A Practical Guide to Performance Management

A Practical Guide To Performance Management Doncaster Chamber

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Contents

Organisations need to recognise that employees bring a mix of skills, knowledge, learning styles, work culture, attitudes, motivations and behaviour.

Foreword Page 3 About Doncaster Chamber of Commerce Page 4 An Introduction to Performance Management Page 5

What is Performance Management? CIPD Viewpoint Importance to Organisations Benefits to the Organisation

Performance Standards Page 9

What to Measure? Key Performance Indicators Targets

Performance Review and Feedback Page 13

Why Prepare? Feedback Cycle Stages

Appropriate Questioning Technique Capability and Underperformance 0

The legal position Reviews and Warnings Serious Underperformance

Authors and Sponsors Page 25

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A Practical Guide to Performance Management

Foreword

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The Voice of Doncaster Business Doncaster Chamber is “the voice of Doncaster business”, the Chamber has a membership base of some 1,200 local businesses who collectively employ some 47,000 people in the Borough. The Chamber’s aim is to help create a profitable, productive Doncaster for the benefit of businesses and residents alike, and works to achieve this by proactively addressing the issues that affect the success of the local economy. The Chamber believes that Doncaster is a great town but wants to make it an even better place for local companies and investors alike to do business. Businesses typically join the Chamber because they want to create and access more commercial opportunities. The Chamber can facilitate this, by helping businesses raise their profile and by brokering new business contacts through events and networking. There are, however, many other barriers to further business growth, such as access to procurement opportunities, difficulties in the transport system or skills shortages in the local area. The Chamber’s role is to identify such issues and work with key stakeholders and partners to remove them, thus engendering a more favourable business climate in the Borough. In order for the Chamber to accurately reflect business opinion, the Chamber delivers a range of Focus Groups which are open to all Chamber members. These groups offer an excellent forum for Doncaster businesses to address the issues, concerns and opportunities pertinent to them, as well as offering the opportunity to network and share best practice. The Chamber offers groups in sectors such as Construction, Professional Services, Transport and Logistics, Retail, and Creative and Digital Industries. The Chamber also runs a Knowledge and Enterprise Focus Group which addresses skills issues, and an Employment and Training Focus Group to tackle HR related issues. Each Focus Group is represented at the Chamber’s Policy Council, whose task is to set the direction of policy work at the Chamber.

This level of engagement with local businesses, combined with regular research, such as this publication, ensures that the Chamber can talk with authority on issues affecting local business and can represent business when working with partner organisations. The Chamber is committed to working with local stakeholders to deliver the Borough’s Economic Strategy for the benefit of the town’s businesses and communities alike. To this end the Chamber publishes a Policy Manifesto each year to outline local business priorities and to identify ways in which Doncaster’s economic regeneration can continue apace. The Policy Manifesto details the key issues affecting business, under four key themes of Business Climate, Business Skills, Business Infrastructure, and Business Opportunities, and suggests a suitable course of action in each case. A full copy of the Policy Manifesto is available via the Chamber’s website. Doncaster faces some serious challenges in the coming years. The town has a productivity gap of some £850m; meaning that Doncaster adds £830m less value to the economy each year than it should for a town of its size. Work is well underway to tackle this headline issue by a number of key organisations, including Doncaster MBC. Nonetheless, the town still has a number of challenges relating to education, health, housing, transport and other issues that must be met if Doncaster is nurture a profitable, productive business climate. This Practical Guide has been produced by the business members of the Chamber’s Employment and Training Focus Group who have contributed their expertise and experiences for the benefit of the wider business community. They have recognised that in difficult economic times it is more important than ever that local businesses re well informed about how to get the best from their workforce; as such, they have produced this guide in order to provide some practical help for local firms in relation to performance management. If you have any questions regarding the content of this guide, or would like more information regarding the benefits of Chamber Membership, please contact the Chamber on 01302 341000 or at [email protected].

A Practical Guide to Performance Management

About Doncaster Chamber“The Chamber’s aim is to help create a profitable, productive Doncaster” Nigel Brewster, President Howard Gannaway, Chief Executive

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What is Performance Management? Performance Management is a key factor in today’s work place. Whatever the economic and market place situation, recession or growth, all organisations require their employees to achieve optimum efficiency and effectiveness so that the organisation is able to progress or simply survive.

These are:

Setting and Communicating Performance Standards

Performance Review and Feedback

Training and Development

Capability procedures and dealing with Underperformance

The Guide will also act as a signpost to a range of activities and techniques designed to enhance performance management.

Context Today’s workplace is complicated, incorporating a diversity of employees, who are expected to perform a range of roles and multi tasks.

People can be employed or contracted on a full time, part time, temporary or casual basis, either in or away from the organisation. The work force is aging. There is equality of opportunity for males and females. People from many countries and ethnic backgrounds are attracted to the UK labour market.

Organisations need to recognise that employees bring a mix of skills, knowledge, learning styles, work culture, attitudes, motivations and behaviour.

For an organisation to benefit from Performance Management, it should be implemented as a holistic approach that requires ownership by everyone in the organisation, regardless of their position or roles, and actioned by line managers.

The process can be described as: “Contributing to the effective management of individuals and teams in order to achieve high levels of organisational performance. “As such, it establishes shared understanding about what is to be achieved and an approach to leading and developing people, which will ensure that it is achieved. “It is a strategy that relates to every activity of the organisation set in the context of its human resource policies, culture, style and communication systems. “The nature of the strategy depends on the organisational context and can vary from organisation to organisation.” (Armstrong M and Baron A (2004) Managing performance: performance management in action, London: CIPD) CIPD Viewpoint Performance management is not easy to implement. A successful application requires:

Clarity regarding what is meant by performance.

Understanding the organisation’s performance culture and how it effects the achievement of goals.

Being focused on how employees will play their part and will benefit.

As a tool primarily for line managers as its success will very much depend on their ability to implement effectively.

Importance to Organisations In 2008, the CIPD engaged with at least a thousand HR practitioners and business leaders in debating and analysing the foundations of high-performance working in order to change the way organisations think and act on this issue.

Performance Management is a key factor in today’s work place. Whatever the economic and market place situation, recession or growth, all organisations require their employees to achieve optimum efficiency and effectiveness so that the organisation is able to progress or simply survive.

An Introduction to Performance Management

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Their view of performance management is highlighted by their responses to this question:

“Do you think the current economic crisis is having any impact on the way in which performance is managed?”

Almost 100% of respondents indicated it is more important than ever to manage the performance of key talent and that there should be more emphasis on performance management generally, in terms of scrutinizing both good and poor employee performance.

Over 80% indicated the need to reassess performance measures to reflect a more challenging work environment.

90% believed that organisations needed to be more creative about how they reward performance by using non-financial incentives. Does this response suggests that performance related pay is no longer considered a viable incentive?

Almost 70% commented that, in their experience, employees were placing more emphasis on managing their own performance effectively.

A number of respondents indicated that they are using the economic downturn as an opportunity to review their operations, including how they defined and measured performance:

“We are using the downturn in business and resultant free time to improve our infrastructure in preparation for the recovery – to ‘hit the ground running’ more quickly than our competitors”.

“I think the economic crisis is making people more mindful that their performance is important, not only to them but also for the organisation, and are therefore keen for performance to be managed effectively.”

All organisations should therefore utilise performance management as a continuously proactive, cyclical process that:

Supports the organisation’s strategic medium and long-term goals.

Integrates the management of employee performance, as individuals and team workers, in all aspects of the business.

The process should incorporate:

Planned, measured and evaluated individual and team performance improvement throughout the organisation.

A flexible structure to support development needs.

Continuous development of individuals and teams otherwise performance will not improve.

Understanding employees’ learning styles and ensuring they have the right learning tools to gain the skills and knowledge required.

Empowering employees to take responsibility for continuous development of themselves and the organisation.

Encouraging individuals to behave in a way that fosters positive working relationships.

All organisations should utilise performance management as a continuously proactive, cyclical process that integrates the management of employee performance, as individuals and team workers, in all aspects of the business.


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It is the role of managers to manage performance effectively and by ensuring that all staff members:

Fully understand what is expected of them.

Have the skills, knowledge and capacity to deliver on those expectations.

Are supported and coached appropriately so that they develop their capacity to meet organisational expectations.

Are given relevant and constructive feedback on their performance.

Have the opportunity to discuss and contribute to their and their team’s aims and objectives.

Managers must also be aware of the impact of their own behaviour on the people they manage and must be encouraged to be a positive influence.

Benefits to the Organisation Planned, organised and measured continuous employee performance, training and development programmes, linked to organisation goals, will enable the organisation to successfully compete in its market place.

Employees will have the skills and knowledge required to adapt to new situations and enable the organisation to operate flexibly in order to grow or survive.

Engaged and empowered employees, who recognise their employer is investing in their future, will be motivated to achieve and increase their productivity.

Communication and transparency as regards performance requirements should lead to recognition as a values based, as well as a profit making, organisation, offering positive leadership and the capability to acknowledge, support and manage performance effectively.

Such organisations are looked upon as Employers of Choice and will therefore attract high quality employees at all levels.

Employees that the organisation requires are far more likely to stay thereby reducing replacement costs.

Increased profitability can be achieved or sustained as a result of holistic performance management investment, relevant implementation and review.

Increased profitability can be achieved or sustained as a result of holistic performance management investment, relevant implementation and review.


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Introduction Performance standards are criteria or indicators that measure how well your organisation is actually doing.

Not only do they give you an indication of what is happening now, they also identify systems that will enable a business to implement its strategies in the future.

It is important that all employees are supported and encouraged in the workplace to achieve an acceptable level of performance. Managers should therefore set realistic and achievable performance standards.

Employees must understand what those standards imply in terms of the quality and quantity of work and the time and costs associated with their expected outputs.

Performance standards provide employees with specific performance expectations for the duties they undertake. These expectations can be described as the observable behaviours and actions that explain how to carry out the task to hand as well as the expected job performance level.

Additionally, performance standards can be used when it is not possible to set time-based targets, or when there is a continuing objective that does not change significantly from one review period to the next.

How is Performance Measured? To improve performance, you will need to know your current level of performance. Measurement provides the basis for generating feedback, and can therefore build a platform for further success by identifying areas where corrective action is necessary.

Getting It Right As the right performance measurement is crucial, organisations should identify the primary areas of its business. After agreeing how best to measure performance in those areas, companies need to identify and prioritise the quantifiable factors linked to the key operations within your business.

What to Measure? Organisations may differ with its requirements, as what works for one company won’t necessarily work for another. Differences can also be industry related.

The following examples are the usual methods used to measure performance:

Appraisals

Formal, informal and regular appraisals are acknowledged as positive and beneficial measurement tools. They provide a practical method of monitoring and encouraging progress and offer exchanges of views between management and employees. Appraisals can be used to:

Increase productivity through setting employee targets for a stated period and measuring progress towards those targets accordingly.

Identify and address performance issues. Team Meetings Frequent team meetings are an effective way of monitoring and assessing wider issues across your organisation as and when they occur. Such meetings should give management an early indicator of important concerns or developments within the business that may not come to your attention until the annual appraisal. This will allow your business to address them before they escalate. Benchmarking Benchmarking concerns the comparison of your organisation’s performance against other businesses to improve your understanding of business performance. It is a valuable way of highlighting the areas in which your business is getting things right. It will also highlight the areas where you are not doing as well. As a result, you will

Performance standards are criteria or indicators that measure how well your organisation is actually doing.

Performance Standards

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be able to divert your resources to those areas that need the most attention. It is advisable to compare against businesses in the same industry in which you operate. However, there are a number of variables that will affect the specific comparisons you wish to make. A rising Small Medium Enterprise (SME) may choose to compare itself with an established market leader. A SME struggling in the economic climate may decide to benchmark against average performance levels in its industry. Your company’s market position and business objectives are both key to any benchmarking exercise. Organisations frequently benchmark internally within their business. Comparing departments should enable you to identify and assess good working practices from the best-performing areas of your business and integrate them into underperforming departments once the key issues have been recognised. Employee Performance Organisations can assess employee performance from a financial perspective. This method can highlight areas of difficulty at an early juncture that might be explored in more detail at subsequent appraisals or team meetings. Commonly used measures are sales, returns and profits per employee. These quantitative measures should run parallel with qualitative measures highlighted in appraisals and team meetings, not as an alternative.

Case Study – HI Weldricks HI Weldricks is a renowned South Yorkshire Pharmacy chain, which has expanded significantly in the last few years. The company is continually looking to achieve business growth and a competitive advantage without having to compete on price with large national rivals. Once the company recognised that developing the workforce to the highest standards could ensure competitive advantage, staff development has become a key factor behind growth and profitability. Employees’ performance standards and skills requirements are initially determined by business development strategies and objectives. As a result, organisational training strategies and objectives are developed. In the wake of a comprehensive assessment of staff strengths and weaknesses, every employee is involved in staff development and performance assessment. Individual training needs are identified from performance assessments, annual appraisal and recommendations from line managers. Training and development has to suit business requirements as well as the needs of the individual. In addition, employees are encouraged to put forward innovative ideas of their own that offer self-development opportunities in areas of a particular personal interest. For example: An employee’s idea has led to the introduction of a specialist service for deaf and hearing-impaired patients and customers. The resulting training needs analysis enables key staff requirements to be identified, budgets determined and ongoing development maintained. All training and development initiatives are fully evaluated upon completion and at regular intervals post completion to ensure improvement is being maintained in relation to business objectives and employee needs. Cumulative evidence indicates that the performance of the organisation has been significantly improved through the development of individuals. Their increased contributions have certainly added to the efficiency of their teams.

Comparing departments should enable you to identify and assess good working practices from the best-performing areas of your business and integrate them into underperforming departments once the key issues have been recognised.


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Key Performance Indicators Key Performance Indicators (KPIs) are critical measurements of performance standards enabling organisations to identify trends and opportunities for improvement.

KPIs measure progress towards pre-established goals and can allow rationalization of core business-critical functions and capabilities.

It is easy to underestimate their importance. Where carefully identified and effectively used, KPIs can be a most powerful management tool to growing businesses. However, inappropriate or no KPIs can have a detrimental effect.

What are the key criteria? Your KPIs should:

Be linked to the key goals for your business.

Be quantifiable.

Relate to aspects of the business environment over which you have some degree of control and are not influenced by external factors.

How should KPIs be selected?

They must reflect an organisation’s goals.

They are usually long-term considerations.

Their definition and measurement techniques should not change often, if at all.

KPIs must be limited to factors that are essential to achieving organisations’ goals.

It is important to select a small, manageable number of KPIs throughout the organisation to ensure that all attention is focused on achieving them.

Management need to recognise how to handle KPIs effectively. Apart from target setting, they can be used to establish further goals in order to continuously monitor progress maintain momentum.

It is crucial that all chosen KPIs are effectively communicated to your management team. They, in turn, must explain effectively to their respective team members.

As strategies evolve over time, so will KPIs. Therefore it is essential that the rationale behind any changes in KPIs be clearly explained to all of your employees.

Key Performance Indicators (KPIs) are critical measurements of performance standards enabling organisations to identify trends and opportunities for improvement.


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Targets Strategic visions can be difficult to communicate. However, breaking key objectives down into more definable targets will make it easier for managers to oversee the process of delivery. As a result, achievable targets will form a fundamental link between your organisation’s long-term business plan and day-to-day operations.

Once you have identified your organisation’s key areas and determined your measurement tools, you should set performance targets aligned with business goals. Your employees will then have a clear picture of what they should be achieving and why.

For example:

Your organisation may have a company goal to become an ‘Employer of Choice’. To achieve this aim, one KPI could be the reduction of Employee turnover by 10%.

Your organisation may drill this KPI down even further by defining it as:

‘The number of resignations and terminations, divided by the total number of employees at the beginning of a particular period’

As a result, the measurement tool of this particular KPI has been clearly established.

Looking to reduce turnover by a percentage over the review period is a clear target that management will be able to understand. It can be communicated to all members of staff so that everyone will know what is expected from them.

Case Study – Intastop Intastop is a family run manufacturing business based in Doncaster. The company has been Investors in People accredited since 1992. The company’s directors and senior management team set out the company’s vision for the next 5 years. The vision is discussed and agreed with staff to enable them to appreciate and take on board strategic aims. SMART KPIs and targets are set in line with the company vision for the forthcoming year. As a result, departments set their own. All members of the management team and staff have individual annual Performance Development Reviews where personal KPIs and targets discussed and agreed. New starters receive a monthly review for their first three months of employment, followed by a review after 6 months. KPIs and targets are agreed and reviewed at each juncture to ensure the staff member recognises what they are working towards and knows how their specific targets fit in with overall company targets. Departmental meetings take place monthly where SMART KPIs are discussed and reviewed. A full company review meeting takes place twice a year where all management and staff attend. This meeting enables the whole organisation to look back and assess the activities and results of the past six months and prepare for what is proposed for the next 6 months. As a result, retention of staff has improved because the company recognises the importance of staff involvement in developing and reviewing KPIs. The philosophy on inclusiveness has not only helped the company survive through these difficult economic times but also effective planning towards future growth.

Breaking key objectives down into more definable targets will make it easier for managers to oversee the process of delivery.


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Setting SMART Targets

All targets should be SMART:

S: Specific – the objective should have a specific outcome linked to the purpose of the job or task.

M: How does your business know that it has achieved the result?

Measurement is usually made up of a combination of measures based on quality, quantity, time and cost.

A: Achievable – does the jobholder have the resources (time, staff, equipment etc.) to achieve the objectives?

R: Realistic/Relevant – has the jobholder the knowledge, skills and attitude to achieve set objectives? If not, do they have the potential to develop them?

T: Time bound – when will the objective be achieved?

Targets should also:

Focus on results.

Reflect reasonable expectations of employees based on the length of time they have been employed n a particular role.

Support continuous improvement.

Reflect the balance between the needs of the job undertaken and the ability, experience and needs of the employee.

Setting Operational Targets

Setting standard targets and measures of performance for people undertaking the same or similar roles is a positive method of promoting performance standards. Individuals may have been given different targets but their performance is always compared with the same range of standards.

Operational objectives should be set at the start of the appraisal period. They should not be the same as a job description i.e. they should not cover every angle of someone’s work. They should deal with the elements of the job that add the most value or are the most critical to achieving success.

Communication Why is communication important?

Although we all recognize that business success is directly related to employee commitment and productivity, too many employees are often under-utilized.

Poor communication is one of the major sources of low productivity. Messages that move between management, employees and even customers, are not always understood in the same way.

To achieve the best possible chance of success, all parties must decide the best way of communicating progress and challenges, in terms of appropriate methods and timescales. This approach appears simple, but it can be difficult to achieve.

Setting standard targets and measures of performance for people undertaking the same or similar roles is a positive method of promoting performance standards.


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Summary

Performance standards measure a company’s current and future well being by supporting the overarching vision and targets, identifying corrective action and areas for development.

They enable employees to develop their skills, knowledge, working practices as well as recognising and maintaining standards.

Employees should be encouraged to be proactive in the identification and delivery of performance standards in order to achieve sustainability.

Key Performance Indicators are critical measurements of performance standards enabling organisations to identify trends and opportunities for improvement.

Targets form a fundamental link between organisation’s long term business plans and day-to-day operations.

Targets must always be SMART in order to be deliverable.

The employee’s ability to deliver the required result must be realistically assessed before target setting.

Poor communication with employees is one of the major sources of low productivity. The most effective methods of two way communication must be determined in order to avoid this problem.

Employees should be encouraged to be proactive in the identification and delivery of performance standards in order to achieve sustainability.


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Introduction In order to assess, maintain and enhance employee performance, a structure for regular performance review and feedback is crucial.

This chapter covers the setting up and benefits gained from performance review and feedback activity, commonly referred to as an Appraisal system.

Key aspects:

How to structure Appraisal meetings.

The skills required for effective feedback.

How to use questions to get the most out of the meeting.

How to achieve continuous improvement.

The process gives the employee and the line manager the opportunity to:

Discuss and review progress while events are still fresh.

Monitor progress and provide feedback on specific events, activities and overall performance.

Identify what may have helped or hindered progress.

Highlight areas of difficulty and identify resolutions.

Record pertinent information or agreed action.

Identify and review development needs.

It is good practice to conduct appraisal meetings throughout the year, not just every twelve months. Even though organisations often have mandatory performance reviews every quarter or four months, it may be appropriate to review performance more often i.e. if the employee is new or if difficulties have been highlighted.

Appraisal meetings should be seen as pro-active, especially for the employee, who should be encouraged to talk about their role and key issues affecting their performance.

Why Prepare Productive appraisals require both parties to prepare for them.

The appraiser should consider:

What outcomes they want to achieve.

“Evidence” – achievement of objectives and demonstration of key competencies.

Employee or company wide issues they may wish to communicate and how the employee may react.

Development undertaken and how well this has gone.

Development that might be required in the future.

The employee should consider:

What they have achieved during the review period, with examples and evidence.

Any examples of objectives not achieved with explanations.

What they most enjoy about the job and how they may wish to develop the role.

Any aspect of their job which could be enhanced and how this might be achieved.

Company wide issues that might be effecting their performance.

Their learning and development needs with arguments to support their case for specific training.

What level of support and guidance they require from their manager.


In order to assess, maintain and enhance employee performance, a structure for regular performance review and feedback is crucial.

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Benefits of a Good Structure A planned and professional structure provides a clear framework ensuring all key aspects are covered. It provides a logical approach, which both participants can follow. It also motivates the employee to contribute.

The following structure is suggested:

Start The start is crucial. It sets the scene, lays out clearly where you are going and puts the employee at their ease. The appraiser could use the following mnemonic.

Set the scene

The appraiser needs to settle both themselves and the employee by creating the right atmosphere for the meeting. Start with some general “chit-chat”, offer refreshments and check that they are comfortable.

Time Confirm how long the meeting expected to last - no more than an hour as a general rule but the manager should allow more time in their diary, just in case.

Agenda The appraiser should propose an agenda and run through it and invite the employee to seek clarification and add to it.

Range The appraiser should make clear the scope of the meeting by: Establishing what they intend to cover,

Informing the employer that they wish them to participate fully,

Asking the jobholder to clarify the scope of any items they have added to the agenda.

Target Clear positive statements about intended outcomes of the meeting.

Core The main part of the meeting provides an opportunity for discussion around the agreed items and for the appraiser to give or elicit feedback.

A successful Core requires:

Participation It is the employee’s appraisal therefore the appraiser should use questioning skills to encourage full participation.

Logical sequence The appraiser should arrange the issues in an order that makes sense. If the employee has concerns they may wish to raise them first.

Steps and stages The appraiser should break the meeting down into manageable steps.

They might look back on the employee’s performance to date before looking forward at future requirements or vice-versa. Each objective and competency should be covered in turn.

Some organisations believe that the “positive – negative – positive” approach is good practice. It should be avoided, as it often appears contrived and artificial.

Balance There are two aspects of balance to consider:

Cover what has happened in the past and what will happen in the future, including planning for development.

Balance the good and the not so good and keep these in perspective.

Research has shown that people learn better from constructive feedback on the things they do well, than from the things they do less well. Disproportionate attention should not be given to one or the other.


Research has shown that people learn better from constructive feedback on the things they do well, than from the things they do less well. Disproportionate attention should not be given to one or the other.

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Assessment Appraisers need to assess key performance factors to identify underlying problems and the reasons behind it i.e. poor communication of objectives, lack of competence, poor fit or external dependencies/issues?

Conclusion Summarise and consolidate what has been agreed by referring to the agenda. Compare what has been agreed with organisation and individual targets to ensure all key aspects and issues have been covered.

The employee should also summarise agreed action to encourage ownership.

Agree timescale for meeting notes to be sent and arrange the next review date there and then.

Dos and Don’ts Reminder Appraiser dos and don’ts when conducting appraisal meetings:

Do

Prepare.

Establish a positive tone and atmosphere.

Ask the employee to assess their own performance and listen to what they say.

Encourage full participation. The employee must not be

passive.

Recognise good performance as this empowers the employee.

Set specific steps for improvement where necessary.

Focus on enhancing current performance.

Don’t

Only use formal appraisals for reviewing performance. Performance should be regularly reviewed through activities such as Keeping in Touch (KIT) meetings.

Be rushed – allow enough time to discuss issues,

objectives, competencies and development.

Put employees on the defensive.

Discount their feelings or minimise their concerns.

Talk at or lecture them. Avoid “If I were you” advice.

Focus only on things that need to be improved.

Side-step difficult areas.

Blame them for failures. Feedback Delivering feedback effectively is critical to success of the appraisal meeting as it can either empower the employee to succeed or significantly de-motivate.

Effective feedback should be:

Balanced Balancing the positive with negative by keeping them in perspective

Objective Based on fact and is dealing with performance not personality

Owned Employees can see the relevance – it is personal to them

Specific Evidence used is specific to the job

Timely Timing is appropriate, especially for the employee


Delivering feedback effectively is critical to success of the appraisal meeting as it can either empower the employee to succeed or significantly de-motivate.

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Directive and Non-directive Feedback

The appraiser will usually choose a blend of these two styles. In directive feedback they will highlight:

What has taken place.

What affect it had on performance.

What the appraiser liked/didn’t like and why.

What the appraiser would like the employee to do in a different way or more of.

In non-directive feedback, the appraiser encourages the employee by using open questions, to think about their role and the work they have done and how they can maintain or improve their performance:

How do you feel you performed in that task or activity?

What did you do that could have helped or hindered progress in some way?

What effect did you have on the project or task?

What barriers did you encounter and what did you do to remove them?

Points to Consider Both approaches are effective if used appropriately. However, as elicitive feedback encourages participation and ownership of performance as well as solutions to problems, it is more likely to generate greater participation and ownership.

Directive feedback can be useful to re-enforce points made earlier.

The two styles can be mixed by using directive observations to lead into elicitive questions:

I noticed you showed the new administrator how to use the photocopier (directive observation)

How could your actions benefit the team? (elicitive feedback)

Underperformance Feedback One of the most difficult tasks for any manager is to deal with underperformance. Because it is uncomfortable, it is often fudged to the detriment of everyone.

The highlighted structured approach will help in this context as the manager is focussing on what the employee has achieved in terms of role and tasks and not who they are.

What are the Feedback Cycle Stages? If we accept that feedback is essentially about learning, we need information to help us learn. The appraiser can help people think about what they have done and apply that thinking in new or similar situations in the future.

The Feedback Cycle stages are:

Type of Questions to Ask When looking at performance, managers should draw upon the “experiences” of the employee by referring to and asking questions about examples of work done:

Performance or activity

Reflection – thinking about what happened

Understanding what happened and the consequences

Testing and applying our understanding in new or

similar situations


If we accept that feedback is essentially about learning, we need information to help us learn. The appraiser can help people think about what they have done and apply that thinking in new or similar situations in the future.

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Reflective questions:

“What happened when you produced that piece of work?” to enable the employee to consider the experience.

Conclusive questions:

“What implications can you draw from that?” so that the employee can recognise the consequences of their actions.

Application questions:

“What will you do differently?” so that the employee can apply the learning in new or similar situations.

The Conclusive Stage of Feedback This stage is critical and often omitted. Employees need to understand the consequences of their behaviour so that they can recognise the importance of changing.

Appropriate questioning to elicit this understanding, for example:

What do you think were the implications of doing it that way?

What do you think the customer thought of that?

Observed and Interpretive Feedback When giving feedback it is important to remain objective, sticking to the facts of what has been observed or heard, also setting aside feelings and opinions as much as possible. Even so, you may experience feelings and make interpretations of what you see or hear. Review your interpretations. Do not assume they are correct.

Consider the following:

I can see you do not agree with what I just said.

I noticed you frowned when I said that. Does that mean you do not agree with me?

Appropriate Questioning Technique A crucial skill required by all appraisers is a well-developed questioning technique. As both the appraiser and employee must be fully engaged, use questions that enable the introduction of views and information around the topics both parties feel are important.

Use of appropriate questions can encourage employees to identify their strengths and improvement issues, allowing you to re-enforce their good performance and prepare the ground for constructive discussion around improvement aspects.

Questions that can quickly stimulate a response:

What do you think you have done well?

Is there any area of performance you were not so happy with/would have liked to have done better?

Many employees do find it difficult to say what they have done well. If they are reluctant to identify areas of good performance the appraiser may need to inform them and encourage them to discuss it.

Otherwise there is a danger that the whole meeting could concentrate on improvement and would not be balanced. Such a meeting is likely to damage the confidence of the employee.

Some employees may be reluctant to admit they are not performing well. The appraiser must not avoid this issue. If questioning does not elicit a response, the appraiser will need to provide facts and details, using relevant examples, to promote discussion.

Appraisers can inadvertently play “guessing games” at these meetings if they feel uncomfortable about raising areas for improvement.

If they have a particular task or incident in mind, they should not keep asking the employee to “try again” until they guess what appraiser has in mind. This will only cause frustration and defensiveness, as well as wasting time. The appraiser

Performance Review and Feedback A crucial skill required by all appraisers is a well-developed questioning technique. As both the appraiser and employee must be fully engaged, use questions that enable the introduction of views and information around the topics both parties feel are important.

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should state the facts and use questions to encourage employee reflection.

Summary Appraisals will be most effective if employers are fully engaged.

Appropriate questions can stimulate these discussions. A well-developed questioning technique will allow appraisal managers to:

Involve employees in the process through 2 way communication.

Encourage people to identify their own strengths and areas for improvement.

Promote ownership of the way forward.

Active listening.

We must be actively, not passively, listening if we are to receive, understand and respond to employees’ messages.

Active listening requires you to un-clutter your mind so that you are focusing your attention fully on what the other person is saying. If you are thinking about your response, you are not listening! Active listening involves:

Eye contact and positive non-verbal communication.

Summaries to check understanding (see below).

Probing questions to achieve a deeper understanding of the key issues.

Summarising and paraphrasing.

Summarising the discussion and paraphrasing what the employee has said are useful tools. They enable appraisers to move to the next stage of the process, but also enable them to check their understanding and demonstrate to employee that they have been listening. As a result, the employee should stay engaged.

Case Study – Allotts Chartered Accountants Allotts Chartered Accountants conducted a review of their performance management arrangements in 2007. Staff members were asked for their opinion on the objectives of the appraisal process by ranking some statements in order of importance. By some distance, the top three objectives were: Ensuring that employees receive regular and constructive feedback from their manager on how effectively they are performing and how they might improve. Identifying and meeting individual’s development needs to enhance current performance and develop potential for the future. Making clear to staff the standards of performance and outputs expected of them and how their work contributes to the business objectives. As a result, a suite of core objectives was developed for each role to facilitate clear performance standards. These in turn had clear links to team objectives (in some cases they were the same) and the strategic objectives in the business plan. Some managers found it difficult to give feedback on performance improvement, so the company offered some practical feedback skills training to give them the confidence to do it. The company introduced a competence framework for all employees, as a means of identifying personal development needs. A personal development plan is considered an integral part of the appraisal form. The company also introduced quarterly appraisal meetings, which were shorter and sharper. The meetings allowed the appraisal report to be cumulative throughout the year rather than becoming an onerous task at the year-end. As a result, appraisals became representative of the whole year, not just the last few months.


Active listening requires you to un-clutter your mind so that you are focusing your attention fully on what the other person is saying.

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Introduction Despite their best efforts in providing training and support, there are times employers recognise that employees are still not reaching the standards required.

When this happens it may be necessary for employers to consider commencing a formal performance management process in order to scrutinise the employee’s under performance, try to find out the reasons and work with the employee to determine ways of addressing this issue.

As a last resort, employers may need to consider whether the employee is suitable for the job, and to take appropriate steps if it is concluded that continued employment will not work.

This chapter will consider what employers need to do when specific performance issues are identified, what factors to consider, what options are available and the risks that can be connected to termination of employment on grounds of underperformance.

The Legal Position Dismissal on grounds of capability is considered a fair reason for dismissal.

If the employer can establish they have dismissed on grounds of capability, which is defined as “being assessed by reference to skill, aptitude, health or any other physical or mental quality”, a claim of unfair dismissal will not succeed.

This sounds very straightforward. In fact, establishing capability grounds can be very difficult and employment tribunals do not lightly accept that an employer has taken the right step.

Employers will need to show:

The evidence from which they have concluded that the employee is incapable of doing this job.

The procedures they have followed to try to address the issue.

Whether (in appropriate circumstances) they have thought about offering alternative employment to the employee.

Appraiser Unfair Dismissal Claim A claim for unfair dismissal can only be brought if an employee has 51 weeks’ service or more. During the first 51 weeks of service, employers have a wider scope to terminate employment on capability grounds without facing the risk of an unfair dismissal claim.

However, the fact that an employee does not have 51 weeks’ service is not a blanket protection to employers. Claims for discrimination can be brought at any time, even if an employee is still employed, and so a full and thorough consideration of the reasons for underperformance is good practice regardless of when the issue arises.

Equally important, staff morale will be affected if there is a perception that under performing employees are simply abandoned by the employer without support or assistance, causing a significant impact upon business performance generally.

For those reasons, it is always sensible and advisable to have a performance management procedure to follow.

Time Pressures Some employers often complain that formal performance management can take time and, in today’s business climate, they do not have enough time to invest in that process.

Some employers take the view that it is easier and quicker to cut their losses and let an employee go, rather than spend time offering additional training and support.

This approach does not often produce the right results. A high staff turnover can have adverse effects for any business, such as:

Low staff morale

Employees see colleagues come and go very quickly.

Capability and Underperformance

Despite their best efforts in providing training and support, there are times employers recognise that employees are still not reaching the standards required.

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A perception that the employer does not support its employees.

Minor mistakes could easily cost an employee their job.

Additional costs:

Recruiting someone new.

Management time in sourcing and interviewing a new replacement.

Paying overtime to cover the work until a replacement is found.

Negativity from potential employees and customers if the employer is perceived as neither supporting staff nor investing in training and development.

A reduction in loyalty from staff.

In most cases, it is worth spending enough time to investigate the reasons for underperformance and taking steps to address it. It is rare that underperformance will be so poor that there is no hope of a positive employment relationship.

Identifying Specific Performance Issues If an effective system of review and support is in place, underperformance or a drop in performance standards will be brought to the attention of the employer very early.

If there is no system of general review in place, underperformance may take far longer to surface. The issues may be more serious by the time they are identified.

Once an issue is identified, the employer should take steps to instigate the formal performance management process. This should be set out in a staff handbook or similar document so that all employees are aware of the procedures to be followed in the event of a performance issue being identified.

The procedures to be followed should be explained to the employee at the outset, so that it is clear how the issue will be tackled and the timescale involved.

Formal Performance Management Specific procedures may vary from industry to industry but, as a minimum, employers should consider:

An initial meeting with the employee to explain to them the issues that have given cause for concern.

If there is documentary evidence, this should be provided.

The meeting must be handled in a non-judgmental way.

The employee should be given an opportunity to explain what has happened.

Enquiries should be made to confirm that the employee has received all necessary training, supervision and support. If not, a timetable should be established. If they have, consideration should be given to offering additional training or mentoring, one-to-one supervision or external training.

Enquiries should also be made to determine whether there are other factors affecting performance, particularly if it seems that the employee has had all relevant training and there are no apparent reasons for underperformance.

After the initial meeting, assuming there are no separate issues that need to be investigated further, a timetable should be agreed. You and the employee should agree what you will each do in order to try to improve performance.

For instance:

Agreeing to set aside time for individual training.

Arranging for external training.


The procedures to be followed should be explained to the employee at the outset, so that it is clear how the issue will be tackled and the timescale involved.

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From the employee’s point of view, agreeing to set aside sufficient time to concentrate on a given task.

Both parties should agree to meet up at the end of the timetabled period to review progress and to assess improvement.

Reviews and Warnings Rationale for Reviews

Review meetings are vital to the employer when they are engaged in a formal performance management process. They should not treat such meetings as unimportant and time consuming, or put them off because there are other things to deal with which are more directly related to work.

Line managers should recognise that the meeting is likely to be at the forefront of the employee’s mind, and that persistent cancellation of the meeting may only add to an employee’s low morale, low confidence resulting in low performance.

In addition, review meetings are a key method that employers can establish to an employment tribunal that they have followed a full and thorough process before taking a decision to dismiss, and that there was nothing else that they could have done in order to preserve the employee’s employment.

Review Process The recommended starting point is to refer to the agreed notes from the previous meeting and determine if all actions have been met. Where training was identified, the employer should be satisfied it has been delivered. Where individual support was offered, checks should be made as regards delivery. If the employee had actions to take, these should be checked.

Employer and employee should next consider the employee’s performance during the review period. The ultimate aim is to achieve improvement up to an identified acceptable standard. However this may not happen overnight, particularly where issues have not been highlighted due to a lack of general review process.

Any noticeable improvement should be recognised and the employee should be given suitable credit. If an acceptable level of performance has been achieved, the employer may choose to end the formal process and integrate the employee back into the normal everyday review system. If performance levels are still to be achieved, further targets can be set and a further review meeting scheduled.

Warnings There may be occasions where no genuine improvement has been identified. As a consequence, commencement of a formal warning process could take place under which warnings are issued with timescales for improvement.

If improvement is still not achieved, increasingly severe warnings are issued which could ultimately lead the employer to consider dismissal.

A typical Warnings process:

Verbal warning.

Written warning.

Final written warning.

Dismissal.

The length of each warning, and therefore the period for improvement, will depend upon the employee’s job, the complexity of the work to be done, and the amount of improvement required.

There is no set timescale however the employer will need to demonstrate unequivocally to the employee why it is reasonable to expect improvement to be achievable within that period.

Serious Underperformance There are rare occasions where an incidence of underperformance is so serious that an employer genuinely cannot pursue a whole performance management process.


The ultimate aim is to achieve improvement up to an identified acceptable standard.

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E.g. if something has happened which has caused an accident, or there has been a breach of the law.

In such cases, a meeting should take place with the employee to investigate what has occurred. The employer may conclude that the event is a disciplinary matter and should seek specific advice about carrying out a formal disciplinary hearing.

Have you considered everything when dealing with serious underperformance? Key point to remember:

There may be a number of reasons why an employee is not performing. They may be related to training, supervision or an inability to do the work required.

However, employers should also take care to investigate the existence of other reasons, and ensure that this is documented.

Example 1

You have a new computer system installed in your office. The system is largely the same as the old one, but there are a few key differences. The quickest way to update all staff is to issue a set of guidance notes that highlight the key differences.

One employee has not absorbed the changes and is consistently making mistakes on the new system, despite being advised by his line manager to continue to refer to the notes as and when he needs to. He appears to have had all necessary training and support, and so you are considering dismissal.

Investigations should be made as to the reasons why he has suddenly begun to make mistakes. What are the reasons for his difficulties? Enquiries may reveal that he has difficulties in reading or processing written information, such as dyslexia.

If you take the last resort of dismissing an employee without making enquiries as to the reasons why the employee was experiencing difficulties with written training notes and

taking action to address those reasons, you may find you are at risk of a claim for disability discrimination.

While it is possible to defend a employment tribunal claim on the basis that you did not know that an employee suffered from a particular condition that affected their performance, the tribunal will want to know what steps you took to investigate the reasons for poor performance before taking any action.

If the tribunal concludes that you should have investigated more thoroughly, or taken more steps once you became aware of any condition of this nature, you may be found to be liable.

Example 2

A new employee is not settling into the workplace and is often found away from their work place. They are late into work and leave as early as possible. You are surprised at their poor attitude as they were very keen at interview and appeared to have all the right skills for the role.

A formal performance management process may indicate that they have received all necessary induction training and are not finding the work difficult. However the process may reveal that a colleague is bullying them.

The employer may well conclude that the formal performance management process is not appropriate. A disciplinary investigation is required to look into the allegations.

Dismissal Action Dismissing an employee because of their performance should always be considered a last resort.

As already highlighted, negative staff related consequences often occur if it appears that underperformance quickly results in an employee being released. The employer can suffer financial consequences.

Employers should only consider dismissal if the process of timetabled improvement and the issuing of warnings has not succeeded. At the stage where dismissal might be


There may be a number of reasons why an employee is not performing. They may be related to training, supervision or an inability to do the work required.

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considered, it is in the employer’s interest to review the entire process to ensure that all available support has been offered.

Review issues:

Management evidence of underperformance.

What are the honestly held views of the employee’s managers and superiors?

Do they feel there is continued underperformance?

What do they base this assertion on? For example, have they done the job themselves and can they speak from experience?

Other evidence of underperformance.

Are there documents that support the assertion that this employee is underperforming?

Have there been customer complaints?

Procedure

Can you demonstrate that you have explained to the employee where they are underperforming, and how they can improve?

Have you offered training?

Have you warned the employee of the consequences of a failure to improve? Have you carried out regular reviews and given the employee reasonable opportunity to improve?

Alternative employment.

Have you considered whether the employee might be capable of carrying out another job in your organisation, other than this one?

This may not be appropriate in all cases, particularly within small businesses, but consideration at this stage will ensure that you have covered all aspects.

Formal Dismissal Process If the employer concludes that they have done everything they can, and that there is no hope for improvement, a formal dismissal process should be commenced.

Procedures:

The statutory dismissal procedures under the Employment Act 2002.

The new procedures under the Employment Act 2008, which come with a new ACAS code of practice.

The statutory dismissal procedures under the Employment Act 2002 If the employer has commenced formal disciplinary action before 6 April 2009, they must continue to use the 2002 procedures.

Action when considering dismissal:

Write to the employee to invite him to a meeting to discuss the possible termination of his employment on grounds of his capability.

Employees are entitled to be accompanied by a work colleague or a trade union representative at that meeting.

Employees should be given reasonable notice of the meeting and make all efforts to attend.

The presiding manager should provide all relevant evidence, including: minutes from all the meetings, copies of review notes, details of the previous warnings and any other documents that indicate alleged underperformance.

The presiding manager conducts the meeting and listens to the employee’s responses to the allegations. No decision should be made at the meeting, but managers should consider the matter afterwards and then confirm their decision in writing to the employee, together with the right to appeal.


If the employer concludes that they have done everything they can, and that there is no hope for improvement, a formal dismissal process should be commenced.

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If the employee appeals, a further meeting should take place. The employee still has the right to be accompanied. The decision should again be confirmed in writing.

This constitutes the end of the Dismissal Process unless the organisation has any other internal procedures, such as a second right of appeal.

However, if the employee has over 51 weeks’ service, or if they consider themselves to be the subject of discrimination, they may choose to issue employment tribunal proceedings.

The new procedures under the Employment Act 2008

On 6 April 2009, the statutory procedures highlighted above were repealed. After that date, employers must have put a reasonable procedure in place. Realistically, this will mean that the same type of procedure has to be followed.

As failure to follow a reasonable procedure can have an impact upon any compensation awarded, employers may wish to take advice upon the procedures currently in place to ensure that these meet the new standards.

Summary Formal performance management should not be seen as a tool to get rid of an employee.

It should be used as positive action to address issues that have arisen and to help the employee through a potentially difficult period.

It is important to recognise and give credit for any improvement achieved in order to boost morale and determination to improve further.

Dismissal is only ever a last resort. However, where there is no other alternative, the employer should be able to establish that all other options have been exhausted and that the decision to dismiss is the only realistic one left.


Formal performance management should not be seen as a tool to get rid of an employee.

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With thanks to the authors of this guide:

Marilyn Jones, HI Weldricks Ltd Marilyn Jones is the Chairperson of the Chamber’s Employment and Training Focus Group and Training Manager at HI Weldricks is a Doncaster owned and run independent chain of community pharmacies. It is a family owned business founded in 1967 as a single pharmacy employing four people; HI Weldricks now has 56 pharmacies throughout South Yorkshire employing in excess of 550 people, most of them in Doncaster.

Sarah Barsby, Intastop Door Guardians

Sarah Barsby is marketing and HR Director at Intastop; Intastop offer a range of innovative and cost-effective protection solutions that increase building life and reduce maintenance bills for hospitals, airports supermarkets and similar businesses. Many products are intended for retrofit projects, enabling protection, performance, functionality and interior environments to be updated without significant investment or interruption.

Liesel Whitfield, Irwin Mitchell Liesel Whitfield is an Associate Solicitor at Irwin Mitchell. Irwin Mitchell is one of the UK's most successful and respected law firms; they currently employ 2,100 staff across nine UK and two Spanish offices. Irwin Mitchell is passionate about the law and in providing clients with the very best legal advice and guidance.

Robert Watston, Allotts Chartered Accountants Allotts is a firm of Chartered Accountants and Business Advisers with offices in Rotherham and Doncaster. Established in 1927 they are one of the largest independent firms of Chartered Accountants in South Yorkshire outside Sheffield employing a total of 70 people – 50 or so in Rotherham and around 20 in Doncaster. Aside from the usual services associated with accountants (accounts preparation, audit, cash flow forecasting, business planning and advice etc) the firm also offers specialist tax advice, wealth management, financial services, payroll and HR/Employment Law support and consultancy. The firm is a patron of Doncaster Chamber.

Jason Sprenger, Highfield Awarding Body of Compliance Limited Jason Sprenger is a qualified Lawyer and the Chief Executive of Highfield Awarding Body of Compliance Limited. HABC (as the Company is known for short) is an Awarding Organisation, endorsed by the Government to offer accredited qualifications in Food Safety, Health and Safety, First Aid and Licensing. HABC is the only organisation based in the Doncaster region approved to award qualifications in any discipline. We are currently the fastest growing Awarding Organisation in the UK. Prior to establishing HABC, Jason Sprenger worked for a number of years as an Associate for Eversheds LLP, one of the world's largest international law firms

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Further Information: The University of Sheffield Management School 9 Mappin Street Sheffield S1 4DT UK Tel: 0114 222 3346 Web: www.sheffield.ac.uk/management Web: http://www.business-advantage.org/index.php

Further Information: Sheffield Business School City Campus Howard Street Sheffield S1 1WB UK Tel: 0114 225 2820 Web: www.shu.ac/sbs Web: http://www.business-advantage.org/index.php

With thanks to the sponsors of this guide:

A Practical Guide to Performance Management

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