Appraising Auditor Performance: Strategies and Lessons Learned

1. Appraising Auditor Performance: Strategies and Lessons Learned Susan Cohen, City Auditor City of Seattle May 12, 2004

2. Agenda • Reflecting on performance appraisal experiences • Lessons learned about performance appraisals • Dealing with performance appraisals and other difficult conversations

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

4. 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

5. Appraising: Limited (annual) feedback Artificial rewards Managing: Continuous management review Active and appropriate reinforcement Appraising vs. Managing Performance

6. 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.

7. 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.

8. 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

9. 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

10. 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”

11. Goals for Appraisal System #2 • “Feedback to auditors • “How to improve skills and personal qualities • “Effective utilization of resources”

12. 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”

13. Goals for Appraisal System #4 • “Reinforce collaboration, teamwork, and a focus on the priorities of the business”

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

15. Planning Data Gathering and Documentation Data Analysis Written Communication Oral Communication Working Relations Supervision Evaluation Criteria #1

16. 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

17. Evaluation Criteria #3 • Amount of Work • Quality of Work • Auditor Knowledge • Problem-Solving Ability • Communications Effectiveness • Ability to Follow Instructions • Planning Skills • Relationships

18. 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

19. 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 Various Scales

20. 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 Typical vs. Ideal System

21. 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

22. 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

23. SMART • Specific • Meaningful • Achievable • Reliable • Timely

24. 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.)

25. 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

26. 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

27. Performance Management Instead of Performance Appraisals

28. 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

29. 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

30. 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

31. Five Stages of Difficult Conversations • Prepare • Imagine resolution • Initiate conversation • Explore their story, then yours • Collaborate on resolution

32. 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)

33. 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.”

34. 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

35. 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

36. 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

37. 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”

38. 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