15 February, 2008
What Is People Management and How Does It Translate to Performance?
Author: Maksim Ovsyannikov

I recently came across a 2007 study conducted by Personnel Decisions International, a well-known HR consultancy, which uncovered a vivid disparity among performance review scores. When multiple managers rated the same employee, they disagreed more than 60% of the time.

Seemingly, a tool trusted for many decades to rate and rank employees within an organization suddenly lost its credibility as a meaningful way to evaluate performance.

Think about it - it would be hard to find a manager who wouldn't claim that their utmost objective is the accurate evaluation of employees during a performance review cycle. Yet, more than half the time, someone else's assessment may counter theirs.

Reviews Alone Don't Equal Improved Performance
And then it came to me - it's not that performance reviews are suddenly meaningless. Instead, they have a new place in the lifecycle of the people management de novo. They cannot be used alone, as they used to be, in the process of evaluating people. Reviews should be looked at as a small (probably one of the smaller) parts of what it means to truly appraise someone in an organization.

Red flags, therefore, should be raised within corporate bodies that rely on performance reviews as the sole means of determining the destiny of their workers. You see, they are in turn determining their own destiny as well - and, as these companies are about to find out, they are not doing themselves any favors!

It is not surprising that performance reviews weren't listed as the top obstacles by HR leaders worldwide, as recently reported by analyst group McKinsey in their interviews with top HR leaders worldwide. Instead, the number one challenge listed by those surveyed is that senior managers do not spend enough high-quality time on talent management! Some of you would agree that we didn't necessarily have to read a McKinsey study to arrive at this conclusion. But what is very compelling in this study is that there is a significant increase in the notion of a "program" that is associated with true talent management. What is even more compelling is that it would no longer be enough to spend "time" on talent management in general - the time spent must be of a "high quality."

What is high quality in talent management?
High quality talent management results in an environment where comfortable people continuously produce ROI for your organization. This is a new high-quality approach in talent management. Performance reviews are still on the list of things to do, but they are not at the top; they are not alone and they are increasingly less meaningful when used solo.

A New Approach Emerges
The new approach calls for a unification of people management activities into a "talent management lifecycle," a program that is embraced by everyone in the company. Overwhelming evidence already suggests that it works! It is not Human Capital Management alone, but rather the integrated Human Capital Management that drives results.

A recent Aberdeen research study compared organizations that are implementing integrated HCM practices against those who use nonintegrated approaches. Data gathered across 38 different metrics in 19 HCM areas is clear - unify or lose big! Results showed that a performance review score is more meaningful when it is compared with your potential rating, aligned with your competencies, and in turn associated with your role within an organization.

For "best-in-class" companies, each employee's goals are achieved collectively, rarely individually, and individual success makes a lesser contribution to organizational well-being - it is the success of a team that matters more.

Employees must be given tools to accomplish more - tools to achieve targeted learning and development activities, and methods to collaborate, share, and truly contribute in ways that are useful to others. A critical path to success becomes the shortest path to knowledge and learning, which is, for the most part, informal. Imagine a map of the organization, but instead of it looking like an org chart, it now looks like clouds of expertise that are overlaid with clouds of interests and the needs to reach desired knowledge. The shortest distance between the needs cloud and the expertise cloud on the same topic results in success!

This is a new era of HCM, and companies who are adopting this lifecycle are able to attract and retain top talent and improve productivity. For these companies, the most valuable asset - their employees - just became more valuable.

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Comment - Feb 27, 2008: Dear Mr.Ovsyannikov, It was a revealing posting and very informative, thanks very much. The approach is probably emerging in big organisations which do like retaining employees as opposed to medium firms that are more focussed on building their capital.

One point did i need to raise though, concept of 'human capital", treating a living being as a capital is akin to treating them like numbers. I understand you may be talking in terms of employees being an asset to the organisation providing the necessary ROI, but it still means monetary gains. Managing people is quiet importantly about managing their personality and character.

Human Capital or employee retention is naturally high in those companies who first listen to their employees and second give them respect. People management, in my little understanding, is about managing people as in making them feel great about doing their job so that even if thier computer is slow, or the light above their head flickers, or their pay is not that great, etc, whatever the circumstances may be, they still feel a great satisfaction in working for that company as they feel ownership towards it.

Thanks again for your time, attention and the information. I'm far away from the managerial level you are at and don't understand the mechanics behind people management. What i told above is my perspective from the view of being managed. I know you once were an employee too, but it is human nature to start forgetting the times we went through as we move up the ladder. Have a good day. Kind Regards Nitin

Reply - Feb 27, 2008: Nitin, you make some very good points. Let me try to respond to all of the issues that you raise.

First, I would absolutely claim that your true "capital" includes your human capital - independent of the size of the organization that you operate. In fact, I would go to the extent of proposing that if this inclusion is not evident, an organization will either loose the bottom line capital with time or never even build it in the first place.

Remember the most simple notion - your people are the only contributors to your ability to do business. That's why my reference to "human capital" is quite far from treating people as numbers, but instead focuses on treating people as humans, so that the "numbers" appear as a result, so I think we are on the same page. I completely agree with your definition of people management - making people feel great about their jobs, about their companies, their bosses, their projects is key. Mutual loyalty is also extremely important. Thanks for these enlightening comments.