Labour Research (December 2013)

Features

Time to ring down the curtain on this performance

New forms of performance management are causing misery for thousands of workers.

According to mainstream human resource management literature, performance management aims to improve the effectiveness of organisations by developing teams and, in particular, individual workers.

It is supposed to be about getting the best out of worker­s, within an ethos of mutuality, consensus and shared decision making.

So how did concerns over performance management almost lead to the first national strike in over a quarter of a century at telecoms giant BT?

Earlier this year, research on performance management commissioned by the Scottish TUC (STUC) confirmed what unions, particularly those organising in finance and telecommunications, had been reporting for some time.

The unions’ suspicions were summed up in the title of the research report, Performance management and the new workplace tyranny, based on a three-year study by Professor Phil Taylor at the University of Strathclyde. The study was the outcome of a debate at the 2009 STUC Congress.

A resolution proposed at Congress by the telecommunications CWU union and seconded by the finance sector of the Unite general union set out that performance management was now widely used throughout the public and private sectors and a central element in human resource management policy and practice.

But it was often being used “to pressurise workers into producing more, drive down wages and create quotas for underperformers and manage workers out of their jobs”.

Delegates reported that it was causing mental health problems including stress, anxiety and depression as well as rising sickness absence levels.

Taylor’s findings make for alarming reading. The report, which focussed particularly on the telecoms and finance sectors, found that the practices are widespread, affecting thousands of Scottish workers.

It reported “a significantly negative impact” on workers as a result of “unrelenting intensity” generated under new forms of performance management. And evidence in the report “overwhelmingly confirms the stressful consequences” of these new regimes. Performance management practices “are not merely unjustifiable on grounds of welfare, decency, dignity and well-being, but also counterproductive from a managerial perspective,” the report said.

“They require enormous commitment of resource by middle and front-line management and serve merely to create a deep well of discontent amongst a highly pressurised workforce.”

Elements of performance management systems

Mainstream human resource management (HRM) literature, says Professor Phil Taylor’s report, claims that performance management “is a systematic process for improving organisational effectiveness through developing the performance of teams, but most importantly that of individual workers”.

There is an assumption of mutuality, consensus and shared decision-making. But Taylor’s study found that employees’ experience of performance management in the workplace contrasts starkly with the version presented in HRM textbooks, with workers subjected to claustrophobic control, micro-management and the unilateral imposition of harsh discipline.

Performance appraisal, or review, is a key element in the performance management cycle — central to ranking and rating employees, targeting underperformers and performance and performance-related pay.

But appraisal is often no longer an “annual ritual”, instead taking place bi-annually or even quarterly.

Taylor says the most insidious element of performance management is the so-called “Bell Curve”, or “forced distribution”. This is where employee performance is ranked according to pre-determined percentages irrespective of the level of actual performance.

In the worst cases, managers are given targets for the number of workers who should be underperforming, put on sickness absence management actions or “exited out” of the organisation.

Should managers fail to meet the targets, they themselves will be judged to be underperforming.

And the “real bite” for workers, lies in Performance Improvement Plans (PIPs) or their equivalents, imposed on those judged “under performers”. These can cause huge anxiety and stress because they can be almost impossible to get out of.

Taylor’s report says: “The evidence is that these PIPs most often are not about providing the coaching and support needed to help employees improve but are for ‘performance managing’ people out of the door.”

The speed of these “managed exits” is astonishing — in two case study organisations it was only 12 weeks between being put on an improvement plan and then being exited.”

The study provides shocking examples of bad practice. In one organisation, cabbages and cauliflowers were placed on the desks of workers identified as “underperformers”. The union there ensured the practice was stopped, but reported that the company concerned was finding “other ways of embarrassing and humiliating people”.

In another, the “car-park conversation” involved a manager taking an employee who had received a poor performance score outside for an “informal discussion”.

The company provided a one-day course for HR managers to go through the mechanisms for best ensuring that an employee would voluntarily suggest a compromise agreement.

This is a legally binding agreement between an employee and employer setting out the terms and conditions reached when a contract of employment is terminated.

In signing the agreement and accepting the settlement terms, the employee gives up their right to make a claim against the employer in a court or employment tribunal. They have since been renamed “settlement agreements”.

BT

It was, the CWU reports, an “exponential rise” in these agreements, together with what it calls “clear evidence” that the company was using “forced distributions” (see box above) that prompted the threat this summer of the first national strike at BT for more than 25 years.

The CWU reported that BT’s use of targets for “managed exits” had driven an increase in the number of people leaving the organisation under compromise agreements.

CWU assistant secretary Colin O’Callaghan told Labour Research: “The numbers increased exponentially, from very small to significant numbers, particularly among BT engineers.”

The union says it also uncovered “clear evidence” that the company was using “forced distribution” of performance markings using arbitrary mathematical calculations. These assumed that a certain percentage of the workforce must, by definition, be underperforming regardless of actual performance.

Strike action was averted at the last minute when in August, BT, the CWU and the managers’ and specialists’ Prospect union reached a deal. According to the CWU, this sets out assurances that mangers would not use forced distribution of performance management markings to set or respond to targets for managed exits.

It includes a new appeals or “escalation” process to enable the unions to identify and challenge continued areas of abuse. And it makes clear that there will be no inappropriate use of compromise (settlement) agreements.

The union says it builds on the 2011 “two-way deal” on performance management, which significantly improved sickness absence management but failed to eradicate the worst excesses of performance management.

O’ Callaghan led the CWU negotiating team and explained: “The deal now needs to be seen to work in practice, and I would say that both staff and the union are hopeful rather than happy. It will need time and a massive cultural change to deal with the loss of trust.”

The unions have also welcomed BT’s offer to commission an independent review of management practices across the business.

Finance sector

The finance sector was the other main focus of Taylor’s report. Here, Unite reports, employers have used performance management and the restructuring of work methods to be “leaner” and more “cost effective”.

As a result, work has intensified and, the union says, finance workers fear for their jobs and face a culture of bullying and harassment and a continued attack on their terms and conditions.

According to Unite research officer Liz Cairns: “Many members initially took performance management on board and were able to identify opportunities which could reward them for their hard work.

“Following the financial crisis, with bonuses cut and an increasing gap between inflation and real wages, a failure to acknowledge the contribution of a significant majority of the workforce and a widening gap between the pay at the top and those further down the ladder, it is no longer delivering for them.”

For many workers in the sector, performance management and performance-based pay is the only system they have known. “This needs to change,” said Cairns. “We need alternatives to performance-based reward, which are fairer and more transparent where successful companies reward the workforce more equitably.”

In addition, between 2008 and 2011 more than 150,000 jobs were lost. Unite’s perception is that people are managed-out of organisations on the cheap on the back of so-called underachieving and poor performance.

Labelled as “underperforming” they can be subject to disciplinary procedures and may well exit the organisation purely on perceived poor performance. Unite believes that this process is a strategic exit policy to avoid paying redundancy pay in some companies.

And while organisations deny they are using the Bell Curve, Cairns has no doubt that it is being used. The numbers of workers involved in the disciplinary process has increased significantly over the past five years.

Unite points out that performance management has not only had serious negative consequences for staff, but also for the financial institutions they work for. For example, Cairns reports that staff were pressurised to sell personal payment insurance (PPI) products and meet targets, with many “managed-out” for underperformance if they did not achieve them. Yet the mis-selling of these products is expected to cost the industry more than £20 billion in PPI compensation payouts to customers.

Intrusive rigid systems damaging health, morale and innovation

Unions generally accept that some level of managing performance is necessary to get the best out of workers, but there is alarm at the way this is now being undertaken in some quarters.

As O’Callaghan said: “Technology-driven companies like BT can increasingly monitor everyone and everything, every keystroke, every van journey, to produce measureable statistics.”

And Prospect deputy general secretary Dai Hudd told Labour Research: “The HR community has developed ever more sophisticated levels of performance management and the practices are becoming very intrusive.

“They are corrupting the relationship between managers and the people they manage by taking away the margin of judgement needed for trust. There are ever more detailed matrices and enormously intensive appraisal practices.”

He explained that while the practices being deployed look benign and difficult to object to on paper, they look at every aspect of performance in very rigid terms and the frequency with which performance is measured is, in some cases quarterly, rather than annually.

He added: “Very powerful tools are in the hands of people who in many circumstances are ill-equipped and ill-trained to use them properly.”

Cairns said: “It doesn’t have to be like this, but examples of good practice are hard to find, while we are inundated with examples of bad practice and people being unfairly treated. Phil Taylor’s research is really useful because we have academic evidence to back up what we have been saying for years.

“I do think it has reached a turning point and there is more recognition that the system needs to change; but we need to be able to provide alternatives to make that change.” Hudd agrees and reports that Prospect is seeking to promote debate within the HR community about performance management and about what “good work” looks like.

“Where members have been surveyed by Prospect, they overwhelmingly don’t think that these practices are beneficial for business, very large numbers think they are harmful to health and many think they take away innovation,” he said,

“People going to work are more miserable now than they ever have been, the average salary is lower as a proportion of GDP than at any time since the end of the Second World War and they go to work in fear. That is not just down to the economy. The HR community needs to face up to its significant contribution to this situation.”

An alternative approach must allow workers to be respected, able to make a contribution, able to join a trade union, have a good quality job and be able to make comment without fear.

www.hazards.org/stress/workplacetyranny.htm

www.hazardscampaign.org.uk/hazardsconference/2013docs/PhilTaylorPresentation1.pdf

www.stuc.org.uk/files/Document%20download/Workplace%20tyranny/STUC%20Performance%20Management%20Final%20Edit.pdf


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