Friday July 17, 2009 (fr the STARONLINE)
Psychology at Work - By Dr Goh Chee Leong
“KPIs” (key performance indicators) and “KRAs” (key result areas) are fast becoming a buzzword among Malaysian organisations, both private and public. It’s part of a trend that began 10-12 years ago, in line with the global push towards performance management systems as a means for accelerating growth and attaining organisational focus and discipline.
On the whole, I think this is a positive development – it’s a necessity, especially for larger organisations which may have outgrown more informal means of managing goals and resource allocation. The theory is good. Everyone in the organisation must be clear about what they are to achieve, every day, every week, every month, every quarter, every year. All strategic business units are clear on what their targets and goals are. Everything is aligned to the organisational key result areas. Neat, nice, clear and meaningful. The challenge though, is in the implementation. As most of us with management experience will know, the devil is in the execution. It’s easy (relatively) to map out the institutional KRAs and KPIs, but whether this leads to real organisational change (for the better) will depend on the following two things:
Do we have the guts to tie performance with reward and punishment ?
No performance management system will work unless it is directly tied to remuneration. When the system carries no bite, it holds no power. The causal relationship must be clear; if I achieve my goals (as captured in my KPIs) then I will be rewarded accordingly. If I fail to meet my goals, then I will not be rewarded. In fact I may even be punished by being dismissed or demoted.
Human beings more often than not are creatures of necessity. We do things when we have to. If performance doesn’t matter come bonus review or promotion time, then don’t expect anything to change. It takes guts to enforce such a system, especially in organisations that have not been accustomed to performance based rewards. Staff in these organisations may have become comfortable with a more subjective system of evaluation. Some are used to systems that emphasise patronage or systems that emphasise longevity over performance. There will be resistance. Some will leave. This is the cost of change management. No matter how well the process is managed and how well the message is communicated, there will always be those who are determined to resist a genuine, bona fide performance management system because they have all this while been getting away with contributing very little. To be fair, the goals and KPIs themselves need to be achievable and reasonable. It is bad practice when organisations purposely set targets that are out of reach, as they perpetuate the attitude that “it doesn’t matter anyway, because these targets are impossible.” Never set unreachable goals. Some organisations have two levels of targets: basic targets and stretch targets which are a little higher. Staff are rewarded when they meet their basic targets and are rewarded even more when they meet their stretch targets. I think this is a fair system; by providing two tiers it is reasonable and at the same time provides incentives for staff to over-perform.
Have we trained the line managers to run performance management systems?
Some performance management systems fail because no one below the middle management level has any clue as to what is really going on. In some organisations, the KPIs may be displayed all over the office (as part of ISO compliance) but when you talk to the individual staff, they have no idea how the goals will be measured or how their individual jobs are linked to the departmental KPIs. Similarly, there are many staff in many organisations who have no idea how they will be evaluated and appraised because their direct superiors do not manage the evaluation and appraisal process with any clarity.
I remember some executives telling me “I don’t think my boss even knows how to evaluate me; in fact, he gets me to fill up my own evaluation forms because he does not have the time.” This is symptomatic of a lack of buy in from the line managers who may see staff evaluations as an unimportant nuisance. Others comment that “my boss doesn’t provide any feedback; positive or negative during my evaluation meetings; so I have no idea whether he is happy with my performance or not.” This may be due to some managers fearing confrontation with staff and therefore, they avoid providing any critical feedback. A recent survey by a local consulting firm among 50 organisations in Kuala Lumpur indicated that less than 45% briefed their staff regularly on whether their department had met their KPIs. This should be of great concern. If staff don’t know whether they are hitting their targets or not, how can they calibrate their performance?
We must brief all our line managers and make it clear in no uncertain terms that the evaluation and appraisal process should be taken seriously and that all staff must be well aware of their KPIs and should be given regular feedback on whether they are achieving them. It helps when we have clear, hard targets, KPIs that are easy to quantify. Many supervisors struggle with evaluating soft targets. This of course, can be a work in progress.
When organisations introduce performance management systems, it is my recommendation that for the first few cycles, they start with the hard targets. It makes it easier for the organisation to get “comfortable” with a new system when it is neat, clean and clear. Over time, soft targets can be introduced and training and mentoring must accompany these to support the line managers in implementing them.
● Dr Goh Chee Leong is vice-president of HELP University College and a psychologist. We welcome feedback on this article. Please email to starbiz@thestar.com.my
