1. Performance Appraisal in Europe – Challenges and State of Affairs - Professor Dr. Christoph Demmke, European Institute of Public Administration HRM-Group, 6 February 2007

2. WHY THIS INITIATIVE UNDER GERMAN EU- PRESIDENCY? In the past focus on Performance Related Pay, Leadership, Public Performance (Lisbon) In the past focus on Performance Related Pay, Leadership, Public Performance (Lisbon) Very little on Performance Appraisal Very little on Performance Appraisal DG´s discussed PA (in 1994) for the last time DG´s discussed PA (in 1994) for the last time Since 1994 many reforms – a lot of good- and bad practices. Since 1994 many reforms – a lot of good- and bad practices. Great potential to learn from each other Great potential to learn from each other

3. In the past discussions about PA were not interesting because.... Systems highly bureaucratic and mathematical - „Objectivity turned into Subjectivity“ Systems highly bureaucratic and mathematical - „Objectivity turned into Subjectivity“ PA not taking seriously, often not taking place PA not taking seriously, often not taking place PA with no consequences – neither on pay, nor other policies PA with no consequences – neither on pay, nor other policies Lack of knowledge and professionalism (attribution problems - what is influencing indiv. performance) ? Lack of knowledge and professionalism (attribution problems - what is influencing indiv. performance) ? Often too good appraisals in order to avoid problems Often too good appraisals in order to avoid problems No time, no motivation on both sides No time, no motivation on both sides No or not sufficient training No or not sufficient training Often hard and soft objectives in one appraisal Often hard and soft objectives in one appraisal Paperwork and Intransparency Paperwork and Intransparency

4. Times are changing - why is PA becoming so important? Introduction of performance related pay and other (immaterial) rewards. Appraisal is linked to pay rewards. Introduction of performance related pay and other (immaterial) rewards. Appraisal is linked to pay rewards. No automatic pay progression anymore (Seniority). Appraisal is linked to pay progression. No automatic pay progression anymore (Seniority). Appraisal is linked to pay progression. Impact of (negative) Performance on Job Security. Appraisal is linked to job security Impact of (negative) Performance on Job Security. Appraisal is linked to job security More direct impact on Personnel Planning. Appraisal is linked to Training More direct impact on Personnel Planning. Appraisal is linked to Training Trend towards individual approaches (Performance contracts, Annual Objectives). Appraisal is „individualised“. Impact on role of social partners and staff representatives? Trend towards individual approaches (Performance contracts, Annual Objectives). Appraisal is „individualised“. Impact on role of social partners and staff representatives?

5. Can life-long employment be terminated for poor performance? (Study, Luxemburg, 2005) Only by disciplinary legislation (D, Cyp, Lux, Ml, P, ESP, IRL, I (partly) Only by disciplinary legislation (D, Cyp, Lux, Ml, P, ESP, IRL, I (partly) Yes, in principle – result of evaluations (EST, B, P, LT, SL, SLK,F,GR, HUN) Yes, in principle – result of evaluations (EST, B, P, LT, SL, SLK,F,GR, HUN) Same as in private sector (DK, FIN, SW, UK) Same as in private sector (DK, FIN, SW, UK)

6. What else has changed? Strong decentralisation of responsibilities in pay, performance management and appraisal Strong decentralisation of responsibilities in pay, performance management and appraisal

7. Centralised and Decentralised HR policies in EU-Europe, Demmke/Hammerschmid,Meyer, 2006 centralised decentralised

8. Consequence of decentralisation Middle managers have more responsibilities. They must implement PRP after having carried out PA – can they cope with their tasks? Middle managers have more responsibilities. They must implement PRP after having carried out PA – can they cope with their tasks? Increasing diversity of PA systems – from organisation to organisation - mobility problems? Increasing diversity of PA systems – from organisation to organisation - mobility problems? Tendency towards individual performance contracts - increasing difficulties in comparing performance? Tendency towards individual performance contracts - increasing difficulties in comparing performance?

9. What is really happening. Evidence – Study Demmke, 2006 Evaluation of several performance appraisal systems in Germany, Denmark, Finland, the United Kingdom, Switzerland and others. Evaluation of several performance appraisal systems in Germany, Denmark, Finland, the United Kingdom, Switzerland and others.

10. Good news and bad news: More evaluation/information brings more evidence – discrimination Positive or negative discrimination should be avoided but difficult to do in practice. Positive or negative discrimination should be avoided but difficult to do in practice.....women,....women,....part-timers,....part-timers,....top-managers,....top-managers,....ethnic minorities,....ethnic minorities,....disabled persons.....disabled persons.

11. Appraisal and Age (T. Borel, Suisse Federal Administration,2004) age

12. Paradox – Employees want changes but are critical as regards what is „new“ Nobody wants to go back to old centralised systems Nobody wants to go back to old centralised systems Employees agree (in the first instance) with the introduction of PRP and indiv. Performance Contracts but do not trust new performance appraisal systems Employees agree (in the first instance) with the introduction of PRP and indiv. Performance Contracts but do not trust new performance appraisal systems High percentage of employees who are dissatisfied High percentage of employees who are dissatisfied

13. 2003-2005 Study Dont know Very negative Negative Rather negative Rather positive Fairly positive Very positive Evulation of annual objective setting

14. Reforms focus on technical issues (how to draft an appraisal formular?, number of notes, criteria etc) but..... Management issues (Time, Trust, Motivation, Communication, Integrity, Professionalism, Skills - how to carry out appraisals,) are much more important Management issues (Time, Trust, Motivation, Communication, Integrity, Professionalism, Skills - how to carry out appraisals,) are much more important

15. „Poor leadership“? The role of Managers Problem: Managers overestimate themselves, too little training Problem: Managers overestimate themselves, too little training Too little incentives for managers to carry out evaluations (need for intelligent incentives) Too little incentives for managers to carry out evaluations (need for intelligent incentives) Too little knowledge on „measuring performance. What determines indiv. performance? Too little knowledge on „measuring performance. What determines indiv. performance?

16. Experiences. Need for Leadership Active support from top-management necessary Active support from top-management necessary ”We find it quite unacceptable that a leader cannot find the necessary time and resources for regularly discussing with their subordinates in order to be well informed on the job requirements and the individual performance levels” (Finland) ”We find it quite unacceptable that a leader cannot find the necessary time and resources for regularly discussing with their subordinates in order to be well informed on the job requirements and the individual performance levels” (Finland)

17. Subjective employees? The attitude of employees Employees overestimate themselves Employees overestimate themselves Always critical as to the ability and capability of superiors to carry out apraisals Always critical as to the ability and capability of superiors to carry out apraisals = Little trust = Little trust

18. Many systems have quotas but difficulties in matching them A++, A+, A, B, C etc. (Swizzerland) A++, A+, A, B, C etc. (Swizzerland) 1-5 (Finland, Ministry of Finance) 1-5 (Finland, Ministry of Finance) 4-10 (Finland) 4-10 (Finland) No notes, only Unsatisfactory (UK) No notes, only Unsatisfactory (UK) Quotas. Best notes only for 15% (Finland, Germany, United Kingdom, Swizzerland) Quotas. Best notes only for 15% (Finland, Germany, United Kingdom, Swizzerland)

19. 2004 Bundesverwaltung insgesamt: 2004 Bundesverwaltung insgesamt: Actual results Standards (Gauss)

20. Individual Performance Contracts are not simply good – or bad. Pro´s and con´s of Employees want to be treated as individuals Employees want to be treated as individuals May lead to more communication May lead to more communication May enhance performance May enhance performance May enhance commitment May enhance commitment May bring fairer pay May bring fairer pay Clarify work priorities Clarify work priorities Often not set in a cooperative process Often not set in a cooperative process Bring difficulties in comparing performance Bring difficulties in comparing performance Difficulties in measuring achievement of objectives Difficulties in measuring achievement of objectives Often, too complex objectives – difficult to measure Often, too complex objectives – difficult to measure Brings individualistion – difficult role for Trade Unions Brings individualistion – difficult role for Trade Unions Possibility for unfair pay Possibility for unfair pay Need for good management skills Need for good management skills

21. Experiences with Performance Contracts and Annual Objectives, e.g. SMART. The more hierarchical an administration, the more difficult it is to introduce new participative instruments (mid-year reviews, annual interviews etc.) The more hierarchical an administration, the more difficult it is to introduce new participative instruments (mid-year reviews, annual interviews etc.) In these cases, annual objectives are „ordered“ but not agreed upon In these cases, annual objectives are „ordered“ but not agreed upon

22. What are other challenges? Efforts to simplify systems (reduction of notes and criteria) but difficulties in practice Efforts to simplify systems (reduction of notes and criteria) but difficulties in practice More resources needed (for training, time needed) More resources needed (for training, time needed) How to cope with higher demands? (higher frequency of appraisals, more categories of employees involved etc.) How to cope with higher demands? (higher frequency of appraisals, more categories of employees involved etc.) Difficulties with the seperation of appraisal and interview.... Difficulties with the seperation of appraisal and interview....

23. Outlook Trend towards more professionalism Trend towards more professionalism Introduction of new systems need a long time Introduction of new systems need a long time Involvement of employees necessary Involvement of employees necessary Regular training should be obligatory Regular training should be obligatory Too few evaluations, so far no Best- Practice, too little evidence on effects of new systems Too few evaluations, so far no Best- Practice, too little evidence on effects of new systems

24. Innovative models in Estonia (Senior Civil Service) and Denmark (Ministry of Finance) Estonia: Electronic self-rating combined with average rating (Competency Management) Estonia: Electronic self-rating combined with average rating (Competency Management) Denmark: Transparency and Monitoring. Employees can see on INTRANET who other colleagues are evaluated Denmark: Transparency and Monitoring. Employees can see on INTRANET who other colleagues are evaluated

25. Emergence of SMART objectives? Specific, Measurable, Achievable, Realistic, Timely (und Tough). Specific, Measurable, Achievable, Realistic, Timely (und Tough).

26. Ideal preconditions for an appraisal Updated Job Description Updated Job Description Clarity about Job Requirements? Clarity about Job Requirements? Clear Performance Objectives Clear Performance Objectives Objectives are measurable Objectives are measurable Attribution of attaining of objectives to invidual is possible Attribution of attaining of objectives to invidual is possible Fair and Professional Performance Appraisal Fair and Professional Performance Appraisal Trust and Openness Trust and Openness

27. Difficulty in measuring performance What is influencing performance? Performance is complex Performance is complex Performance output is the result of: Performance output is the result of: –Qualification, Competence, Motivation, Resources, Technologies, Leadership, Health, Organisation, Support, Working Methods, Political impact, org. objectives

28. Subjectivity – what makes a judgement ? Personal Impression of Appraiser Personal Impression of Appraiser Individual Characteristics of person to be evaluated (Age, Position, Sex, Minority, Working time etc.) Individual Characteristics of person to be evaluated (Age, Position, Sex, Minority, Working time etc.) Professional context: Does the appraiser have an interest in good/bad evaluations (number of promotion places, bonuses available, climate in Unit, Sympathy)? Professional context: Does the appraiser have an interest in good/bad evaluations (number of promotion places, bonuses available, climate in Unit, Sympathy)?

29. Individual performance attribution is influencing the outcome of appraisals Level of Self-confidence. Self-attribution. Level of Self-confidence. Self-attribution. –„It was pure luck that I reached this result“ –„I reached this result because I am competent and performing well“