Understanding Individual Performance in an Organisation

Employee performance is a favourite topic of mine because it is one which is often very misunderstood and in this blog I want to give you a sense of why I think this to be the case!
Let us start with a simple scenario. Sam is a very competent saleswoman and she works for a company who we will call ‘Old School’. Sam is in charge of selling a product which has become less easy to sell in recent months. Customers seem to be buying a competitor’s product which better meets their requirements. The recently implemented Old School CMS is time consuming and clunky whilst the company have recently introduced additional reporting procedures to try and control cost. All of this has created more bureaucracy for Sam. Her figures show a decline in performance from the previous year and going into her quarterly review, Sam feels frustrated, vulnerable and unsure about what to do.
During the meeting, her manager Nick, suggests that Sam should try harder to sell Old School’s products. “Yes it is tough but you need to be more innovative in your approach and need to try even harder” he tells her as he awards a ‘Requires Performance Improvement’ grade. Sam had already being working very hard but at least she is now sure about what to do. She leaves her review meeting feeling completely demoralised and the first thing she does is to phone a recruitment agency. The question is was Sam to blame?
A traditionalist like Nick might say yes. Yet what this example hopefully shows, is that an individual’s performance is actually impacted by many different factors out with the control of the individual. In Old School we saw external changes to the market in the way of new competition as well as significant internal change imposed upon Sam. What we’ve seen is the greater system impact her total performance leaving Sam stuck as something of a bystander to events. The renowned late American industrialist Edward Deming talked about the 85/15 rule – that in certain circumstances the system was responsible for up to 85% of an individual’s actual performance. We could argue about the actual weighting of this ratio but he highlights a very important point. If Nick had understood this he could approach the problem differently and work with Sam to look at the decline of performance in a more constructive way.
The misunderstanding of the multifaceted nature of performance can be hugely detrimental to business success and individual wellbeing. I’m not saying for one minute we have an abdication of individual responsibility, but surely if we recruit the right people in the first place and they pass their probation period, they’re competent to work for the company? I’ll leave you with one last thought, imagine how nicer work would be without a blame culture…
What do you think, does this example resonate with you?


The problem with Performance Related Pay...

I read an article in today’s Guardian which referred to performance related pay in the civil service. It got me thinking - I understand George Osborne plans to introduce greater performance related pay to the Civil Service in 2016. I don’t have an issue with reform of the civil service (although I don’t pretend to know much about the civil service if I’m honest) but I do have an issue with performance related pay. On the face of it, performance related pay seems like a logical thing to do. No doubt politicians think it is a good way to ensure results and demonstrate to the public that they’re being tough yet fair. After all “reward” equals “pay” right?
The unfortunate thing is there is very little (in fact next to none) evidence to show that performance related pay actually works! There is however evidence to show it can be damaging and actually drive the wrong behaviours. For many decades respected industrialists and academics have told us that money is a poor motivator. For example Frederick Hertzberg told us in 1959 that money is important to an extent - but only to a limited extent. Karl Dunkers ‘candle problem’ published way back in 1945 showed the limitations financial incentives have in driving results to complex problems. The fact is the ‘carrot and stick’ approach which encompasses things like performance related pay and performance appraisal rarely works and when it does, does so in limited circumstances.

The most powerful human motivation comes from within and there is a lot of evidence to support this. If you’re sceptical, apply this to your own life and you will see it makes sense. For example do you bust a gut to finish that 10k because someone is going to pay you? Do you volunteer with your local sports club because you will get punished? No of course you don’t. A cursory glance at some of the most successful entrepreneurs in the world is revealing. People like Branson or Zuckerberg talk about solving problems, coming up with innovative solutions, creation, having mastery of their work. In fact money is a consequence of their success rather than the driving factor.

Yet in late 2013 we’re still in a situation where politicians and many companies think the best way to motivate people is through performance related pay.