Management by Projects: A Paradigm Shift in Performance Appraisals

The other day Adobe Systems, the global software company known for its digital documentation technologies announced that it would be scrapping the annual performance appraisal process and would instead opt for regular feedback to its employees. The plan is to have managers regular feedback to their teams to ensure a quicker and continuous self-actualization, rather than wait for the year-end. The company now says it would provide feed-forward instead of feedback. Not a borrowed practice, the roots can be traced to management guru Marshall Goldsmith's theory on how instant and real-time feedback can boost performance. “Course correction is also faster and more immediate this way," says the Company. Considering that annual performance appraisals have been a direct result of management by results or managing for results, the quest for alternative is both natural and surprising.

Companies have always been challenged by the complexities and sensitivities of conducting performance appraisal in manners that are not only comprehensive and performance supportive but also equitable and developmental. Towards this objective, firms tend to constantly innovate and tweak their appraisal systems. Some companies emphasize a 360-degree appraisal where employees are assessed by peers, bosses and subordinates. Some others now place greater emphasis on employee behavior rather than on targets. Most others emphasize adding additional dimensions such as managerial aptitude and leadership skill inventories as appraisal platforms in addition to goal oriented rating systems. All these have only added to paperwork or portal work (where appraisals are digitized) without making any fundamental difference to the timeliness and effectiveness of appraisals. Management by, and for, results continues to be somewhat elusive for firms.

Baby and the bath water

The mainstay of the traditional annual performance cycles has been the specific linkage with goals, though assessment of developmental needs and an understanding of the managerial and leadership potential became integral part of the process. Standardization of appraisal templates, harmonization of rating scales and simultaneous assessment of employees across the company serve to ensure relative equity at least as a conceptual goal. The failure of the annual appraisal systems can be related more to the inability of the managers to provide objective and honest feedback and provide tangible mentoring and support for overcoming gaps and developing the employees. This is further compounded by the linkages of ratings with salary increases and promotions. A play-safe bias gets introduced in the appraisal processes at one end with managers becoming paternalistic as an extreme. At the other end, the role played by the appraisals in determining the career development makes employees to be excessively submissive towards the supervisors.

While companies have been cognizant of the deficiencies of the annual performance appraisal systems, hardly any company has gone as far as Adobe in terms of scrapping totally the annual appraisal systems. Companies have been trying to address issues of “halo” and “bias” as well as seeking to avoid the temptations of excessive generosity and criticality through appropriate counseling for objectivity on one hand, and prescription of normal distribution in ratings on the other. In practice, these guidelines do little more than sober down excessive variations, reaching rarely to the core of objectively yet empathetically appraising performance and potential in all the complex facets. As a result, annual performance appraisals continue to have their critiques. It is, however, doubtful if continuous feedback, as a substitute for an annual review, would lend itself to personalized flexibility and standardized efficiency of annual appraisals and provide the anticipated motivation for self-actualization. Firms with larger staff are likely to struggle to get superior options relative to the established and well-oiled annual appraisal systems. And, without a simultaneous and relative assessment of employee performance, company-wide, working out salary increments and career promotions could be quite difficult.

Annual results and specific projects

The root cause for the unhappiness with the annual performance appraisals lies in the assumption that all the results achieved by an individual can be assessed after each period of twelve months. Reducing the review period to six months or even a quarter does not take away the basic deficiency. Neither does focusing on inter-personal relationships and delivery through 360 degree feedback and assessment centers compensate for the deficiency. Taking focus away from metrics and bringing it onto behaviors also does not resolve the problem. This is because neither day-to-day processes and behaviors nor annual performance snapshots truly reflect what individuals, teams and organizations need to deliver against performance goals. Moreover, abolition of annual reviews and substitution by ongoing feedback requires maturity on the part of the team members. The organization also needs to overcome the diffidence and weariness caused by frequent feedback, and stay alert with the needed checks and balances.

The challenge with either sporadic or frequent feedback system is that with targets being hard to quantify on a high frequency, appraisals tend to focus only on behaviors and other qualitative aspects. Supervisors and team members could lack the maturity to handle work without targets. The problem is bound to be more acute with remote working virtual teams. Considering that feedback processes involve considerable allocation of time, daily or even weekly feedback is likely to divert significant amount of productive time to appraisals which could be emotionally consuming for their lack of novelty. While substituting the annual reviews with frequent, say weekly, reviews will help prevent 'the top of the mind recall' and “recency” biases the benefit is too small relative to other difficulties. It also appears that there are very few ways to retool the managers and employees to achieve frequent feedback capabilities.

Management by results vs projects

The performance appraisal systems typically assess performance in terms of results (vis-a-vis goals), work (vis-a-vis time) and competencies (vis-a-vis requisites) in three different buckets, each as a snapshot at the end of a year. If, in addition, peer and other stake holder inputs are required though they demand additional tools such as 360 degree feedback. A paradigm to integrate all the three appraisal components and other stake holder feedbacks can be made possible by a conceptual shift from Management by Results to Management by Projects. Management by Projects or MBP is a logical evolution of a performance management process which started with the once famous Management by Objectives (MBO) and got stuck in Management by Results (MBR).

All work, professional or even personal, is nothing but a series of projects, each with specific start point, end point, work flow, resource commitment, result delivery and stake holder acceptance. These projects could be short term in nature, beginning and ending within an appraisal cycle or long term ones starting prior to and/or ending later than a current appraisal cycle. Regardless of the overall timeframes, projects will have milestones which invariably fall within an annual appraisal period. Compared to the individual components of an appraisal process, projects are more amenable to a holistic appraisal at the end of each milestone as well as at the conclusion of the project.

The case of car design

It would be best to illustrate how MBP can positively influence a performance appraisal system by a case example. For simplicity let us assume that a car body is to be redesigned by a team of engineers in a period that falls within an appraisal cycle. Typically, the redesign will involve body design, head lamp design, tail lamp design, dimensional redesign, compatibility check of the new body profile with the other new or existing components, manufacturing feasibility, marketing acceptance and so on. While each work stream would have functional specialty and several engineers for each team, the entire design group has to work together with several other non-design functions, teams and team members to deliver successfully.

The project of redesigning a car typically tends to be in terms of a series of steps, some sequential and some parallel. For example, these could be understanding of on-road performance of the current model, understanding of new material, component and process technologies, creation of new design specifications, development of manufacturing process parameters, sourcing specifications, development of new designs, development of samples, integration of components and body, laboratory testing of new materials, components and body, on-road testing of new body, limited market acceptance testing, finalization of design and manufacturing , and sign-off by the project and management teams. Several of the above will also be iterative.

Stage gates as assessment centers

The essence of project management lies in the judicious identification of milestones, and stage gates which need to be successfully crossed to proceed to the next stage. Typically, these involve the presence of all members of the larger team and sign-off on each successful milestone. In the case of the car example, for example, the design teams in charge of current product analysis and new material and component trends would make presentations on their findings and seek the group's approval to proceed to the next stage of developing design specifications. How well the two teams perform in their studies and how the peer teams perceive their performance would be well reflected in the presentation.

The senior leadership team and the human resource team that participate in such stage gate presentations would have a wonderful 360 degree view of the performance of the presenting teams, and the members, that no further performance appraisals or assessment centre or peer review methodologies are required. Even more significantly, the leadership teams can participate in the stage gate processes through questions and suggestions, making the whole system inclusive and virtuous. The challenge, if at all, lies in capturing the essence of performance through appropriate templates by leaders who are well tuned for the selection process.

While stage gates are important, the ability of the team to successfully complete the project to the stipulated specifications and time lines within the approved budgets would be the ultimate reflection of the success of the project, and with it of the team members. These conclusive events serve as events that foster team bonding and development based on demonstrated success. Even when the success falls below the expected level such stage gates as well as concluding events would help members to learn appropriate lessons and prepare themselves for handling future projects better. Ideally the stage gates should receive fifty percent of weight and the project conclusion receiving the remaining fifty percent in the performance appraisal of the MBP process.

Organizational requirements

The MBP approach to performance appraisal is unique in that it is universally applicable to all types of industries and all sizes of firms. Projects, defined in a manner broader than setting up physical brick and mortar, projects are the core of work flows in any setting. Each goal of any organization needs to be accomplished through a project or a set of synchronized projects. By focusing on projects as living or real time platforms of goal delivery and performance appraisals absolute harmony can be achieved between organizational goals, team results and individual performance. For the business leaders, functional leaders and human resource partners to effectively participate in MBP, an open organizational architecture which discourages silos is required. To leverage it as a performance appraisal tool, the leaders and more particularly the human resource experts would require an ability to appreciate and analyze work flows in terms of projects, and only projects. The appraisers would need to be learners in the MBP system, and not mere judges as in the traditional appraisal systems.

MBP also requires an organizational culture which is collaboration and communication oriented and which has the true professionalism to discuss project performance transparently despite the knowledge that it would constitute a part of performance appraisal system. The advantages of MBP based performance appraisal system are many. Fundamentally, it institutionalizes a goal driven project management culture in the organization with emphasis on cross-functional team work. Secondly, it makes performance appraisal meaningfully calibrated with logical milestones and process parameters. Thirdly, it transforms performance appraisal into a real time virtuous process which knits together the basic performers, supporting and associated team members as well as peers and leaders. Fourthly, MBP helps leadership development across all levels and makes performance appraisal, leadership development and achievement of individual, team and corporate goals truly harmonized. Given the multifarious benefits, it is time for companies to adopt Management by Projects as a required paradigm shift in performance appraisals.

Posted by Dr CB Rao on March 30, 2012

Infosys Board Rejig: Crowded at the Top?

It is lonely at the top in the corporate world, it is often said. For the founders of Infosys, however, it has been a journey of togetherness ever since the company was founded in 1981. In an era which routinely saw first generation entrepreneurs fall apart, second generation siblings spar and multi generation business families struggle to remain together, it has indeed been remarkable that the core founders of Infosys, led by the iconic N R Narayana Murthy not only stayed together but also transformed Infosys into a USD 6 billion corporation and 100,000 plus people organization in a remarkably short period of time. Whoever has left the founders’s group, be it Ashok Arora at the time of IPO, N S Raghavan for his pursuit of entrepreneurial support initiatives or K Dinesh to make way for new board members, the separations have been for reasons acceptable to all the seven founders.

Despite the several blue chip companies that strode the Indian business scene, Infosys has always been an amazing corporate bell-weather. In many ways, Infosys, founded almost a decade before India’s economic liberalization not only brought India’s software prowess onto the global scene but also symbolized the emergence of a new entrepreneurial and leadership class that won global admiration. The team of Infosys founders led by N R Narayana Murthy consistently shone as a great example of founders’ promise to the corporation and investors getting redeemed beyond expectations. Over time, Narayana Murthy, in particular, came to represent an eclectic fusion of individual intellect, business ethics and corporate governance acquiring in the process the image of an irreplaceable leader. As a result, ever since Murthy announced his decision to retire from Infosys upon attaining the retirement age of 65 years, and preparatory to which event he became the chairman and chief mentor of the company in 1994, speculation has been rife over the future course of Infosys leadership.

A contour of changes; real and apparent

It is not surprising, therefore, that the board level leadership rejig at Infosys announced on April 30, 2011 attracted a tremendous amount of media attention. It is not that leadership changes are new to Infosys. In fact, ever since Murthy became the chairman and chief mentor of Infosys in 1994, the company saw a series of leadership transitions, all of them very orderly and within the founder group. First, it was Nandan Nilankani, who became the CEO and MD in March 2002 following the transition of Narayana Murthy to the executive chairman' role.  Subsequently Murthy became non-executive chairman and chief mentor in August 2006.  It was later the turn of Kris Gopalakrishnan to move into Nandan' shoes in April 2007 as Nandan moved into public service. And now in August 2011, it would be S D Shibbulal's turn to move into Kris' MD and CEO role even as Narayana Murthy moves out to become the Chairman Emeritus, KV Kamath non-executive chairman and Kris, the full time co-chairman. There is as yet no announcement of who will fill in Shibulal's COO role.

The latest leadership level changes at Infosys are remarkable for several reasons. The first and foremost reason is that there is indeed no change; all the core founders continue to be associated in one way or the other, and if at all with certain newly defined roles. The second reason is that for the first time a business icon has been brought into the leadership system from outside the founders’ team. The third is that the changes have sought to directly address the so called ‘founders versus professionals’ debate generated by analysts in the media, and momentarily heightened by the abrupt resignation of T V Mohandas Pai who, as the most successful non-founder leader, became director early but could not wait for the CEO position until the last of the core founders could fulfill that role. The fourth is that the changes could, in fact, be more fundamental in their objectives than apparent at first sight, and could portend a major gear shift in corporate strategy, including major acquisitions or a fundamental transformation in organization, including leadership transitions at all levels.

A balanced media view

Though there have been several hypotheses and analysis in the media and a measure of explanation by the principal leaders themselves, the view taken by The Economic Times seems to be the one which is quite balanced. Commenting on the changes, The Economic Times in its editorial dated May 2, 2011 titled "Changing Slowly: Infosys' new management structure is complex but can still work" stated, "Infosys has now three chairmen, one emeritus, one co-executive and one plain vanilla. This is overkill, at first glance, but still a workable arrangement on closer scrutiny, provided all the three at the top collectively mark out their areas of responsibility and curb wanderlust". The reference is to Narayana Murthy, Kris Gopalakrishnan and K V Kamath, respectively. Commenting on Shibulal's appointment, the editorial said "By appointing SD Shibulal as managing director and chief executive officer, Infosys has continued its tradition of honouring the founders, turn by turn. So far, this has not done the company any harm. This time around, too, it could work, particularly given that the board has also decided to induct three younger leaders by June.

The paper's comments on KV Kamath's appointment appear to seek some prophetic touch. It said "Apart from his other achievements at ICICI,  Kamath's outstanding contribution was effective succession planning. And this could be his lasting contribution at Infosys in the few years he has here before he also retires".  It may be noted that Infosys has extended the retirement age for non-founder directors to 70 years while keeping that of founder-directors unchanged at 65 years.  The paper felt "Narayana Murthy's stamp on Infosys is indelible and given his energy and capacity for statesman-like advocacy, it would be silly for the company not to continue to use him as brand ambassador for as long as possible. Murthy can be trusted to provide the room that his successors need in the company's active management." On Kris, the paper felt that Gopalakrishnan's elevation probably reflected the company's desire to reward an effective leader who saw revenues double over a turbulent four years and take the right strategic calls on stepping up consulting and moving into growth areas like telecom. The paper concluded that while some younger companies showed greater dynamism of late, the shake-up showed that Infosys had the will to evolve and stay at the top of the game.

An internal explanatory perspective

Eager as the media has been, the four key leaders, Murthy, Kamath, Kris and Shibulal have also been open about articulating their points of view on the rejig, individually and collectively. The corporate view is that Murthy is a visionary and a mentor par excellence, who will continue to inspire the corporation for a long, long time; Kamath is a great organization and leadership developer, with strong growth instincts and transformational capabilities; Kris is an innovative thinker with the ability to take the right bets on revenue drivers; and Shibulal is a focused execution person whose mission is to implement the new Infosys vision 3.3. This unique combination of leadership strengths, it is said, would deliver equally unique value to Infosys. All the four leaders are expected to continue the established values of ethical credibility, financial prudence and positive aggression. The corporate view also is that there are still some missing pieces of the leadership puzzle, like bringing a new generation of non-founder leaders to key positions which will be rolled out over the next few months.

From the individual statements of the four key players, however, no key new directions are discernible. Murthy states that having worked hard for 42 years, he would take life a little easier, and even take up a public role if something exciting comes by. Kamath states that he would do just what a non-executive chairman is expected to – good corporate governance, clear strategic articulation and light touch steering of a company that is well on its course. Kris sees himself taking direct interest in client relationships, and people development through Infosys Leadership Institute. Shibulal would like to be a client-centric, execution-focused leader, who would lead by example. No out of the box acquisitions for growth are proposed; only those that could fit in the strategic plan would be evaluated. When the dust settles, therefore, the question would be as to whether the leadership is sub-optimizing itself for continuity or consolidating itself for as yet unknown major transformation?

The Infosys board rejig raises pertinent issues of leadership and corporate development that extend far beyond Infosys. In fact, this blog post is not really on Infosys, nor is it intended to analyze the happenings at Infosys. Further attention on Infosys is perhaps not even necessary as the company is extremely fortunate to have a combination of exceptional leaders at the top. But not every company can do, or needs to do, what Infosys has done. The issues that arise from the Infosys saga that have relevance for several other companies are as follows.

Founders' dilemma

Firstly, the sooner the founders' dilemma is resolved, the better it would be for a founder-driven entrepreneurial company. The resolution need not necessarily be in terms of either founders staying in control or giving up control. As long as the right choice is made keeping merit as the benchmark, either decision would be good. That said, each route has its additional challenges. The route taken by Infosys of founder continuity could lead to sub-optimization when the founders are one too many, and each a capable individual, with the company in addition having a strong professional leadership bench. The question would be whether a company, even of 6 billion dollar scale, would need so many iconic leaders when much larger, multi-industry behemoths like Reliance are ably led by just one great leader.

Clearly, having many great leaders at the board level, many of them founders, is a great asset for any company. If the board, instead of adopting an approach of division of functional responsibilities, adopts an approach of entrusting an entire business vertical to one leader it could transform the company from merely being a scale driven business corporation to a scope driven multi-business conglomerate. In Infosys example, if this approach is taken, one can visualize at least four founders driving four types of IT businesses each (for example, services, products, consulting and BPO) and making Infosys an IT conglomerate. Another method could be for the founders who built a company to a multi-billion dollar level and in the process accumulated multi-million dollar personal wealth to rediscover entrepreneurial roots. If certain smart founders could establish and grow a company to 6 billion dollar scale with an investment of a few thousands of rupees, clearly with a proven track record and the security of personal wealth, each of the founders can be trusted to recreate equivalent or larger corporations.

Integrated leaders

in general, successful leaders tend to be holistic and integrated personalities. While, each leader may have something of an additional core competence, be it in terms of vision, strategy or execution and mentoring, coaching or transforming, a successful leader would be able to work on a set of multiple dimensions. It would be more appropriate for the leader at the apex level to stretch that integrated capability as long as one would wish, rather than divide, albeit consensually, the responsibility matrix with other equally competent leaders. One would believe that the Tata group and Hindustan Unilever are particularly adept at developing integrated leaders who could simultaneously transform and grow their companies.

That said, a deliberate de-emphasis of one's holistic capabilities would have its relevance and appropriateness when the established integrated leader desires to develop potential leaders in waiting. Such a developmental pathway was followed in an exemplary manner as the baton moved from Murthy to Nandan to Kris, and now to Shibulal. The challenge lies in pursuing such a pathway between founders and professionals (as founders seek to retire to grow the professionals) or between professionals and next generation members of founders (as founders seek to bring their family members into leadership positions). The time span to achieve such transition needs to be neither too short nor too long so that the full potential of all the leaders is brought into play at the earliest.

Management of instincts

Leadership of corporations is not only one of skills and competencies but also one of values and ethics. Leadership is also one of managing instincts in a positive and purposive manner. There are again two ways of approaching the management of instincts, given that business is as much of collaboration as of competition. Infosys, for example, has very distinctive methods of integrating ethics and values as part of decision making. For example, the loss of an acquisition candidate to another IT giant in recent times is attributed by the Infosys leadership to certain “un-Infosys’ style negotiation approaches of the target candidate. When the board composition represents a cultural homogeneity, decisions are likely to be careful, conservative and compliant, a real virtue for the tough times as Infosys demonstrated.

That said, homogeneity has its limitations when business environment is competitive yet full of opportunities. Debate and challenge at the apex level is often essential to crystallize new ways of doing business without compromising core values and basic ethics. The current Infosys model of positive aggression in a framework of homogeneity may not be competitive under all circumstances, both internal and external. Any divergence to homogeneity model needs to be well thought out. The turmoil caused by iRace human resources transformation in Infosys has apparently some relevance in this context. A debate on extracting more value vis-a-vis restructuring positions or compensation would have helped in a better management of instincts.

Trauma of benchmarking

The comfort and pride of being a leader often breeds a reluctance to benchmark oneself against competition. This gets ensconced in a false sense of invincibility as the corporation and leadership become darlings of the media, investors and analysts. At least two of the three software bell-weather corporations have taken to such smugness with the leaders extending the lead and the followers shortening the lead. The Infosys act shows that the corporation and leadership had enough sagacity and appropriate timeliness to pull back into an overdrive. The lesson exists for all corporations in leadership positions in an industry to be always alert and keep exploring methods that leverage intrinsic talent to explore new avenues of growth, in the process enabling the corporate leaders self-actualize themselves and build value for the corporation.  

Bench-marking requires not only skills of analysis but also openness of objectivity. Viewing industry boundaries from several angles and in multiple manners is essential to achieve meaningful benchmarking guidance. Ashok Leyland for long prided itself for being in a leadership position in the bus segment and having the second largest position in the truck segment little realizing the strides a more expansive Tata Motors has been taking in a wider range of light, medium and heavy commercial vehicles, multi utility vehicles, sports utility vehicles and passenger cars of all ranges. Again, both Ashok Leyland and Tata Motors missed the point that an entirely new luxury bus segment driven by Volvo was emerging leaving them as marginal players in the new segment. Too narrow an industry focus or single measures of benchmarking lead to needless complacence in leading companies due to a failure to appreciate the changing industry boundaries.  

Lonely amongst a crowd, at the top

Clearly, a corporation is blessed if it is able to groom organically robust leadership talent and also inorganically attract proven external talent. The greater the number of leaders with iconic or near iconic status in a corporation the greater is its potential to grow and reward all the stakeholders. As the Infosys model shows it is entirely possible for a corporation to achieve growth rates better than industry average on the strength of its leadership, and with a good game plan for division of responsibilities as per core or super-core competencies. On the other hand, there also lies a hypothesis, proven elsewhere, that the crowded leadership leverages all of its talent most effectively if it is deployed in a lean manner and utilized on an integrated canvas.

In any corporation, the greater is the leadership potential the greater should be the applicable functional and business canvas. The difference between a great corporation which has a dominant scale and a great conglomerate that has both dominant scale and expansive scope, despite both having the same bench of iconic leadership talent at the top is only one factor; the former knows how to collaboratively deploy its leadership talent even at the risk of sub-optimization to prudently consolidate itself while the later knows how to competitively deploy its leadership talent even at the risk of stretching itself adventurously into new horizons.

Posted by Dr CB Rao on May 7, 2011