail are people centric and do not deliver business results. Therefore business managers are not interested. In the bargain people do not learn and grow. The input that such a PMS process provides to all the other HR processes is not rich enough, making all the HR processes redundant from business perspective.

Business and HR Part 1: Is "Corporate Socialism" killing businesses?

Most Indian organizations and foreign companies operating in India could have done better than what they are doing. There are many reasons for suboptimal performance of organizations, across business, Government and NGOs. These are lack of appropriate capabilities, lack of training and development, lack of leadership, improper risk assessment, inappropriate strategy or business model. Different companies are plagued with some or a combination of these issues. All of us know that even if strategy or business model is slightly defective or if the risk was not properly assessed, the key to success is excellent execution. However, most companies demonstrate lack of excellence in execution. What is the root cause?

The primary reason for lack of excellence in execution is "Socialism at Work", which cuts across most companies in almost all sectors in Asia and especially in India. If the organizations reward the high performer and low performer similarly, what is the incentive to perform? Even worse, the organizations do not give differential treatment to performers, in terms of opportunities, resources and recognition and appreciation.

What should companies do to enhance performance?

DIFFERENTIATE through:

1. A very transparent PMS process with quantified goals.

2. Capability of managers to call a spade a spade. 

3. Leaders own differentiation of performance and drive it though the year.

3. Very high differentiation in variable pay and increments between high and average performers.

4. The developmental and growth opportunities for the high performers, which should be distinct from those available to average performers.

5. Superior resources to high performers in order to help them be more productive and effective. This would ultimately help business perform better.

In Government sector the option to differentiate is limited. Therefore motivation  to perform is limited.

Some of the public sector companies, especially banks, have used differentiated opportunities and resources as key drivers to motivate high performers and help them deliver better. These organizations have excelled compared to their peer group. Their ability to influence or effect differentiation in compensation was limited.

In Private Sector all the levers are available. But the will to create differentiation is lacking in most organization. The challenge becomes bigger when CEOs do not want to differentiate, little realising that this will hamper the business performance and consequently their own performance, and may be survival. 

In an environment of Corporate Socialism, high performers are frustrated and leave for greener pastures. This leaves the well rewarded mediocre talent behind, resulting in a mediocre organization and mediocre business performance.

Leaders have to choose between socialism and high performing businesses.