StandOut Next-Generation Performance Management

7/23/2019 StandOut Next-Generation Performance Management

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StandOutNext-Generation Performance Management

by Marcus Buckingham

White Paper Series


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Table of Contents

Performance Management as the Pony Express 4

Ratings are Unreliable 4

The Wrong Practice: Streamlined 5

The Blueprint 6

StandOut 9


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Performance Managementas the Pony Express

In 1850, it took the average piece of mail ve

weeks to travel from St. Joseph, Missouri toSacramento. This was frustrating for many

reasons, not least because in 1848 gold had

been discovered in the California hills and the

wild rush west was on. America needed a more

efcient way to communicate with its land of

newfound riches.

The Pony Express was the answer. Four hundred

horses. A hundred and fty short, wiry riders. Two

hundred stations, and the innovation of lightweight,

leather cantinas to carry the mail itself. It was a

fantastically complicated arrangement, requiringcareful forethought, detailed planning, and not

inconsiderable daring. And, having woven together

this complicated system, the inventors managed to

streamline the process so well that, on its very rst

journey, what was once a ve-week trek turned

into a ten-day sprint from St. Joseph to Sacramento.

Speeches were made, reworks launched, a great

innovation celebrated.

And then, Baron Pavel Schilling destroyed it all.

He didnt do it deliberately, of course. But he didinvent the telegraph. And with that one invention,

he created a new worldview, one that rendered

obsolete the entire system that others had worked

so hard to streamline.

Our current performance management systems

are akin to the Pony Expresslabor-intensive,

complicated, and centralized systems straining to

add a little efciency to a difcult and cumbersome

process.

And the telegraph? In this paper we offer StandOut

as the telegraph.

The telegraph was actually an innovative

combination of a new technology

electromagnetic signal cables-and a new

languageMorse code. In the same way, StandOut

is the combination of a new technologyyour

smart phoneand a new languagethe language

of strengths. These combine to create the blueprint

for a lighter, faster, future-focused system. Our hope

is that, guided by this blueprint, you will be able

to implement a system for your company that trulyaccelerates performance.

Before we present this blueprint, we need to lay

bare the two reasons why our current systems can

neverno matter how much technology we infuse

them withdeliver any meaningful return

on all the time and money we spend on them.

They are built on ratings, andratings are unreliable.

All current Human Capital Management

systems are based on the notion that

a manager can be guided to become

a reliable rater of another persons

strengths and skills. The assumption is that, if we

give you just the right scale, and just the right words

to anchor that scale, and if we tell you to look for

certain behaviors, and to rate this person a 5 if

you see these behaviors frequently, and a 3 if you

see them less frequently, then, over time, you and

your fellow managers will become reliable raters of

other peoples performance.

Indeed, your ratings will come to have such high

inter-rater reliability (meaning that two managers

would give the same employees performance

the same rating) that the company will use your

ratings to pinpoint low performers, promote top

performers, and determine everyones pay.

Unfortunately there is scant evidence that this

happens. Instead, a large body of research reveals

that each of us is an unreliable rater of another

persons strengths and skills. It appears that,

when it comes to rating someone else, our ownstrengths, skills, and biases get in the way and we

end up rating the person not on some wonderfully

objective scale, but on our own scale. The result?

Our rating measures us, and not the person we

are rating.


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The most comprehensive research on what ratings

actually measure was conducted by professors

Mount, Scullen, and Goff. In their study, 4,492

individuals were rated on a number of different

performance dimensions by two bosses, two peersand two subordinates, who combined to produce

almost half a million ratings. The researchers then

analyzed these ratings and discovered that 54%

of the variance in the ratings could be accounted

for by idiosyncratic rater effectsnamely the

peculiarities of each individual raters perception.

Only 21% of the variance in ratings could be

explained by the ratees actual performance. All

of which led the researchers to the following

conclusion:

Although it is implicitly assumed that the ratingsmeasure the performance of the ratee, most

of what is being measured by the ratings is the

unique rating tendencies of the rater. Thus ratings

reveal more about the rater than they do about

the ratee.1

This means not only that one persons rating of

another is unreliable, but also that when we

combine many ratingsas in a 360 survey, for

examplewe make the data worse, not better. If

one rating is actually a rating of the rater, not the

ratee, then many ratings are simply a combination

of raters rating themselves, which only obscures

the ratee all the more. If one rating is bad data,

many ratings dont transform it into good data: they

simply make more bad data.

Ratings reveal more aboutthe rater than they do aboutthe ratee.

Scour the literature and you will discover similarstudies all conrming our struggles with rating

the competencies and skills of others. Our ratings

1Scullen, S., Mount, M., & Goff, M. (2000).

Understanding the latent structure of job performance

ratings. J Appl Psychol., 85(6), 95670.

of others certainly look precise. They look like

objective data. But they arent. They are corrupted.

They offer precision, but it is a false precision. So

when we decide to promote someone based upon

a 4 rating, or when we say that a certain choiceassignment is open only to those employees who

scored an exceeds expectations rating, or when

we pay someone based on these ratings, or suggest

a particular training course based upon them, we

are making decisions based on corrupt data.

In a recent article in The Wall Street Journal,

Jack Welch advocated rating people on lists of

competencies so that you can, in his words, let

them know where they stand. This may be a

worthy sentiment, but ratings will never achieve

itgiven how poor we are as raters, ratings willonly ever serve to confuse people as to where they

stand. As they say in the data world: garbage in,

garbage out.

They streamline thewrong practice.

E

ven if we could somehow train our

managers to become objective raters, our

current performance management systems

would still be awed. Why? Because, asmany of us realize when we try to implement these

systems within our own teams, they are designed

to streamline a practice utterly unfamiliar to great

managers.

We know how great managers manage. They

dene very clearly the outcomes they want, and

then they get to know a person in as much detail

as possible to discover the best way to help this

person achieve the outcomes. Whether you call

this an individualized approach, a strengths-based

approach, or just common sense, its what greatmanagers do.

This is not what our current performance

management systems do. They ignore the real

person and instead tell the manager to rate the

person on disembodied competencies, and

then try to teach the person how to acquire


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the competencies she lacks. This is hard, and

not just the rating part. The teaching part is

alarmingly difcultafter all, what is the best

way to help someone learn how to be a better

strategic thinker or to display learning agility?In recognition of just how hard this is, current

performance management systems attempt to

streamline the process by supplying the manager

with writing tips on how to phrase feedback about

the persons competencies, or lack thereof, and

then by integrating the competency rating with

the companys Learning Management System so

that it spits out a training course to x a particular

competency gap.

The problem with all of this is not just the

lack of credible research proving that the bestperformers possess the entire list of competencies,

or the dearth of any research showing that if you

acquire competencies you didnt have before,

your performance improvesor even that, as we

described earlier, managers are woefully inaccurate

at rating the competencies of others. No, the chief

problem with all of this is that it is not what the best

managers actually do.

They dont look past the real person to a list of

abstract competencies. Instead, the person, with her

unique mix of strengths and skills, is their singular

focus. They know they cant ignore her. After all, the

persons messy uniqueness is the very raw material

they must mold and focus in order to create the

performance they want. Cloaking it with generic

competencies is inherently counter-productive.

What the best managers strive to do today is

understand and capitalize on the whole individual.

This is hard enough to do when you work with the

person every day. Its nigh on impossible when you

are expected to peer at her through the lter of a

competency formula.

The Blueprint

Obviously, we need a new system. What

do we know about this new system?

Well, the specics of your systemwill depend on your company, but

we do know that it must have the following six

characteristics, each of which follows logically from

the one preceding.

First, and most obviously, it must be a

real-time systemthat helps managers give in the

moment coaching and course-correcting. The

world we live in is unnervingly dynamic: where we

are on one team one week, another the next, goals

that were fresh and exciting at the beginning of Q1

are irrelevant by the third week of Q1, and wherethe necessary skills, relationships, even strategies

have to be constantly recalibrated. In this real-time

world, batched performance reviews delivered

once or twice a year are obsolete before weve

even sat down to write them. We need much more

frequent check-ins.

Luckily, we now live in a world where most of

us are armed with a device that knows exactly

who we are, and into which we can record pretty

much anything we want. This deviceyour smart

phonewill enable you, the employee, to inputwhat you are doing this week and what help you

need; and, because it knows you, it will be able to

serve up to your manager coaching tips, insights,

and prompts customized to your particular set of

strengths and skills.

Second, it must be a system with a light touch. If

we expect our employees to share their weekly

focus, and if we expect our managers to react to

and adjust this focus as needed, then there can be

no complicated forms to complete, no narrative

sections requiring writing wizards to supply the

right words, no conversation guides, no input

required from a requisite number of peers. None

of that. For this performance system to be as agile

as it needs to be, it must be wonderfully simple. A

couple of questions answered by the employee

What am I going to get done this week, and what

help do I need from my manager?and a chance


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for the manager to speak into these answers.

Counter-intuitively, the simpler the form, the richer

the coaching.

This start with mepositioning is the least wewill expect.

Third, it must feel to the individual employee that it

is a system about me, for me.Even if it is light-

touch, managers will reject any real-time system

that they have to initiate. Instead, the employee has

to drive it. And the only way to achieve this is to

make its starting point and ongoing focus me, mystrengths, where I am at my best, and how I can get

better.

At present, we dont do this very well at all. We talk

about it a great dealwere all familiar with the

mantra that you have to be responsible for your

own developmentbut we struggle to execute. For

example, most companies employee prole pages

are clearly a company tool, not a me tool, and as

such are updated infrequently and inauthentically,

and wind up reading like a computer-generated

resume. With a little creativity, there is every reasonto believe that we can design for each employee

an online space to positively present her strengths,

her skills, her accomplishments and her aspirations.

Although current proles are clinical, supercial,

and out of date, it is entirely in the companys

interest that they not stay this way.

And besides, given that we live in a world where

we expect all content, from our news to our

entertainment to our healthcare, to be aware of our

individual needs and desires, this start with me

positioning is the least we will expect.

Fourth, and centrally, it must be a

strengths-basedsystem. Current systems are

explicitly remedial, built on the belief that to help

people get better you must measure them against

a series of competency bars, point out where they

fall short, and then challenge them to jump higher.

While this feels practical, and rigorous, even

tough, it is also depressingly inefcient. Although

we label weaknesses areas of opportunity, brain

science reveals that we do not learn and grow the

most in our areas of weakness. In fact the oppositeis true: we grow the most new synapses in those

areas of our brain where we have the most pre-

existing synapses. Our strengths, therefore, are our

true areas of opportunity for growth.

More to the point, if we want each employee to

take responsibility for her own performance and

development, what better place to start than with

her particular strengths? The new performance

system must help each employee pinpoint her

strengths in detail, and then nd myriad ways to

challenge her to contribute her strengths moreintelligently over time. (To be clear, this does not

mean ignoring her weaknesses. It simply means

acknowledging that her weaknesses are actually her

areas of least opportunity for growth.)

Fifth, it must be a system focused on the

near-term future. Our current systems are xated

on feedback about the past. You are asked to write

a review on yourself, your manager writes her

review, often she will be required to sit with her

peers to calibrate your review with others at your

level, sometimes even your peers will be called

upon to share their insights about your personality

and performance, and then your manager will be

trained on how to deliver this feedback to you so

that you will see it as developmental rather than

overly critical.

The new performance system will dispense with all

of this, on one level simply because these feedback

systems are plagued by a terrible signal-to-noise

ratio: managers are, and will always be, highly

subjective providers of feedback; peer feedback

when private is just gossip, when public is

sugarcoated; your own self-ratings are more than

likely generously distorted; and calibration sessions

merely turn up the volume on the noise.

On another level, though, we will dispense with

it because future-focused coaching about my

work is a better use of time than past-focused


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feedback about my personality. To accelerate my

performance tomorrow, dont try to grade my

personality with feedback from all sidesit will

always be hard to give and hard to receive, and it

will net a disproportionately small performancereturn. Instead, coach me on the few specic work-

related activities that I could usefully add to my

strengths repertoire tomorrow. Or tell me what skills

I should go acquire next week. Or advise me which

specic contacts I should seek out next month.

None of these will necessarily be easy for me to do,

but at least they will be something that I cando

because they are in the near-term future. In the new

performance system, this is where most of our time

and creativity will be focused.

The new performancemanagement system mustcapture local intelligenceand then aggregate it up.

Finally, it must be a local system. Current

performance management systems are not. Their

express purpose is to align all levels of the company

around dened strategies and values. This mayseem sensible, but on closer scrutiny it becomes

clear that a performance management system is

the wrong mechanism to achieve alignment. It is

too mechanistic, too infrequent, too cumbersome,

too retrospective, and above all too centralized.

True alignment is about creating a context within

which local teams use their discretion, and make

decisions based on the best local information

available. Education and communication are the

most effective ways to create it and reinforce it. In

contrast, when you try to align the organization

through a performance management systembycoercing leaders into putting their objectives into

one of the dened strategy or values buckets, and

then cascading these objectives down through the

ranksyou inevitably create a rigid organization

that is almost immediately out of date.

Furthermore, most of the companys best

intelligence about the future of its products,

people, and customers can be found in each local

team. If you want to know what is relevant to

your customers, what trends are happening in themarketplace, and which employees are truly most

valuable, you must look inside each local team. So

in place of cascading down, the new performance

system must be designed to capture this local

intelligence, and then aggregate it up. Priorities

should be set at the team level and aggregated up;

compensation should be allocated by local leaders

directly and then aggregated up; employee opinion

surveys should be triggered by the local team leader

and aggregated up. Only then will the company be

innovative enough to stay relevant.

So, that is a blueprint for a better systemlight,

agile, strengths-based, future-focused, and all of it

underpinned by reliable data, collected locally and

aggregated centrally.

In the next section we will go beyond a blueprint,

and present an actual system, built to possess these

six, vital characteristics.


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StandOut: What does anext-generation performancemanagement system actually

look like?The Foundation:Positive Self-Presentation

No performance management system can work

well unless each team member is invested in it. So

the foundation of this system is a toolcalled a

StandOut pagedesigned to allow each teammember to positively self-present to her teammates,

her team leader, and the entire organization.

This tool will begin with a credible strengths

assessment to pinpoint her strengths.

The results of this assessmenther strengths

algorithmwill deliver to her (and every team

member) a stream of content customized to her

strengths. Aided by this content, she will present

to the organization a detailed picture of her

strengths, her skills, how to work best with her, her

aspirations, and the values and concepts that, over

time, have most resonated with her.

From the moment she joins, the organization willemphasize that this tool was built for her to enable

her to describe and present the very best of herself

to her colleagues. If she wants to excel on a team,

if she wants to build a productive relationship

with each new team leader, and if she wants the

broader organization to know where she is at her

best, then it is entirely in her interest to use this

tool intelligently and purposefully. It becomes her

personal brand within the organization. Obviously,

this tool will replace existing company prole pages.


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With this tool as the foundation, the performance

management system will then perform three

separate but interlocking functions:

1. Accelerate performance

2. Evaluate performance

3. Reward performance

1) Accelerate performance:Both qualitative and

quantitative research into the practices of the best

team leaders reveals that there is one ritual they

share: weekly check-ins with each team member

about near-term work. These check-ins are where

the team leader sets expectations for the week,

but they are also where a team leader can offer a

comment about last weeks work, or a slight coursecorrection for the upcoming week, or coaching, or

an important new piece of information. All of this

wont happen in one check-in of course, but instead

little by little, over time.

Each check-in will be initiated by the team member,

using a simple tool to capture answers to the

following questions, two quantitative and

two qualitative:

This last week, I had a chance to use my

strengths every day. (On a 15 scale)

This last week, I added outstanding value.

(On a 15 scale)

These are my priorities for the week.

This is the help I need from you.

The team leader can then speak into these answers

in person, by phone, via e-mail, or within the tool

itself. Each check-in and subsequent conversation

should last 515 minutes.

These check-insare not in addition to the work ofa team leader. They are the work of a team leader.

They are what team leaders do to keep everyone

focused and engaged.

And the frequency is critical. They are once a week,

not once a month, or once a quarter. If a leader

checks in at a lower frequency than once a week,

then the conversation ceases to be about coaching

for near-term future work, and instead becomesmired in giving feedback about performance

long past.

Not only does such feedback twist the organization

around until it is almost entirely backward facing,

but it is highly unpopular with both leaders and

team members. Feedback about performance

months old is, and always will be, fraught. Because

it comes so long after the actual work has been

done, the feedback inevitably descends into

abstractions about the persons personality, whether

she is innovative, say, or a good communicator,or customer focused. This kind of feedback is not

only hard to give and to receive; it is also not what

the best leaders do. Study effective leaders and you

do not see them writing and re-writing in-depth

performance appraisals. Instead, you see them

giving real-time coaching about the work that is just

about to happen. The distinction here is between

near-term coaching about the workin which the

best leaders actively want to engageand detailed

feedback about a persons personalityin which

they do not.

Collected each week, these check-ins become the

ongoing reference point for the team members

performance and state of mind. In combination

across the organization, they are the ritual through

which the organization can manage change,

communicate new strategies, and teach new skills.

They keep the organization agile.

2) Evaluate performance:For obvious reasons,

the organization will want to reveal the subjective

judgment of what each team leader thinks of each

team member. The inverse is important as well:

the organization will want to know what the team

members think of their team leader. However, as we

described earlier, measuring these is tricky because

team leaders and members, like all human beings,

are notoriously unreliable raters of other peoples

performance. So how can the organization capture

what the leader thinks about the team member, and

vice versa, without producing corrupt data?


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Essential Eval:How to reveal reliably what theleader thinks of each team member.

Counter-intuitively, the best way is not to ask the

leader about the past performance of the team

member; instead the best way is to ask the leader

about the future actions of the leader herself. Why?

Because though we may not be reliable raters of

other peoples performance, we are reliable raters

of our own feelings and intentions.

Therefore, to reveal the team members

performance, the leader should be asked the

following four questions once a quarter, each of

which addresses the intended future actions of the

leader:

From what I know of this persons performance,I would always rehire him/her for the

company(on a 15 scale). This question

measures the leaders view of the persons

overall performance and unique value to the

organization.

I would always want to have this person on my

team(on a 15 scale). This question measures

the leaders view of the persons ability to work

well with others.

If I could I would promote this person today

(Y/N). This question measures the leaders

current opinion of the persons potential.

This person has a performance problem that

needs to be addressed immediately(Y/N). This

question captures the low-performing outliers

who are in danger of causing harm to the

customer or the team.

The answers to these questions are kept

condentialin other words, they can be sharedwith the team member only in aggregate. Why,

in this increasingly transparent world, would we

keep them condential? Because the function of

these questions is not to let the team member know

where she standscheck-ins do this every week.

Instead their function is to provide an accurate

measure of each team members performance from

the person who is closest to that performance,

namely the team leader. By keeping this judgment

condential, we are much more likely to capture

the team leaders unltered opinionwe avoid

the sugarcoating that invariably happens when weknow someone will learn what we think of her. We

can then aggregate these opinions and use them for

succession planning and variable compensation.

The SL8 Survey:How to measure reliably whatthe team members think of the team leader.

Every organization wants to have a way to measure

leader effectiveness, and yet all of them struggle to

do so reliablythe most common practice is a 360

survey process, which, as we now know, always

produces bad data. The solution is actually quite

simple, and over time will come to replace 360 andemployee engagement tools: the SL8 survey.

This survey is elded a minimum of once a quarter

to the members of each team. The team leader sees

her data, shares the results with her team, and also

receives advice customized to her strengths on how

to address each of the items.

The items have been very carefully chosen and

worded based on decades of research into the

key drivers of leader effectiveness and team

engagement. None of the items asks the teammember to rate the leader. Instead, each of them

asks the team members to rate their own feelings

and experience. The team members ratings of

themselves can then be combined to give the leader

a reliable measure of the kind of team environment

shes created, from the perspective of the people in

it. They are not evaluating her.

Rather they are evaluating their own feelings: it

is up to the leader to judge for herself what these

feelings say about her as a leader.

The questions are broken into four pairs. The

rst pair addresses the team members need to

understand the purpose of the team and her unique

contribution to it.

I am really enthusiastic about the mission of my

company.


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At work, I clearly understand what is expected

of me.

The second pair speaks to the team members need

to understand how you dene excellence, for both

the team and for me.

In my team, I am surrounded by people who

share my values.

I have the chance to use my strengths every day

at work.

The third pair measures the team members

certainty that she will be valued and supported

along the way.

My teammates have my back.

I know I will be recognized for excellent work.

And the nal pairing focuses on the leaders

responsibility to paint a vivid picture of a

better future.

I have great condence in my companys future.

In my work I am always challenged to grow.

At the team level, these items reveal to the leader

how engaged her team is right now, and whatactions she can take to build a stronger team. At

the organization level, each teams scores can be

aggregated to create a real-time view of the peaks

and valleys of the engagement levels across

all teams.

The one critical distinction to make here, though,

is that the leaders direct boss does not get to see

her data. The moment the leader realizes that her

boss is going to hold her data over her head is the

moment when the data stops being hers, and she

starts to gure out ways to bump up her scores. It isnot in the organizations interest that she bump up

her scoresthe organization may get higher scores

overall, but they wont mean anything in the real

world. Instead the organization is interested in her,

and every leader, building genuinely higher levels

of engagement within their teams. This will happen

only if the team leader sees the SL8 survey as a tool

designed explicitly to help her grow as a leader.

Thus, while the organization can aggregate her

data, she must own it.

3) Reward performance:Many organizations want

to be able to reward a team members performancein the form of either challenging job opportunities,

incentive compensation, or both. The performance

management system must accommodate this desire.

Workforce/Succession planning:The

StandOut page, the check-ins, and the team

leader evaluation questions all capture reliable

and relevant data on each team member.

During formal Quarterly Talent Reviews,

or during ad hoc workforce planning sessions,

the organization will be able to search for anddisplay particular individuals with dened

strengths, skills, and performance evaluations.

The purpose of these talent reviews is not to

justify or defend the ratings of a particular

team memberteam members are not given

ratings. Instead, relying on the information

inputted by the team member and the

team leader, their sole purpose is for the

organization to identify which actions it can

take to stretch and challenge its most valuable

team members.

Incentive compensation:Any incentive

compensation scheme depends on having the

most direct information possible to determine

how much a team member should be paid.

Obviously, the most direct information is

piece-worksome roles lend themselves to

counting the exact number of products a team

member produces, and paying them on that

amount. The next most direct information

is salessales roles are best measured andcompensated according to the salespersons

ability to inuence the behavior of the

customer, in the form of increased revenue

per customer.

But for many roles, counting piece-work

or sales increase is neither possible nor


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M

arcus Buckinghams groundbreaking

ideas about how to turn strengths

into performance have changed the

business world. Beginning with First, Break AllThe Rules, his books have sold more than four

million copies. His leadership development

rm, The Marcus Buckingham Company

(www.TMBC.com), works with organizations

worldwide to achieve a straightforward but

impactful mission: instill at scale the very few

practices shared by the worlds best leaders.

TMBCs strengths-based performance platform

StandOut reinvents performance management

by providing team leaders with a light-touch,

in-the-work tool to accelerate, evaluate, and

reward employee performance.

To nd out how to get StandOut for your organization, please contact Rosette Cataldo.

Email: [email protected] Phone: 323.218.0456

desirable. For such roles, by far the most

direct information on which to base variable

compensation is the team members

immediate leader. So, at years end, having

asked the four condential evaluationquestions of the team leader, and having

done so a minimum of four times a year,

the organization can then aggregate these

inputs and use them as the lter to determine

variable compensation. The rst question,

Would you always rehire this person for

the company? serves as the rst lter. If this

lter does not net the distribution required

by the organization, it can turn to the next

questionI would always want to have this

person on my teamas a second lter. If this

still doesnt produce the desired distribution,then the organization will rely on a higher

administrative level to make the necessary

judgment calls and so smooth the curve.

That is the new design.

Its foundation is the desire of each person to claim

and present the very best of herself to her team and

her organization.

Its framework is a combination of three distinct

systemsaccelerate, evaluate, rewardeach with

its own distinctive requirements.

Its focus steers away from feedback about the past

and toward coaching about the actual

near-term work.

Its purpose is performance.


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Notes

Documents

StandOut Next-Generation Performance Management