Sunday 17 March 2013

Matthew at play in the performance management game

Most organisations maintain a performance management system that is based on a rating system that stack-ranks employees. One benefit is the identification of individuals whose performance has been above the norm (peer average) so that the organisation can direct scarce resources (recognition or pay increase or promotion) to these “above average performers.”

The crux of a
stack ranking methodology is that a few gain (at a perceived cost to others) but the rationale is that performance variation needs to be rewarded. I agree with rewarding performance variation to the minority (typically most rating systems will only allow for 20% of rated employees to be above the average) but on occasion I have fielded questions and taken feedback from many of the remaining 80% (average or below average performers) employees wondering whether their manager’s own rating also reflects that he hired them and then failed to grow them. Yes I concede that this is a trick question and patently unfair but then perceptions are usually difficult to manage when it comes to ensuring justice and equity around performance management.

The thought for this blog came to me as I was talking to a few peers at work on rotational or promotional opportunities for people in my team and I noticed that all my peers wanted to only take those individuals in my team that had received an above average rating. Hold on, theory states that these are precisely the people that I should retain in my own domain as they are making a 'positive impact' (which is also reflected in the rating that I gave them). When I tried to steer the conversation to other individuals who had been in my area for some time and ready to move into another role the conversation fizzled away when I revealed the person’s performance as being average. And let me remind you that being average puts you in the majority in any organisation’s performance management system. I was getting frustrated by the fact that all benefits were naturally (or unnaturally) flowing to a select pool of individuals (above average raters). This reminded me about the Mathew Effect that I had first come across when reading
Malcolm Gladwell’s book ‘Outliers’.

Matthew Effect is derived from the Bible verse (Mathew 25:29) "For whoever has will be given more, and they will have abundance. Whoever does not have, even what they have will be taken from them." In simple terms, it refers to an advantage (of any kind) that leads to the same person/entity getting more advantage(s) over time, which ultimately leads to a wider gap between those who got more resources/advantages vs. those who did not get resources/advantages (and possibly even got less resources given).

This is an interesting theory and I am not quoting it here to state that the 20% (above average performers) are benefitting from the performance management system but rather to draw attention to the other 80% (average and below average performers) whose rating will position them unfavourably in how they got access to critical resources or incentives. This can then set the basis for a similar rating in the next performance appraisal cycle. The reality is that most performance management systems are not designed to allow a manager to incentivise such performers and it requires a very strong level-headed people manager to undertake conscious action(s) to ensure that an employee's past rating is not taken into consideration when rating that employee in the next cycle and focus is required (on the part of the people manager) to ensure that the employee feels that he or she has been adequately empowered or motivated to focus on improving the rating accorded to them in the follow up performance appraisal cycle. It is critical for a people manager to ensure the perception of fairness amongst all employees and maintain employee engagement of all employees irrespective of the rating that they are given. I feel that employee engagement is as important for an above average rater as it is for an average or below average rater. Am I wrong in holding this belief?

The negative impact of the Mathew Effect is pronounced for those individuals who have received an average or below average rating for a few performance appraisal cycles. The general outcome is that no matter how hard an employee positions himself his past average or below average rating will prevail/sustain even if they make attempts to improve performance in the future. Additionally, there is a serious challenge with many managers who provide individuals with above average ratings over the course of time due to the presence of the
Halo Effect, which is nothing more than the presence of a positive bias in how a manager judges a subordinate due to their overall positive overall impression of the subordinate.

bias can also extend to the creation of clusters of groups of subordinates who enjoy higher levels of trust, interaction as well as rewards from the manager. The converse has been found for the perceived cluster that was out of favour with the manager. Interestingly, where a subordinate from the cluster (that was out of favour) did manage to perform better then the same would be attributed to chance and not to the employee’s effort or ability. The converse situation can also arise when the subordinate performed poorly then it was attributed to the individual (labelled as lazy or incompetent) and not necessarily to any circumstance that could have been out of control for the employee.

The reality of any stack ranking methodology is that the majority will always feel dissatisfied with their rating even if the performance rating is satisfactory and/or having met expectations. In fact, this is a
key contributor to low job satisfaction and overall dissatisfaction with the performance appraisal or performance management methodology applied. This is a critical aspect and one that I feel organisations do not spend much effort on. One recommendation would be to take the results of an organisation’s work-force survey(s) that are designed to measure employee engagement and then create sub-clusters around high performers and average/low performers. Can employee engagement be different for these two pools of individuals? Can the overall employee engagement index be pulled down due to the reality that even an individual getting an average or meets expectations rating have been known to be dissatisfied with this rating? I believe this to be true based on my own interaction with such individuals. This also becomes very critical to examine and understand when people managers use ratings as a means to jolt the subordinate into upping performance or to send a political message to a “rebellious subordinate” and of course, to start documenting performance to ensure that an exit strategy is set-up for the individual that can be scrutinised in court (if necessary) and the most interesting dilemma of all is when the manager uses those matters/issues which are fresh on his or her mind when assessing the individual (this works both ways i.e. the manager is either 'overly-upset' or 'overly-impressed').

I cannot close off without giving some context to my point of view.I am not against performance management tools or processes. What I am espousing is that people managers in any organisation need to understand that the mandate and power given to them by the organisation is a responsibility and not a perquisite or job benefit given to them by virtue of them being a people manager.

People managers need to ensure that they are working on improving the performance of the people that they manage. Managing perceptions and being the devil’s advocate to their own decision with the intent to eliminate any bias or perception is critical. Doing this ensures that justice prevails and that employee engagement is maintained/maximised within the constraints of the organisation’s performance management system, which the manager has to live with and not live without. At the end of the day I want to put my head down on my pillow and not have to pray for redemption due to the actions I take as a people manager and because I sincerely believe that “
everybody deserves the best shot managers can give them.

What do you think?


Please feel free to subscribe via email (on the right use 'follow by email' feature) and also consider sharing with others using the links/tools provided below. This is the best way for me to broaden my reach and increasing my blog's visibility. Thanks in advance for your support.


  1. What you call the Matthew effect is exactly what people like Nandan Nilekani use to exploit their power and position.There is no reason for a senior director in Infosys to be given such powers or such eminent positions in the Indian constitutional framework. Is there a legitimate ground for 3000 crore expenditure on Aadhar? I appreciate the thought that has gone into the blog, and this is a prime example of where an individual was time and again given resources and has not performed. We Indians love to idolize our heros and that is the reason such a behavioral trait is prominent in India.

  2. Mr B, it usually starts with not having clearly defined parameters for the basis of appraisal. It is usually left to the manager, generally towards the end of the year, to decide how he wants to judge someone. So if a particular set of accounts or a particular geography had outperformed for the year, the people in that area get rated higher, no matter how worthy they are or how incompetent they could be. Similarly, a really good person having a bad patch in his / her accounts / geography does not get recognised for hard work that, in all probability, will pay dividends in the coming years, but will not cause the employee left before the company saw the benefits.

    At the end of the day, the manager is the one who should be able to separate efforts and results and assess each individually. Only then can he / she say who made more efforts or who had more luck.

    Just my 2 centavos :)