Performance management has three core functions for enterprises: the ladder to the top, the catfish effect, and the driver. What is the ladder to the top? It is the mechanism that allows a nobody to rise to CEO. Ask yourself: without performance appraisal, how can a company promote employees? There are only two ways: by gut feeling or by relationships. If an employee has real ability but doesn't know how to please superiors, they may be overlooked. Conversely, those who are good at flattering and building relationships but lack real ability will definitely rise. Isn't that typical internal political darkness? One of the important reasons for the fall of the Qing Dynasty was the abolition of the imperial examination in 1905, which removed the dynasty's ladder to the top. The mechanism that allowed anyone, regardless of race, poverty, or background, to go from a farmer in the morning to a minister in the evening was gone. Those scholars who had no way out became the gravediggers of the Qing Dynasty. Enterprises say they lack talent, but talent comes from external recruitment and internal development. The most effective internal development is on-the-job training. Many companies dare not recruit because they lack a scientific performance evaluation system, i.e., the ladder to the top. Even if they recruit, they cannot effectively train and assess. Conversely, with the ladder to the top, companies can lower the bar, recruit widely, and use the performance evaluation system to race horses. Education doesn't matter; practice is the sole criterion for testing truth, and the ultimate standard. Excellent employees are quickly promoted and given important roles; mediocre ones are adjusted or eliminated, creating a fast track from the bottom to CEO. Haier's mechanism of racing horses rather than judging horses is valuable for many enterprises. Because it's hard to judge people accurately; understanding people requires wisdom. In thousands of years of Chinese history, few truly understood people. Famous examples include Cao Cao, Wu Zetian, and Zeng Guofan of the late Qing. Such geniuses appear only once every few hundred years. Since we can't judge accurately, we race horses. Performance is the true essence; everything else is fleeting. Moreover, with this ladder to the top, other HR management functions are laid on a solid foundation. Training has a basis, promotion and advancement have a basis, material incentives have a basis, and eliminating unqualified employees and optimizing the team also have a basis. Making personnel decisions and actions based on performance evaluation results is the proper way. Otherwise, it's easy to invite but hard to dismiss. What is the proper way? For example, in feudal times, those who passed the imperial examination and became officials were accepted by the people willingly. That is the proper way. What is the catfish effect? It is said that Norwegians love eating sardines, but fishermen found that sardines died by the time they returned from sea, which troubled them. Once, a fisherman accidentally mixed a catfish among the sardines and found them alive upon return. The catfish is the natural enemy of sardines. With the catfish, the sardines felt pressure and kept swimming to avoid being eaten, which activated their survival ability. Performance appraisal creates competition, pressure, urgency, and crisis. People can generate motivation and unleash potential under moderate pressure, thus activating the organization. What is the driver of performance? The driver is the engine, also called the motor or the engine. Setting goals is not strategy; planning measures to achieve goals is strategy. But only when measures are implemented and turned into results is strategic management complete. The driver that turns measures into results is performance management. Without this driver, problems arise: the company has strategic goals and measures but they are hard to implement downward; the boss is anxious while employees are not; it's hard to reward or punish responsible persons based on goal achievement; the final result is no pressure, no motivation, no execution. Three realms of performance management The first realm: No performance management This is common in startup teams with fewer than 30 people. Although they don't enjoy the benefits of the ladder and driver, it's not a big problem because the boss can oversee everyone. But when the team exceeds 30, problems change from quantitative to qualitative, and lack of performance management becomes problematic. Even so, for departments like sales, procurement, engineering, and production where performance is easy to quantify, performance management is still necessary. The second realm: Having performance management But it doesn't produce expected results, or even has side effects. This is the majority in society. Look at the following phenomena: the company's performance is poor, but employees' performance scores are high; or the opposite. Performance appraisal cannot promote the achievement of company goals; this is ineffective assessment, resulting in futile efforts. This doesn't play the driver role. Employees who actually perform well get low scores, while those who perform poorly get high scores. Or two employees with vastly different performance get similar scores, failing to differentiate; this is non-discriminating assessment, which harms by not rewarding good and punishing bad, failing to play the ladder and catfish effect. Worse, positions with easily quantifiable work and high pressure get low scores, while logistics, administration, finance, and other functional departments get high scores. This is assessment with side effects, the biggest harm being rewarding bad and punishing good, not motivating but demotivating employees. This is worse than no assessment. Why do these results occur? Mainly due to operational errors, listed below: First, unscientific indicator design, the primary cause of performance management failure. Specific manifestations: assessment indicators are not the true core or KPIs of the position, but trivial matters; or they focus on the process rather than results (except for sales personnel, who need moderate process assessment); or they assess during the period, such as ability and attitude, which are vague concepts of performance conditions. If indicators are improperly designed, the baton points in the wrong direction, failing to drive company performance improvement. The assessment looks lively but is actually ineffective. Second, unscientific application of results. Specific manifestations: either the results are not applied at all, or applied unscientifically. One manifestation: insufficient intensity, not painful or itchy, meaning the rewards and punishments based on performance results are too weak to reach the psychological threshold for motivation and deterrence, making assessment optional. Another manifestation: improper linkage, such as linking ability and attitude (performance conditions) to material rewards, dispersing limited incentive resources. Another manifestation: unscientific division of labor, treating performance management as the HR department's affair with too little participation from line departments, or the opposite, where line departments act independently without HR involvement. The scientific approach is: the boss drives, HR leads, and line departments are the main body. Third, lax execution, lack of seriousness, and going through the motions. One manifestation: some companies put performance management aside when business is busy. Another: some companies cut corners in the operational steps, even removing core steps, greatly reducing effectiveness. For example, not communicating with the assessed when setting indicators, not signing the assessment form, not reviewing performance during the period, not conducting performance interviews after assessment, and not improving management issues found through assessment. Another: some companies don't omit important steps but operate carelessly, each step not done properly, resulting in greatly reduced effectiveness. Why do operational errors occur? Because of a deviation in understanding the essence of performance management. One manifestation: treating assessment as an exam, wrong direction. Exams test results, typical post-control. True performance management is pre-, mid-, and post-control. It sets goals in advance, finds driving factors (KPIs), and achieves company goals by meeting KPIs, not just testing results. Another manifestation: treating assessment as a universal tool, misuse. Some companies try to include every aspect of employees' work and life, even trivial details, in the assessment. The assessment form has more than a dozen indicators, even including dormitory hygiene. Some companies use assessment as a means to scare employees, adding things to assessment at every turn. Assessment is only part of management, not all. Scientific performance assessment should not include trivial matters or processes. Another manifestation: treating assessment only as a tool for distributing bonuses, narrow error. Some companies assess only when it's time to give bonuses. Assessment can indeed provide a basis for bonus distribution, but its core is to promote improvement. The third realm: Grand performance management Truly playing the ladder, catfish effect, and driver effect, we call it grand performance management, the highest realm of performance management, an upgraded version based on traditional performance management. The philosophy of Sijin Consulting: Performance management that doesn't achieve company performance goals is bureaucracy and hooliganism; at the same time, performance management that only achieves goals is not the highest realm. The highest realm: achieving goals while improving management. Achieving goals solves current effectiveness issues; improving management (organizational and individual) creates greater performance for the future. This is the essence of grand performance management. - END- The best learning platform for FMCG distributors in China Focusing on providing professional, practical, and actionable tutorials for enterprises and distributors Committed to helping Chinese FMCG distributors grow rapidly The most professional and practical knowledge base in the FMCG industry Reply with the red number below to get the corresponding content Reply with number 1 to view the complete knowledge base | 001 Excellent article selection | 002 Distributor market operations | 003 Terminal visit management | 004 Sales supervisor skills | 005 Sales improvement techniques | 006 Channel expansion | 007 Managing distributors | 008 Distributor development | 009 Distributor internal operations management | 010 Team management | 011 Efficient distribution techniques | 012 Sales manager's eighteen skills | 013 KA operation methods and strategies | 014 First lesson for new sales | 015 Internet, brand | 016 Distributor B2B transformation | [Long press QR code to follow]