Appraising Auditor Performance: Strategies and

Lessons Learned

Susan Cohen, City AuditorCity of Seattle

May 12, 2004

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Agenda

Reflecting on performance appraisal experiences

Lessons learned about performance appraisals

Dealing with performance appraisals and other difficult conversations

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Credit

Wilson, Thomas B. Innovative Reward Systems For the Changing Workplace McGraw-Hill, New York 1994

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Definition

A PERFORMANCE APPRAISAL IS:

One of those special human encounters where the manager gets no sleep the night before, and the employee gets no sleep the night after.

--Thomas B. Wilson

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Appraising vs. Managing Performance

Appraising: Limited (annual)

feedback Artificial rewards

Managing: Continuous

management review Active and appropriate

reinforcement

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What Do We Want? Managers: Ability to recognize and reward

superior performers. Employees: Honest and timely feedback, specific

development, and an opportunity to receive effective coaching.

Compensation Managers: To ensure that dollars are allocated according to performance levels.

Human Resource Executives: Ability to identify top performers, plan for their development and succession, and reward them adequately.

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What the Experts Say

Quality management gurus (Deming, Juran) argue that appraisals should be eliminated because they:

Inaccurately portray individual performance as a major impact on results

Inadequately address system-based issues.

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Did You Know?

At least two dozen studies over the last three decades conclusively documented that people who expect a reward for completing a task, or for doing that task successfully, simply do not perform as well as those who expect no reward at all.

--Harry Levinson

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Rewards or Punishment? Pay is not a motivator Rewards have a punitive effect because they

are manipulative Not receiving an expected reward is also

indistinguishable from being punished. Rewards rupture relationships Rewards undermine interest because artificial

incentive cannot match intrinsic motivation

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Goals for Appraisal System #1

“Providing staff with information designed to maximize their individual potential and contributions to the agency

“Providing management with information needed to recognize and reward top performers

“Providing information and documentation needed to deal with poor performers”

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Goals for Appraisal System #2

“Feedback to auditors “How to improve skills and personal

qualities “Effective utilization of resources”

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Goals for Appraisal System #3 “Provide employees with feedback to improve performance “Provide basis for allocating pay increases/incentive awards “Focus training and development activities “Identify candidates for promotion “Create an opportunity for employees to receive recognition “Assure adequate documentation of performance that satisfies

the requirements of the 1964 Civil Rights Act and EEO Commission guidelines

“Improve communication between managers and employees “Establish performance goals and standards for the next

performance period”

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Goals for Appraisal System #4

“Reinforce collaboration, teamwork, and a focus on the priorities of the business”

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Overarching Goal

To create and promote a workforce that can achieve the organization’s mission to provide the most value to its stakeholders

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Evaluation Criteria #1

Planning Data Gathering and Documentation Data Analysis Written Communication Oral Communication Working Relations Supervision

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Evaluation Criteria #2 Achieving Results Maintaining Client and Customer Focus Developing People Thinking Critically Improving Professional Competence Collaborating with Others Presenting Information Orally and in

Writing Facilitating and Implementing Change Representing the Organization Investing Resources Leading Others

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Evaluation Criteria #3

Amount of Work Quality of Work Auditor Knowledge Problem-Solving Ability Communications Effectiveness Ability to Follow Instructions Planning Skills Relationships

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Remember Myers-Briggs

Anyone who supervises someone else should:

--Look carefully at the assumptions made about motivation.

--Assess the degree to which carrot-and-stick assumptions influence own attitudes.

--Harry Levinson

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Various Scales Scale 1

Meets Expectations

Exceeds Expectations

Role Model

Below Expectations

Scale 2

Pass

Fail

Scale 3

Unacceptable

Needs Improvements

Fully Successful

Exceeds Fully Successful

Outstanding Scale 4

No scale--qualitative information only

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Typical vs. Ideal System

Highly subjective process

Unilateral from boss’s perspective

Little focus on future capacity

Uncertain link to business success drivers

Explicitly defined process

Mutually understood Strong development

focus Grounded in business

success drivers

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New Practices Pass/fail systems rather than individual

performance ratings, or no ratings at all Peer review systems rather than manager-

driven systems Using review periods as a means to counsel

employees on career and promotional opportunities

Minimizing the relationship between performance and pay raises

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Why Appraisal Systems Fail

Managers lack sufficient information to judge performance accurately

The goals and standards are unclear and subjective

Employees become defensive The process is not taken seriously Managers do not prepare adequately

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SMART

Specific Meaningful Achievable Reliable Timely

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Legal Considerations Personnel laws and court cases have established

requirements for performance appraisals:

--Performance measures must relate directly to the job

--Evaluations must be based solely on job criteria

--Results of evaluations must serve as the basis for making decisions (e.g., salary, training, promoting, layoffs, and terminations)

--Performance appraisals must be conducted at least once a year

– (Civil Rights Act, Bito v Zia Company, Griggs v Duke Power, Wade v Miss.)

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Employee Considerations

Clear sense of direction Opportunity to participate in goal-setting Timely, honest, and meaningful feedback Immediate, meaningful, and sincere reinforcement

of efforts Coaching and assistance to improve job

performance Fair and respectful treatment Opportunity to understand and influence decisions

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Susan’s Favorite Quote

If people do not participate in and “own” the solution to the problems or agree to the decision, implementation will be halfhearted at best, probably misunderstood, and more likely than not fail.

--Michael Doyle in forward to Kaner, Sam Facilitator’s Guide to Participatory Decision Making New Society Publishers, Gabriola Island, BC 1996

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Performance Management

Instead of Performance Appraisals

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Performance Management Communicate the organization’s mission,

strategies, and performance goals Establish performance measures to reflect both

quantitative and qualitative elements. Identify goals that balance short-term results with

longer-term success indicators Ensure that employees throughout the audit

function understand the organization's goals

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Performance Management (cont.)

• Foster employee involvement in goal-setting process

Provide training to managers and employees on giving and receiving feedback

Designate manager to serve as mentor and assist employees in using feedback for performance improvements

Provide training for employees to strengthen performance and advance career

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Feedback Feedback should be related to meaningful

consequence Quantitative assessments valued more than

narrative or subjective assessments Public displays for group results and private

meetings for individual feedback Daily, weekly or biweekly feedback is valued

more than annual feedback Self-assessments have little value as an

objective and meaningful source

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Five Stages of Difficult Conversations

1) Prepare

2) Imagine resolution

3) Initiate conversation

4) Explore their story, then yours

5) Collaborate on resolution

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Stage 1: Prepare

Consider your objectives and approach Coach yourself to accept multiple outcomes Focus on your purpose in initiating the

conversation Adopt a positive mindset (see next slide)

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Choose a Positive Context

When a conflict is framed in a negative context, the focus is on power, and will likely result in a winner and a loser.

“If a hammer is the only tool you have, everything looks like a nail.”

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Stage 2: Imagine Resolution

Relationship will improve as a result of conversation

Remain open-minded rather than advocate for a specific solution

Believe that a mutually acceptable solution can be achieved

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Stage 3: Initiate Conversation

Invite conversation and share your purpose Key practice: describe the issue/problem as

a difference in perspective Avoid problem solving during initial stage

of conversation Acknowledge feelings that are frequently

core issues, before attempting to solve stated problems

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Stage 4: Explore Their Story-- Then Yours

Start with their story Don’t assume that you know their story Don’t push back—Listening does not imply

agreement Express your views and feelings after their

story is finished

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Your Story

Start with the most important points State what you mean clearly to avoid

assumptions Share how you formed conclusions Avoid words like “never” or “always” or

“fault” Present your story as “your truth” not “the

truth”

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Stage 5: Collaborate on Resolution

Invite the other person to help identify solutions

Invite the other person to come back if attempted resolution is not successful

Remain hopeful that mutually acceptable solution is possible