Exceptional Proff 600

IMPLEMENTING CARE IN ORGANIZATIONS

Human resource performance metrics: methods and processes

that demonstrate you care Neil Boyd

Department of Business Administration, Lycoming College, Williamsport, Pennsylvania, USA, and

Brooke Gessner School of Public Policy and Administration, University of Delaware,

Newark, Delaware, USA

Abstract

Purpose – The purpose of the present analysis is to show that HR systems are not always designed in ways that consider the well-being of employees. In particular, performance metric methods seem to be designed with organizational goals in mind while focusing less on what employees need and desire.

Design/methodology/approach – A literature review and multiple case-study method was utilized.

Findings – The analysis showed that performance metrics should be revaluated by executives and HR professionals if they seek to develop socially responsible organizational cultures which care about the well-being of employees.

Originality/value – The paper exposes the fact that performance appraisal techniques can be rooted in methodologies that ignore or deemphasize the value of employee well-being. The analysis provides a context in which all HR practices can be questioned in relation to meeting the standards of a social justice agenda in the area of corporate social responsibility.

Keywords Performance metrics, Performance appraisal, Organizational justice, Human resource management, Employee empowerment, Performance management

Paper type Research paper

Introduction The field of management has seen a precipitous growth in scholarly discussions of corporate social responsibility (CSR) in the past 35 years (Maignan and Raltson, 2002) as scholars worked toward determining its definition (Carroll, 1979, 1991; McClenahen, 2005; Hopkins, 2005; Aguinis, 2011), conceptualization (Carroll, 1999; McWilliams and Siegel, 2001; Goodpaster, 1991; Brown and Dacin, 1997; Davis and Blomstrom, 1975; Campbell, 2007), and measurement (Sethi, 1975; Woods, 1991; Parisi and Hockerts, 2008; Graafland et al., 2004; Aravossis et al., 2006). In short, CSR interventions attempt to promote responsibility for all stakeholders who are represented in the triple-bottom-line (people, profit and planet) of an organization. Several key issues have promoted the growth in attention to CSR including the lack of public sector capacity to solve social and environmental problems (Laslo, 2008), and increased pressure to act responsibly from legislative requirements, consumers, and other stakeholders (Berman et al., 1999; Donaldson and Preston, 1995; Kapstein, 2001; Laslo, 2008).

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1352-7606.htm

Cross Cultural Management Vol. 20 No. 2, 2013

pp. 251-273 q Emerald Group Publishing Limited

1352-7606 DOI 10.1108/13527601311313508

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In the field of business policy and strategy, both Porter and Kramer (2006) and Laslo and Zhexembayeva (2011) have recently promoted that CSR should be integrated into strategic business opportunities. In addition, a number of scholars have demonstrated that a company’s use of CSR leads to a more positive corporate image (Smith and Stodghill, 1994; Brown and Dacin, 1997; Creyer and Ross, 1997; Ellen et al., 2000; Sen and Bhattacharya, 2001; Jones, 1995; McGuire et al., 1988; Romm, 1994; Smith, 1994; Solomon and Hanson, 1985; Manaktola and Jauhari, 2007; Brammer and Pavelin, 2006), and others have shown connections to an increase in loyal customers (Miller, 2002; Kroll, 1996; Maignan et al., 1999), consumers being more likely to purchase a product (Brown and Dacin, 1997; Sen and Bhattacharya, 2001) and positive investor perceptions of the firm (Coffey and Fryxell, 1991; Graves and Waddock, 1994; Johnson and Greening, 1999; Dijken, 2007).

In terms of outcomes, several studies have found a link between CSR and organizational performance (Ruf et al., 2001; Simpson and Kohers, 2002; Wang and Bansal, 2012), and a number of other studies have explicitly focused on connections to financial performance (Elkington, 1997; Zadek et al., 1997; Wheeler and Sillapää, 1997; Gonella et al., 1998; McIntosh et al., 1998; Verschoor, 1997; Orlitsky et al., 2003; Griffin and Mahon, 1997; McWilliams and Siegel, 2000; Waddock and Graves, 1997; Peloza, 2009).

In the field of human resource management (HR), several authors have proposed that systems need to be developed which promote equity and social justice for employees (Corley and Eades, 2006; Elliott and Turnbull, 2005; Fenwick, 2005; Valentin, 2006), and it appears that HR managers are increasingly becoming responsible for delivering socially responsible HR interventions that align with organization-wide CSR. For example, including CSR messages in recruiting materials tends to attract employees who want to work in a socially responsible organizational culture. In turn, this also functionally produces a wider and more talented applicant pool (Fombrun and Shanley, 1990; Turban and Greening, 1997; Scott, 2004; Lievens et al., 2001). One reason this is thought to occur is because an individual’s self-image is based on the social categories to which they perceive they belong (Hogg and Abrams, 1988; Tajfel, 1978; Tajfel and Turner, 1985; Ashford and Mael, 1989; Grant and Hogg, 2012), including the organization where the individual works (Ashford and Mael, 1989; Dutton et al., 1994; Ellemers et al., 2004). Individuals will establish their self-image based on comparisons between groups they belong to with other groups, and favorable comparisons lead to increased self-image (Brammer et al., 2007). Therefore, individuals are the most satisfied when they are associated with organizations that are viewed positively because it increases their self-image (Maignan and Ferrell, 2001; Tajfel and Turner, 1985; Ashford and Mael, 1989; Dutton et al., 1994; Gavin and Maynard, 1975). In addition, potential employees look at a company’s CSR record when deciding if they would want to work in a particular organization (Greening and Turban, 2000; Turban and Greening, 1997; Lin et al., 2012). This so-called “signaling effect” shows that genuine CSR matters to recruits, and that organizational policies and actions serve as a signal of working conditions at the company (Breaugh, 1992; Rynes, 1991; Spence, 1974; Lin et al., 2012). When an individual identifies with the organization’s values, the attraction, retention and motivation of employees improve (Coldwell et al., 2008; Peterson, 2004; Gardner et al., 2001; Willard, 2002), and studies have shown that profits will increase (Collins and Porras, 1994; Graves and Waddock, 2000). Other studies have shown that CSR also increases engagement,

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high-quality connections with others, and creativity (Glavas and Piderit, 2009). Furthermore, when employees are proud to be a part of their company, they will tend to be more committed to their job (Peterson, 2004).

Training is another area where companies have invested in ethics, sustainability, and social responsibility. The most common forms are training courses and workshops which can effectively teach employees about these topics (Armstrong and Sadler-Smith, 2008). Another form of training that can be used is voluntary codes of conduct (Rowledge et al., 1999). Company visits to organizations that have already implemented sustainability practices can also be beneficial (Haugh and Talwar, 2010), as well as encouraging employees to volunteer in relevant organizations (Hess et al., 2002). Training in these areas also has positive impacts on the organization and often improves its performance ( Ji et al., 2012; Tan and Lim, 2012; Collier et al., 2011).

Companies are also trying to provide benefits that are socially responsible. From healthcare to pension plans, from wellness programs to flexible hours, companies are considering the social impact of their decisions. Wellness programs tend to provide positive life benefits, increase productivity, and also reduce costs that are associated with health problems of employees (Reavley et al., 2010). In order to make a more satisfying workplace, companies are also offering on-site child care, on-site health care, and a number of other perks that show a concern for the well-being of employees (Dennis et al., 2008).

Yet, with all of the recent interest in social responsibility in the field of HR, there are still many ways that HR professionals contribute to cultures which support organizational objectives while limiting a focus on employee well-being. A focus on employee well-being is important because common measures of well-being (e.g. job satisfaction) have been shown to correlate with many positive consequences for the organization and the individual (Bowling, 2007; Griffeth et al., 2000; Judge and Bono, 2001; Kinicki et al., 2002; Price, 1977, 2001).

In particular, performance metrics tend to be very focused on employee contributions to achieving the goals and outcomes of the firm, and therefore, as we shall see in subsequent arguments, current performance metric frameworks and methodologies do little to show employees that the organization cares.

The arguments that follow attempt to analyze several issues where HR performance metrics fail to deliver socially responsible methods that produce employee well-being. First, we will examine HR balanced scorecards, and several other macro-level HR metric systems which are used by HR managers to score overall performance of the HR function in organizations. We will show how these macro-level metrics often consider organizational goals in greater priority compared to measures of employee well-being. Next, we will examine performance metrics at the group and individual-level and show how systems like 360-degree feedback and individual employee performance appraisals are commonly designed in ways that inhibit fairness and justice for workers. Further, we will explore several components of performance metric systems which demonstrate to employees that an organization is concerned about delivering socially responsible measurement. We do this via a literature review and by analyzing multiple case studies of organizations who recently attempted to increase social justice and fairness in their performance management programs. Finally, we offer several suggestions for HR managers who are interested in designing socially responsible performance metric systems in their professional practice.

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Lack of focus in performance metrics One of the most recent developments in macro-level performance metrics involves the use of human resource scorecards. Based on Kaplan and Norton’s (1992) balanced scorecard framework (financial, customer, internal operational, and learning growth criteria), the human resource scorecard is a way of measuring the performance of people in an organization. The HR performance scorecard is broken down into several sections, each of which contains multiple metrics. While there are many ways to organize the HR scorecard, Table I shows two commonly cited HR balanced scorecard frameworks.

As can be seen in Table I, many of the metrics that are typically included in HR scorecards place more emphasis on achieving organizational outcomes rather than addressing employee concerns. The majority of metrics focus on quantitative and financial measures, such as job vacancy rate, number of employee referrals, salaries as a percentage of the budget, and various costs that are attributable to each employee. However, the most important metrics that affect human capital are those that deal directly with individual employee-related outcomes, and not merely aggregated quantitative and financial outcomes. For example, there are few variables (if any) directly related to employee well-being, developing life skills, and furthering personal professional development goals that may or may not relate to one’s present job.

Elliott et al. (2010) Huselid et al. (2005) Criterion Sample metrics Criterion Sample metrics

Attracting talent

Job vacancy rate time to hire, type of hire, source of hire

Work force success Metrics that reflect goals of workforce scorecard, such as competencies, mind-set and culture, workforce behavior, competencies employee satisfaction score

Engaging Numbers of grievances, number of employee referrals

Right HR functions/ workplace costs

Accident costs, attendance, benefit costs per person, average employee tenure, turnover ratio, offer-to- acceptance ratio

Operations Salaries, wages, and benefits as percentage of budget, revenue per employee

Right type of alignment

Extent to which employees feel performance appraisal standards are fair, quality of training

Retention Total and voluntary turnover, top voluntary turnover reasons, retention rate for top performers

Right HR practices Firm salary/competitor salary ratio, HR employees/ total employees, number training hours, percent retention of high performing employees, time to promotion

Workforce demographics

Number of active full-time employees, staff by diversity category, staff by gender

Right HR professionals

Percent of HR professions with graduate degrees in HR

Development Training type, training cost, promotions

Sources: Huselid et al. (2005); Elliott et al. (2010, pp. 206-214)

Table I. HR Balanced scorecard frameworks

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Relatedly, Chen and Jones (2009) found that employees do not feel that balanced scorecards accurately represent their work performances. The lack of correlation between perceived work performance and scorecard outcomes shows that balanced scorecards are not successfully addressing the needs and concerns of the employees.

On another front, the recent creation of ISO 26000 guidelines and the Global Reporting Initiative are direct attempts to create metric systems which promote social responsibility in organizations, and HR professionals are using these systems as rubrics for macro-level HR assessment. The International Standard ISO 26000 (Guidance on Social Responsibility) provides voluntary guidelines in seven core subjects which include organizational governance, consumer issues, community involvement and development, human rights, labor practices, the environment, and fair operating practices. Examples of the metrics include human rights measures which focus on due diligence, resolving grievances, civil and political rights and discrimination. Others include labor practices which concentrate on topics such as employment and employment relationships, social dialogue, health and safety, development and training, and fair operating practices which contain guidelines on anti-corruption, responsible political involvement, and fair competition (International Standards Organization, 2011).

The Global Reporting Initiative Sustainability Reporting Guidelines covers six criteria: economic, environmental, labor practices and decent work, human rights, society and product responsibility. Example metrics include labor practices which index employment, labor/management relations, health and safety, training and education, and diversity and equal opportunity metrics. In addition, human rights measures are included which focus on investment and procurement practices, non-discrimination, freedom of association and collective bargaining, child labor, forced and compulsory labor, security practices, and indigenous rights (Global Reporting Initiatives, 2006).

It is clear that the ISO 26000 and Global Reporting Initiatives are a step in the right direction, and are important advancements in socially responsible reporting. However, these metrics are macro-oriented systems that capture the practices of an organization as a whole, and are voluntary programs in which relatively few organizations participate. The clear majority of organizations across the globe use performance metric frameworks like those discussed earlier which almost exclusively focus on organizational goals, or they use traditional performance appraisal techniques that have dominated the performance metric landscape for decades.

With this in mind, the next set of discussion points will center on employee performance appraisal systems that are at the heart of typical performance metric systems used in organizations. Subsequent arguments will demonstrate several issues that prevent human resource professionals from delivering performance metrics that are comprehensively socially responsible.

Performance metrics: failed attempts to create fairness Attempts to design efficient and effective performance appraisal metrics has proliferated over the last seven decades (Landy and Farr, 1980), yet scholars continue to argue about the validity, merits and whether or not these systems are fair in the eyes of employees.

Performance metrics can provide useful information to supervisors and the leaders of firms for decisions regarding merit pay, promotions, training needs, and they may

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be important for legal purposes and for the development of valid selection predictors (Taylor et al., 1995). Ideally, performance metrics could be used to keep track of one’s “objective” performance for a variety of reasons. Thus, under ideal conditions, they could serve as the means of deciding fair pay increases, promotions, demotions, and a host of other outcomes. However, regardless of their importance to leaders in organizations, there are empirical and philosophical reasons to question the fairness of performance metrics for employees.

From a measurement and empirical point of view, performance metrics are unjust if they do not accurately measure the performance of an employee. Unfortunately, several problems on this front abound including, rater evaluation subjectively (DeNisi and Williams, 1988; Longenecker et al., 1987), differential standards of raters which causes inconsistent, unreliable, and invalid evaluations (Folger et al., 1992), central tendency, halo, leniency errors (Bardo and Yeager, 1982; Bardo et al., 1982; Greenleaf, 1992; Smith and Albaum, 2005; Landy et al., 1980), and the inability to fully capture all of the job-related criteria that exist for a position within one performance metric system. In addition, performance metric metrics can be unfair because of distributive, procedural, and social justice problems (Boyd, 2010; Boyd and Kyle, 2004; Brown and Benson, 2003; Gabris and Ihrke, 2001; Tyler and Bies, 1990).

Distributive problems Concerns about distributive justice in the performance metric literature typically note that employees may feel they are not receiving appropriate outcomes in the form of money, recognition, and decisions that directly affect them. From this perspective, the primary premise of a distributive problem is that feelings of discomfort motivate employees to restore cognitive equity by altering their behaviors, attitudes, or both (Adams and Freedman, 1976; Greenberg, 1990; Walster et al., 1978).

In the case of performance metrics, distributive justice requires that “performance metric ratings meet employee expectations, outcomes are based on the ratings, and outcomes meet the expectations of employees” (Bowen et al., 1999). In regard to outcomes specifically, employees need to perceive that monetary or social outcomes are directly tied to evaluation metrics. For example, if a monetary outcome was promised following an evaluation, the amount of the monetary increase needs to meet employee expectations of fairness.

Procedural problems Procedural justice centers on the perceived fairness of the means, or procedures, used to determine performance metric outcomes (Folger and Konovsky, 1989). For procedures to be perceived as just, they should:

(1) be applied consistently across people and time;

(2) be free from bias;

(3) ensure that accurate information is collected and used in making decisions;

(4) have some mechanism to correct flawed or inaccurate decisions;

(5) conform to personal or prevailing standards of ethics or morality; and

(6) ensure that the opinions of various groups affected by a decision have been taken into account (Colquitt et al., 2001, p. 426).

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One of the central contributors to procedural justice is the amount of autonomy employees have in relation to the performance metric system. Individuals prefer to be in control of decision-making processes rather than be passive recipients, and this can significantly impact justice perceptions of employees (Douthitt and Aiello, 2001). Further, individuals want to be respected and valued members of groups, and they perceive higher procedural justice when they feel valued and accepted by group members in the midst of performance metric systems (Lind and Tyler, 1988; Robbins et al., 2000).

Social problems Social justice in the context of performance metrics centers on the fact that social problems exist beyond the boundaries of organizations that seep into the fabric of internal organizational life, and into the design and execution of performance systems. Boyd (2010) and Boyd and Kyle (2004) showed that social justice concerns were not typically considered in the justice literature, and that ignoring this stream of thought was underserving the needs of employees. For example, employees are typically subjected to subordinate positions, or even worse, ignored when performance metric systems are designed and implemented which is a social construction of the manager/employee relationship in many cultures (i.e. especially western cultures). In addition, they argued that social constructions which follow legal mandates in the design of performance metrics (e.g. job-related criteria as key indices) usurp perceived justice for employees who want performance metrics to make sense (Weick, 2001).

Expanding justice arguments in relation to performance metrics To date, justice arguments in the management literature have focused narrowly on the procedures and distributions of performance metric systems. And while there are undeniably procedural and distributive problems with performance metric systems, there has been a lack of attention to social justice problems which promulgate the design of contemporary performance metric systems. Many of the distributive and procedural problems with performance metrics are a function of external environmental social problems, and if ignored, will perpetuate the development of ineffective and unfair performance metric systems. Therefore, a few illustrations will be presented that center on social justice problems in performance metric design which comparatively have lacked attention by scholars and practitioners in the HR literature. First, a discussion of the legal system will be provided, which will show how external environmental social conditions shape the very definition of performance metrics. Next, an analysis of a leading performance metric system, 360-degree feedback, will be presented in light of several social justice concerns.

Performance metric designs: legal systems and control Human resource managers are required to design performance metrics based on “essential job functions” (i.e. using a knowledge, skills, abilities, others approach (KSAOs)) promoted in civil rights laws such as the Equal Opportunities Act of 1964 and the Americans with Disabilities Act of 1990.This requirement is intended to reduce overt discrimination in performance systems. However, what many employees perceive is that the KSAO analysis is too limiting a definition of what constitutes appropriate performance metrics. Therefore, in response to legal social constructions, KSAO analysis biases performance metric designs from their

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very inception. In our quest for objectivity and legal compliance, we have strayed from meeting the psychological expectation of workers for a fair performance metric system.

Another social construction is that performance metric systems should be designed by human resource professionals. Sometimes employees are allowed to be used as subject matter experts (SMEs), but even then, they tend to be subordinate to human resource professionals who “own” the performance metric system. Our legal system does not mandate who develops the performance metric system. The legal requirement is that it is non-discriminatory. Yet, if employees do not have a full stake in the process cognitively and emotionally, they will not feel ownership of the process, and there justice concerns will not be met.

Once the performance metric system has been developed, it is common that a supervisory-driven process is used on organizations. Employees are typically subjugated during the performance review and are not sufficiently empowered to seriously contest or modify the evaluation from their superior. Therefore, the most common form of performance metric implementation contains a bias of power and control that is rooted in the social construction of hierarchy.

As a challenge to the socially constructed problem of hierarchy, alternatives to supervisory-driven rating systems have been explored and developed by human resource professionals. One alternative is 360-degree feedback, which purportedly improves measurement accuracy and employee fairness perceptions. Ironically, the analysis presented next will show that social justice concerns are not solved by this apparent “progressive” performance metric advancement.

360-degree systems and their latent injustices Proponents of the 360-degree feedback (i.e. measurement from a variety of stakeholders to an individual) believe that it addresses many procedural justice concerns (Church and Bracken, 1997), and are well suited for the flexible, team-based, cultures in many organizations today. In addition, it apparently reduces measurement errors (central tendency, positive skewness, halo effects, and single-rater bias), it helps in defending legal challenges related to bias, it meets employee empowerment needs, and it exercises employee opinions and attitudes. While there can be a tendency to underrate or overrate oneself in self-rating systems (Eichinger and Lombardo, 2004), individual rankings are less likely to contribute to significant bias because scores are combined with all others in the 360-degree system. In terms of the six criteria for evaluating perceptions of fairness in employee evaluation outlined by Colquitt et al. (2001) above, 360-degree metric systems seem to answer most, if not all, of the concerns. However, 360-degree metrics could be met with a number of objections including:

(1) 360-degree systems unreflectively maintain hierarchy as a norm which many contend is often a source of injustice; and

(2) such systems unreflectively promote the possibility and goal of impartiality which many challenge (Savage and Witz, 1992; Box, 1995).

Despite the fact that employees measure themselves, and ratings are gathered from peers and others, final decisions about employee advancement and retention are still controlled by management. The implications of such a situation are important, because a performance metric system that “cares” might be predicated on the need for an

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organizational restructuring that allows employees to have a greater voice in basic decisions that affect the organization as a whole.

Performance metric solutions that show you care Underlying the present analysis is the contention that human resource professionals have not adequately expanded their view of performance metric design to include social justice concerns. By widening their view of justice, human resource managers could team up with organization members to co-develop a mutually agreed upon performance metric system. Such a system could intentionally address the organization’s internal culture, and in doing so, they could introduce some degree of democratic governance into the workplace itself.

Allowing the employee to be part of the evaluation process can increase employee autonomy, and help to ensure that the employee’s voice is heard. In turn, autonomy has been shown to correlate with important individual and organizational outcomes (Boezeman and Ellemers, 2009; Lange, 2012), and therefore, co-developed performance metric systems can aid in achievement of desired organizational goals. Moreover, the view that employees should be a part of the performance measurement system is aligned with the stakeholder view of the firm (Crilly and Sloan, 2012) which is now more commonly used by organizations that put a premium on including all relevant stakeholders in organizational decisions.

In direct relation to performance metric systems, a variety of organizations have experimented with seemingly high levels of employee empowerment (Clifford, 1999; Coggburn, 1998; Hutt, 1994). However, empowerment of employees has mostly occurred during the measurement of performance (i.e. self-measurement or subordinates measuring managers), and not in the design phase of the system, such as the development of performance standards and rating forms (Roberts, 2003). As developed in the preceding analysis, a fair and caring methodology should empower employees in all phases of performance metric system.

With this in mind, Boyd (2010) and Boyd and Kyle (2004) provide guidance by suggesting that “we can envision a future where, during the interview process, or very early after one is hired”, someone asks the question, “How can we most fairly evaluate your work performance?” Employees would be co-authors in developing the performance metric system when they feel comfortable enough with their job tasks. Instead of being told by the management team how performance will be measured, employees would have an immediate stake in deciding how they need to be evaluated. Employees might have different reactions to this situation, but in the end, when an employee is comfortable with the way their performance is measured, then the system has met their psychological expectations for validity. Validity of performance metric systems would entail consideration of the degree to which the measurement system is correlated with one’s psychological acceptance of the correctness of the system, along with other more traditional considerations. The result of such a process would be to customize performance measures for individual employees, or collectives of employees, that meet their psychological expectations of a just system.

During the process, management would act as a facilitator or mediator. Employees would own the performance metric process, and human resource professionals would exist in an advisory role. The process would encourage employees to engage in self-reflection, and reflection of organizational, and other issues, that affect their work.

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During the design phase, employees would be encouraged to create metrics that focus on immediate work performance, but they would also be able to design measures in others areas like professional development (both short and long term), and life skills. For example, if an employee is interested in becoming a manager someday, they might design measures of professional skills that are needed for the future position that could be assessed during the performance of their current job. In addition, we can envision situations where employees might desire to improve a core life skill, like verbal communication for example, where they want to measure that skill even if it is not a behavior that occurs with great frequency in their immediate job.

After the system is designed, an implementation step could include employees reporting their performances to others instead of management reporting it to them. This method would also reduce the problem of managers feeling that they need to give up significant amounts of time in conducting performance metric reviews during the year. Hence, a positive side effect of this method might be to free up management to perform other duties besides performance metrics. Further, if employees controlled the metric process, they would have fewer legal grounds to file legal actions against the organization regarding perceived incorrect evaluations. In essence, with increased control of the process, employees would also increase their level of accountability for the system, thus alleviating some of the accountability burdens for the organization.

Moreover, the system could be jointly implemented by employee groups and HR professionals, and the data would be collected and shared between appropriate parties. In most current organizations, even when employees complete self-evaluations, they go to a performance review meeting to learn how the supervisor (and perhaps others) evaluated them. At the meeting, employees are typically not able to seriously contest or modify the evaluation once it has been completed by the supervisor. Therefore, common performance appraisal systems contain power and control issues that are rooted in hierarchy. As Freire (1970, p. 34) noted:

[. . .] the oppressor knows full well that this intervention [giving employees control] would not be to his interest. What is to his interest is for the people to continue in a state of submersion, impotent in the face of oppressive reality.

A fair system that showed a deep sense of caring would allow employees to have a greater voice in analyzing the data, verifying its validity and meaning, and contesting findings.

In order for these activities to occur employees would need to be trained in advanced performance appraisal methodologies, and develop enough expertise so they could converse with HR professionals at an equal level. In a setting like this, HR professionals would need to abdicate their authority of the performance metric system, the knowledge asymmetry that manifests as power over others and allow employees to have a greater stake in the intellectual decision-making process regarding the performance metric system. If these conditions were to occur, the organization would be well on its way to creating a culture that demonstrated a caring ethos toward employees.

Moving toward caring performance appraisal systems In relation to the tenets of caring which we have articulated so far, a few companies are utilizing different methods to create more meaningful and just performance appraisal systems. These attempts range from performance previews, to social media software

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systems, to complete overhauls of the performance appraisal system. We present three cases and demonstrate how the performance metric solutions show that one cares. In addition, we will discuss positive and negative lessons learned in the process of developing the performance appraisal systems (Table II).

An entry-level attempt One method that has recently been explored as a step toward caring in a performance appraisal process is the implementation of performance previews. The previews are goals that are developed through a meeting between the employee and manager and are ultimately set by the employee. The manager and employee are jointly responsible for the employee’s success in meeting the goal (Culbert, 2008). A company called Here Media, Inc., a publisher of several magazines including Advocate and Out, uses performance previews to create a more flexible culture. Twice a year, employees and managers meet to set goals and discuss ways to meet the goals. Paul Colichman, CEO of Here Media Inc., has found that this allows the employees to be more empowered and motivated to perform well (Pyrillis, 2011). This system allows employees to be

Level of caring

Company name Caring tenet Positive outcomes Negative outcomes

Entry level

Here Media, Inc.

Employees are co- authors

Increased employee motivation

Not fully employee owned Managers and employees are jointly responsible Hierarchical system No training for employees No employee reporting to others No greater employee voice

A step further

Rypple Employees report findings to others

Increased accountability

Inauthentic feedback Hierarchical system Employees are not part of design process Not fully employee owned

Frees up time for managers

Increased communication

Employees have increased voice Employees have some control

Reporting outcomes Frees up time for managers

A serious attempt

Atlassian Employee participation in design Employees have greater power Less hierarchical system Job related elements/ future job elements/ elements outside job Managers are facilitators/ mediators Training for managers

Increased engagement scores Increased communication Smaller team size No ratings Focus on employee strength and interest Management as coaches Engagement in design Less hierarchical system Employees own part of process

Lack of training for employees

Table II. Advancements in

performance appraisals

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co-authors of the performance appraisal system by enabling them to help set the goals. However, the employees do not truly own the process, and the system is still hierarchal with managers being the ultimate judge of performance. The method does not provide training for employees about setting their own goals, does not allow employees to report their progress to others, and does not truly allow the employees a greater voice in the organization. While the performance preview method is a step in the right direction, it does not go far enough to show that the company cares about its employees.

A step further Another method that is being used by companies, which goes further toward developing a caring system, is to redesign the performance appraisal system via the application of social media software systems. One example of a software system now being utilized is Rypple, a social media tool created by a Toronto-based company that focuses on the ability to ask for feedback from colleagues on a range of topics, offers the ability of users to give “kudos” to peers, which are badges representing a job well done (McClearn, 2010), and allows managers and employees to set goals and track progress towards them (Kalman, 2011). Facebook is a high-profile company which uses Rypple because they needed a more employee-driven performance appraisal system. The company felt that their traditional performance appraisal method was not effective, and considered doing away with the system entirely. However, many employees wanted to keep some form of a system in place because they wanted to be fairly and accurately recognized for their achievements, and compensated accordingly. Facebook eventually developed two processes – a continuous feedback and recognition process that eventually fed into a more formal review. As Facebook looked for a software system to use for their continuous feedback system, they came across Rypple, and worked with them to design a product to fit their needs (Carr, 2011). Besides Facebook, companies such as Mozilla and Digg are now using the Rypple software (Holloway, 2010).

Enservio, a Massachusetts based business-to-business company also implemented Rypple after a pilot test involving five employees was conducted, and it soon spread to over seventy employees. The company has found that the system is quicker and more useful than a traditional performance review. The main benefit the company has received since implementing the system has been an increase in accountability, goal progress being public, and performance can easily be updated. It is also allowing more communication between managers and workers, and employees are more productive and motivated (Kalman, 2011).

However, Rypple does not solve the problem of performance appraisals entirely. Rypple succeeds in allowing employees to report the findings to others through the use of badges, and the method does free up more time for managers. While employees have an increased voice in the organization, employees did not design the system, and management still acts in a hierarchal way during the traditional performance appraisal part of the system. While Rypple allows employees to have some control, they still do not own the process. Further, outgoing employees who often brag about their accomplishments might be more likely to receive praise through the system, while quieter employees who work more behind-the-scenes might still not receive the praise they deserve. Peter Cappelli, director of the Wharton Center for Human Resources,

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recently stated that many employees view the feedback from these programs as “not authentic,” and believe that the feedback is only occurring because “software triggered [the] supervisor to respond” (Stern, 2012).

A serious attempt At a more extreme level of delivering a caring performance appraisal system, in August 2010, Atlassian, an Australian software company, set forth to reimagine their performance appraisal system, and published a blog describing their progress. In the past, Atlassian had used a 360-degree review system, in which a variety of stakeholders rated team members on a five-point Likert-type scale. The company found that the performance appraisal process was taking too much time, and was causing stress and anxiety. After conducting a review, the company found that there were no viable alternatives for them to model their new system after, so they decided to create a method from scratch.

The model Atlassian finally developed included one-on-one meetings held every month to discuss how the person could enhance their own performance. Each month’s conversation was to focus specifically on a single coaching topic in order to give equal attention to different issues. Coaching topics included career development, strengths, and interests. The focus on ratings was completely removed, as well as individual performance bonuses. The new system focused on two scales for measuring performance: achievements, and how often the employee had stretched themselves. Employees and managers evaluated team-members on both scales, and the measures were then compared and used as a topic of discussion. An informal praise system was also set up, where employees could give “kudos” to peers without manager approval for a job well done.

Atlassian faced five problems in the development and implementation of their new system: a lack of best practices, a lack of HR systems to fit their process, lack of experience in coaching conversations, large team sizes, and the lack of numbers. Because Atlassian was designing a completely new system, they had no system of best practices to rely on. Atlassian also had trouble finding a software system that fit to their new system, but eventually found a small start-up which created a software program for them. The new system also placed managers in a new role, that of a coach. Many of the managers were unsure of their roles, and they did not know how to handle coaching conversations. This problem was solved by hiring an executive coach to offer trainings to the managers. Atlassian also found a problem with their structure. Some of the teams were just too large for one manager to handle all of the necessary coaching conversations each month. This led to a restructuring of the company to a method that featured smaller teams. Finally, Atlassian faced some problems with employee complaints regarding the rigidity of numbers in the system, even though the numbers provided guidance of how an employee was performing, and if they needed to work harder to improve. This was simply a cultural issue that the company had to adjust to over time.

Overall, Atlassian received many benefits from the implementation of their new system. The new system has put on a focus on employee’s strengths and interests, and all staff members have had conversations about their strengths, and how they can utilize their skills to focus on things that they enjoy doing. The “kudos” method was very successful, extremely popular, and engagement scores of both independent and internal staff were both over 80 percent.

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The lessons learned from Atlassian include challenging best practices, working around a lack of HR systems to match your process, and making bold, inspired decisions. If the current performance appraisal system is not working, a company must re-evaluate their process, even if it fits with best practices. A new performance appraisal system does not have to match an already established HR software system in order to be successful. If the new performance system is worthwhile, a software system can be developed. Further, while it is hard to go against tradition and propose something radically different, it can be beneficial to the company to take a chance (Luijke, 2011).

Atlassian’s complete system overhaul is the closest example we could find of an employee-controlled system currently available in the literature. Atlassian employees were involved in the design of the system, and employees owned part of the process. It gave the employees greater power, and made the performance appraisal system less hierarchal. Several recommendations for a caring method which are present in Atlassian’s system are the importance of job related elements, future job elements, elements that are currently outside their job, and the use of management as facilitators and mediators. Employees talk about the parts of the job they especially like, and where they want to see their career go in the future as topics in the coaching meetings. In addition, every quarter Atlassian sponsors “FedEx Days,” where employees are allowed to work on their own ideas for twenty-four hours, after which the ideas are presented to the entire company (LaBarre, 2011). Atlassian also calls its managers “coaches” which plays into the idea of managers as mediators and facilitators. However, while Atlassian provided training for its managers to become good coaches, it did not offer training for the employees. Although Atlassian currently has a very progressive performance appraisal system, their case shows that companies can potentially go farther when attempting to reach the goals of an employee-owned caring and just system. Yet, in the end, the case of Atlassian shows that caring performance metric systems produce more positive outcomes compared to other systems.

Conclusions The present analysis showed that CSR ideations have increased in recent years, in management, and in the field of human resources. However, there are important areas of practice where fairness and social justice toward employees is not manifested. In particular, the analysis showed that most performance metric systems are designed with a singular focus on organizational goals, and a primary intent to serve the interests of the organization. In addition, procedural, distributive, and social justice problems continue to permeate the inherent culture of performance metric systems. Most current popular systems of performance metrics fall squarely into a domination system, with top management often developing, evaluating, and showing the results of performance metrics to lower level employees. In order to show they care, companies need to move to a more partnership-based system that includes all employees in the development and use of performance metrics.

This is consistent with Eisler and Carter’s (2010) proposition that organizations need to develop egalitarian systems which overtly promote empathy, caring, and listening, rather than an abusive and dominating management style. In addition, it is just as important to focus on latent manifestations of procedural, distributive, and social justice concerns which exist outside the daily realm of cognitive reflection.

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In the case of performance metrics, it is clear that a variety of advancements need to occur in order to eliminate both manifest and latent justice concerns which impede employees from receiving the care that they deserve.

Finally, the present analysis suggests several important lessons for HR managers who are interested in designing socially responsible performance metric systems. First, employees should be involved as co-authors in the design phase of the system. Employee involvement at this stage will promote goodwill, and give workers greater authority, control, and a genuine stake in the system. Second, performance metric systems should be designed with the intent of reducing hierarchical relationships between management and employees. This will change the role of the manager in a way where they act more as a facilitator and mentor to employees, and less as the ultimate authority who determines performance scoring. As the case analysis demonstrated, this will likely increase communication and employee engagement at work. In addition, performance appraisal metrics should focus on job related tasks, but they could also include future desired job elements which help employees in their professional development, and outside-of-work elements which help employees reach life goals that they desire to seek. Last, these newly designed performance appraisal systems would require managerial training in which managers would learn how to effectively co-design metric systems with employees, and act as a coach during the implementation and measurement phases of a performance measurement process. In the end, HR managers who attempt to implement these lessons would be well on their way to delivering socially responsible performance metric systems in their organizations.

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About the authors Neil Boyd is an Associate Professor of Management and Chair of the Business Administration Department at Lycoming College where he teaches courses in human resource management, organization development, and sustainability. His research examines organizational development and change issues with a primary focus in organizational behavior and human resource management in all types of organizations. His work has appeared in a variety of publication outlets including the Organization Development Journal, Public Administration Quarterly, the Journal of Community Psychology, the Journal of Prevention and Intervention in the Community, and Administrative Theory and Praxis. He is a past Division Chair for the Public and Non-Profit Division of the Academy of Management, and is Chair of the Organization Studies Interest Group in the Society for Community Action and Research (Division 27 of the American Psychological Association). He holds a PhD in Public Administration and a Master’s Degree in Business Administration from the Pennsylvania State University, a Master’s degree in Experimental Psychology (with a focus in industrial/organizational psychology) from the University of Notre Dame, and a Bachelor’s degree in Psychology from Bloomsburg University. Neil Boyd is the corresponding author and can be contacted at: [email protected]

Brooke Gessner is a graduate student at the University of Delaware pursuing a Master’s in Public Administration with a concentration in nonprofit management. She graduated suma cum laude from Lycoming College in 2012 with a degree in Business Administration and concentrations in marketing and finance. Her research interests include sustainability, social justice and civil liberties.

To purchase reprints of this article please e-mail: [email protected] Or visit our web site for further details: www.emeraldinsight.com/reprints

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