HR SPECIAL ...............The Performance Trap

The Performance Trap  Why performance is not the right measure to assess people for future roles   In simpler times, organisations evaluated their people, and hired new ones, on the basis of their strength and looks. As things got complicated, these measures were substituted with more pertinent ones like intelligence, competence and experience. These days, people are most often evaluated on the parameter of `potential,' loosely defined as the ability to do well if promoted to a bigger role in the future. What constitutes potential in a volatile, uncertain, complex and ambiguous world? In an article titled The Big Idea: 21st-Century Talent Spotting in Harvard Business Review, June 2014, Claudio Fernández-Aráoz of executive search firm Egon Zehnder says companies too often fall into the trap of judging people's potential from their past performance. They have not truly made the transition to potential, but continue to evaluate on competence and experience. “What makes someone successful in a particular role today might not tomorrow if the competitive environment shifts, the company's strategy changes, or he or she must collaborate with or manage a different group of colleagues. So the question is not whether your company's employees and leaders have the right skills; it's whether they have the potential to learn new ones,“ he says. At Philips India, vice-chairman and managing director Krishna Kumar sees himself as a `talent scout' whose job is to `grow people and grow the organisation.' “Performance is an objective parameter, whereas potential is not,“ he says. “Potential spotting is not an exact science; so you need to take a risk. I would say we have had an 80% hit rate in spotting potential. If 20% have fallen by the wayside, it's because we were not rigorous enough, or didn't mentor them right. They eventually stopped learning.“ Philips' approach to spotting potential is tailored to its culture and business strategy. For example, as a marketing oriented company, it has traditionally drawn its business leaders from the sales and marketing function and that is where its top level talent spotting is most focused. The manufacturing, research & development, finance and human resources (HR) departments have their own high potentials, and they may be very different. But as they climb the hierarchy, high potentials are expected to have some common traits, like the ability to work in a team and think strategically. “In an environment that is rapidly changing, people with po tential need to have clarity on strategic choices,“ says Kumar. BPO major WNS Global Services has a program called WiNS, based on a per formance evaluation system originally created by Jack Welch of GE, which uses a nine box grid to assess employ ees, with potential on the x-axis and performance on the y-axis. The high performance, low-potential individuals, of which there are many, tend to be function are many, tend to be function experts who are not interested in managing teams. High-potential low-performance individuals thrown up by the system are those who have not managed to find their feet after a recent promotion and they're the ones in danger of being downgraded. The WNS assessment team, comprising 25 top leaders of the organisation, meets twice a year, and CEO Keshav Murugesh says the deliberations can get quite impassioned: “Everyone is in agreement on high potential, high performance individuals, but the debate heats up when there's disagreement on potential. The system is dynamic and it's not uncommon to have someone who was thought to have high potential reassessed as having low potential.“ The potential-performance quandary is not new. In his 1969 classic The Peter Principle: Why Things Always Go Wrong, Laurence Peter said organisations keep promoting competent people until they reach a level where they are no longer competent in their role. As a result, most large organisations come to be manned by people at their `level of incompetence.' Which is why most organisations now promote for potential and reward perfor mance with bonuses and incre ments. But not all. Richard Rekhy, CEO of KPMG India, has advised many a client on the subject and says, “Companies still promote solely on performance, leading to cases of former high performer exits. You need a very mature per formance system to capture the difference between potential and performance. Potential is about self-awareness, mental agility, the ability to change.“ What makes someone successful in a particular role today might not tomorrow if the competitive environment shifts or the company's strategy changes Qualities like self awareness are not always easy to discern, but the best corporates are trying. Most have lists of high potentials sts of high potentials and invest in them through training, mentoring, job rota tion and challenging assignments. Larsen & Toubro seeks to unleash the potential of its high potentials through a seven step process that culmi nates in the very best being posted as executive assis tants to the group executive chairman AM Naik for 18 months. “Our chairman himself mentors top talent who have the potential to reach a Board level position or an Independent Company (division) head position,“ says Yogi Shriram, head of corporate HR. “One young man posted at Seoul today is using the skills that he picked up in the Chairman's office to win customers and introduce L&T to substantial business opportunities.“ Organisations might save themselves a lot of effort if they could simply hire potential. This, however, is easier said than done. Fernández-Aráoz's article gives several examples of Egon Zehnder's CEO hires who turned out to be disasters, even though they seemed to have everything the job required at the interview stage. But it's not just new CEO hires that have the ability to cause pain -it's also the young recruits on whom the organisation invests substantially. Interviewing for potential is tricky and research shows that while the best interviewers' assessments have a very high positive correlation with the candidates' ultimate performance, some interviewers' opinions are worse than flipping a coin. The best organisations today call upon talented skill evaluators from across the organisation to sit in at interviews and ask the right questions and vastly improve the odds of hiring the right candidates. “Structured questions that measure agility, curiosity, social skills can be a big help,“ says Ninad Karpe, CEO & MD of Aptech. “For example, you could ask the candidate to describe how he managed to adjust to changes announced in his organisation, especially when he wasn't in agreement with the changes. A 30 minute interview is never enough to actually spot potential, but it can give you enough information to then go by your gut feeling.“ Campus recruitments are one opportunity organisations get to hire almost wholly on potential, which is why most CEOs make it a point to be a part of the exercise. At Marriott Hotels India, Rajeev Menon, area head for South Asia, leads the team at campus recruitments. After the rest of the team has ascertained the candidates know their subject, Menon likes to pitch a googly: “In our business, the ability to think fast and use common sense is an important trait at every stage of your career, so I throw in a few role-play type of questions which are meant to measure the candidate's ability to handle difficult circumstances. For example, I might ask them to sell me a glass.“ CD dibeyendu.ganguly