Defining Performance: The Outcome vs. Behavior Dilemma

By Niranjana Harikumar
22/1/2013

The philosophy of performance management entails the achievement of individual and team level results in a manner that is consistent with organizational goals and expectations. This is done through devising appropriate metrics or measures that define organizational expectations from the employee and through consequence management mechanisms. As theories of behavior and motivation have repeatedly shown, every performance measure whether it is used explicitly to influence behavior or not will affect employee actions and decisions.

As the pressure on the bottom line increases in recessionary times, our approach to performance management has evolved from a process or activity focus to a single-minded focus on goal or outcome achievement. The argument used in this context is that only outcomes are “real” key results. However, a quick look at organizations that have consistently performed over the decades is enough to reveal that behavior often trumps outcomes in the long term. Sustainable excellence is as much about a long term focus on the enduring behavioural and cultural drivers of success as it is about a shorter term focus on goal achievement.

A More Expanded View of Performance

How an organization defines its expectations of performance is crucial in shaping employee behavior. However, many organizations view performance in tactical terms on a case-to-case basis without agreeing on an actionable organizational philosophy or definition of performance. For example, a performance management system that defines performance in pure “outcome” terms may have metrics such as quality or quantity expected, deadlines to be met, cost to deliver, etc. defined for an individual employee. However, giving undue focus to these outcomes may result in longer term parameters getting impacted; say for instance, an appropriate focus on customer service or on team working.  Another example could be of a brand manager who sees his brand’s market share as his key performance measure – this may result in him making decisions that will maximize market share in the short term but may inadvertently sacrifice long-term profit or adversely impact other brands in the organization’s portfolio.

Thus, integrating desired behaviors through competencies or values within the performance management system supports an ongoing organizational focus not only on “what” was achieved, but also on “how” it was achieved. Therefore, many organizations choose to include competencies, values or desired behaviors within performance expectations, to reinforce the link to business strategy and the longer term vision and mission. This in turn reinforces behaviors that lead to exceptional, sustained performance. It also ensures that these desired behaviors are fully understood, institutionalized and made part of the organizational DNA, thus signaling the organization’s priorities and values. All other talent management processes may also be integrated to this “expanded” performance management system. In addition, ongoing performance feedback and dialogue between the line manager and employee can also use these behaviours as the cornerstone.

Thus, this “expanded” view of performance describes performance in the following terms:

• Expected Outcomes or Objectives: Identification and evaluation of the employee’s major work outcomes – this entails a focus on results.
• Behaviors Displayed or Competencies: Evaluation on the competencies that are associated with exceptional performance – this is essentially an assessment of the behavioural characteristics that impact results in the longer term. Additionally, this evaluation links up to the ongoing development dialogue with the employee that will help enhance strengths and work on development areas for future roles.

Many organizations have successfully integrated the competency or behavioral perspective into their goal or outcome-oriented performance management systems. Several methods of outcome-behavior aggregation may be used for this purpose such as the following:

Behavior not as an evaluative component, but as a tool for development dialogue

In these cases, while competency or behavioral aspects are assessed, these are not considered in arriving at a performance rating. They instead form the basis for a development dialogue between the line manager and the employee.

Behavior as a “gate” for performance

Some organizations use the behavior rating arrived at as an entry criterion or “gate” for performance ratings. For instance, performance ratings may be defined in such a way that an employee who has scored exceptionally well in outcome achievement may yet not obtain an overall “Exceptional” performance rating unless he has met the defined benchmark on the behavioural component of the performance management system.

Weighted Composite Ratings

Here, both the behavioral and outcome dimensions are rated on a standalone basis. Appropriate predefined weightages are then applied to these ratings to arrive at the overall composite performance rating. For instance, if the behavior dimension is rated as a 3 and the outcome dimension as a 4 with weightages of 40% and 60% respectively, the overall composite performance rating for the employee may be calculated as 3*0.4 + 4*0.6 = 3.6.

Challenges in Implementing Outcome – Behavior Aggregation for Performance Assessment

The implementation of a hybrid outcome-behavior aggregated view of performance in an organization is a complex process that requires significant organization development expertise, critical thinking and creative design. It cannot be seen merely as a “process” change but involves changes that will impact the very core of an organization. If the resultant performance rating is linked to pay, the scenario may become even more complex. Implementing outcome-behavior aggregation calls for a redefinition of the organization’s view of performance and dramatic changes in how the organization understands, values and recognizes performance.

Concerns have been raised about subjectivity and rater bias in the assessment of competency or behavior dimensions. The difficulties involved in quantifying behavior have also been pointed out though mechanisms such as multi-rater feedback surveys have helped in addressing this concern to some extent. Often, in order to measure behavior in “below, meets or exceeds” expectations terms, very clear “behavioral” examples will need to be defined for specific roles and levels. Agreeing on the relative weightages for outcome-behavior dimensions as well as the relative relevance of a competency to a particular business environment are also activities that need significant effort and top management support.

Are You Ready to Integrate Behavior Assessment into Your Performance Management Process?

Before implementing goal-behavior aggregation in your performance management process, it may be worthwhile to analyze your current organizational landscape in depth. Some themes for initial exploration could include the following:

• The design and validity of your competency framework
• Is it rooted in the DNA of your organization?
• Has it been derived from a comprehensive analysis of your industry challenges and opportunities, the business strategy and the current or desired work environment?
• Is it simple and self-explanatory?
• Organizational Environment and Employee Buy-In
• What is the business imperative for taking a longer term behavioral view of performance rather than a purely outcome-driven view?
• Does top management see any value in taking a longer term behavioral view of performance?
• What are the current challenges in implementing your performance management system?
• How will outcome-behavior aggregation impact these challenges?
• To what extent do employees understand and buy into your competency framework?
• Are your line managers skilled at coaching or feedback and in using competency or behavior language to facilitate career or developmental dialogue?
• How will you educate your employees on the competencies and their business impact?
• Gathering Inputs for Behavior Assessment
• Do mechanisms exist to gather input for behavior assessment?
• What mechanisms could be used to ensure that the behavior assessment for each employee is relatively objective and fair?

Performance management is about enabling long-term, sustained business performance. In order to ensure that individual performance is aligned to long-term organizational interests, it may be needed to expand the view of performance from a short-term goal or outcome achievement perspective to a longer term focus on cultivating and embedding desired behaviors that will eventually give the organization a competitive advantage. In this light, performance management will need to be seen not just as a vehicle for cascading objectives but also as a means of driving positive behavioural change.

At the same time, incorporating behavioral dimensions into a goal-centric performance management system calls for a paradigm shift in how the organization views performance. Therefore, this activity needs to be done after an appropriate evaluation of the long term business imperatives as well as the execution challenges that the organization is likely to face.

Niranjana Harikumar is an organizational development consultant who has consulted with several organizations in the areas of talent management, leadership development and employer brand management.