Performance Management Opportunities for HR Consultants

With the economy in a tailspin that some experts say will take months, if not years, to recover from, companies are more concerned than ever about maximizing the effectiveness of their staff. Performance management (PM) is moving front and center as less emphasis is placed on hiring new staff, while more is being placed on utilizing the staff that are already on board effectively.

This represents opportunities for HR consultants who are well positioned to add value in this area.

Rick Lepsinger is president of OnPoint Consulting in New York. His firm recently conducted a study to clarify the factors that differentiate the most effective PM systems. The study of 115 HR professionals and 441 line managers found that:

• Only 44 percent of the line managers and 45 percent of the HR professionals believe their companies’ performance management systems deliver value to the business.
• Only 43 percent of line managers and 46 percent of HR professionals believe the time spent on their performance management systems is worth the investment.
• Only 30 percent of respondents believe that their performance management systems achieve their intended objectives “to a great” or “to a very great” extent.

Scott Nelson is a partner EVP of consulting services with MDA Leadership Consulting in Minneapolis, where he specializes in helping organizations build talent management and leadership consulting programs. These results support Nelson’s belief that it is not just the economy that is driving more organizations to focus attention on performance management.

“I believe what’s driving companies to develop and improve their performance management systems is not only the economy, but also a recognition among HR leaders that now is a singularly unique and ideal time to enhance performance management to ensure their organizations are primed to compete in the months and years ahead,” says Nelson.

While he notes that performance management systems have been around for a long time, he agrees they are not always effective. “In some cases, performance management has been more about checking a box than about aligning performance and development,” he says.

Missing Pieces

According to Lepsinger’s study, the obstacles to PM systems achieving their intended objectives and goals most frequently cited by HR professionals and line managers include:

• Lack of clarity in the link between pay and performance.
• Inconsistent application of the PM system across the organization.
• Lack of managers’ commitment to developing people.
• Lack of managers’ skills to use the system effectively.

Lara Summers is an HR consultant with Legacy Alliance in Chicago. There are, she agrees, many key pieces that are missed in most companies’ PM systems. These include, she says:

• They aren’t tied to the strategic direction of the organization.
• Leaders aren’t invested in the process.
• They are used for bonuses and promotions but are not used effectively for development.
• Performance objectives are only looked at every six or 12 months—not on a continuing basis to manage performance improvement and development proactively.
• The rating scales are entirely subjective, with no behavioral anchors or markers to let individuals know how to improve or to help supervisors know how to rate effective performance against behaviors and outputs.
• Performance appraisals aren’t a part of a larger system and can be perceived as busywork to be completed with no one actually looking at the results or goals set.
• Employees might not feel that they have the resources to change their performance, or supervisors might not know how to aid in employee development.

Each of these missing components represents an area of potential opportunity for HR consultants.

Skills Needed

Performance management systems can take a variety of different forms and can contain multiple nuances, including the use of technology to help manage the process. In fact, the term “performance management system” often applies to the processes within an organization as well as to the technology solutions it might use to drive these processes. There is no one-size-fits-all solution, says Laurence Stybel of Stybel Peabody Associates in Boston. But, he says: “All systems need to strike the required balance— make it simple enough so line management can easily implement, and make it comprehensive enough so it can be of value in promotion, development, compensation and recruitment.”

Sharon Armstrong is a co-author of Stress-free Performance Appraisals (Career Press, 2003) and The Essential HR Handbook (Career Press, 2008) and an HR consultant based in Washington, D.C. Her new book, The Effective Performance Review Handbook, is scheduled for release by Career Press in May 2010. There is ample opportunity for HR consultants to become involved in this process, says Armstrong, particularly for those with a background in performance management and the ability to listen. But the complexities require more than just a passing knowledge of “performance evaluation.”

For those without extensive experience, Armstrong suggests partnering with “competent colleagues.” She notes that there are many facets of working on PM that draw upon varied skills, including writing, survey analysis and training.

“You separate the pros from the amateurs in this area by whether the performance management system really gets at the key aspects of performance in the organization versus measuring personality traits,” says Dennis Kravetz, president of Kravetz Associates in Scottsdale, Ariz. Kravetz is the author of Measuring Human Capital: Converting Workplace Behavior into Dollars (KAPublishing, 2004). “The best consultants I have seen in this area have advanced degrees in behavioral science to get the measurement and metrics correct, along with a business background which helps with goal development.”

Michael Denisoff, SPHR, is founder and CEO of Denisoff Consulting Group in Redondo Beach, Calif. Denisoff says that for HR consultants to succeed in this area “they should have extensive experience with performance management as an employee and manager, and as a consultant who has seen and implemented a variety of effective performance management systems.

“The skills come in diagnosing organizational needs, matching them with the proper approach of designing a process management system with the organization and leading a change management plan to ensure that it gains traction.”

Ultimately, measurable, bottom-line results must be evident to point to the success of the system. The good news for HR consultants with the requisite background and skill in this area is that this PM is an aspect of HR for which companies are beginning to see a specific, bottom-line return on investment for their efforts.

Lin Grensing-Pophal, SPHR, is a Wisconsin-based business journalist with HR consulting experience in employee communication, training and management issues.