Performance management (PM) has become the whipping boy for HR. There are few defenders. The media now focuses on companies that have abandoned traditional approaches. Even the Society for Human Resource Management (SHRM) reflects the criticism. The first feature article in the April issue of HR Magazine is, “Is It Time to Put Performance Review on a PIP?” (A PIP, of course, is a performance improvement plan.) Performance management has been a problem for decades. The article quotes the VP for Adobe Systems, Donna Morris—a company that abandoned the traditional approach—who highlighted the core problem, “So many of the processes and functions in HR are practices that were adopted in a different era.” She’s correct, of course; the widely used practices continue to resemble those used a generation ago. But my purpose here is to discuss why PM is an essential process and the strategies to avoid the problems and make it a valuable activity. Central to the argument is that this should not be treated as an HR function. The obvious fact is that HR is not involved in the day-to-day management of performance. It is strictly the responsibility of line managers and supervisors. HR carries the towels and the water bottles.

Of course, the focus on pay transparency is political. The history of the Paycheck Fairness Act is a dead giveaway—it was brought to a vote in April and filibustered again by Republicans just as it was in the two preceding election years, 2010 and 2012. The bill was originally introduced in the Senate in 2007 by Hillary Clinton. The prospect of her campaigning to be President suggests it will not be forgotten. In the current Congress, the legislation has no chance of passage. No doubt Democrats will do their best to keep the idea alive in the current year’s campaigns. Advocates undoubtedly will as well. The Executive Orders recently signed by the President are more important. Now federal contractors are prohibited from retaliating against employees who discuss compensation. Contractors, according to media reports, account for roughly a quarter of the country’s workforce and include a number of Fortune 100 companies—GE, IBM, Boeing, and so on—along with several prominent consulting firms (including companies represented on this journal’s Advisory Board). More important, the President ordered the Department of Labor to draft regulations requiring contractors to submit summary data on compensation, including data by gender and race. If the reports are based on EEO-1 job categories, they would receive a lot of attention. Pay confidentiality has been eroding for years. In my 40 years in consulting it has been accepted, seemingly taken for granted, but I have never seen a written policy nor has it surfaced in conversations. There do not appear to be any recent surveys of company practice, but a 2001 survey found that more than one third had specific policies. It is not widely known but secrecy policies violate the National Labor Relations Act. The law gives workers the right to engage in “concerted activities for the purpose of collective bargaining or other mutual aid or protection.” That covers discussions of pay or any work practice— and it is not limited to union members. There have been cases where an employee was fired for discussing pay and the NLRB ordered back pay and reinstatement. There are companies where everyone’s salary is posted. Whole Foods is often mentioned. It has been true in government for decades, and it is also common in public universities as well in many not-for-profit organizations. Union contracts are another example. Plus of course the compensation of top executives is disclosed annually. Interestingly, professional athletes and entertainers appear to be completely comfortable with the disclosure of their compensation. It is also common on Wall Street for the big producers to discuss and compare bonuses with colleagues. The best performers seem to see their compensation as proof of ability. All of this leads me to believe pay confidentiality will be impossible to maintain. The pressure is likely to increase as young employees enter the workforce in greater numbers. HR offices need to prepare for what will almost certainly emerge.

The creation of high-performance organizations has been the subject of numerous books and articles. Research studies in the early 1990s focused on new ideas in the way work is organized and managed, which were referred to as a new work paradigm. Emerging companies like Microsoft highlighted the importance of intellectual capital. That was followed by the concept of knowledge organizations and the focus on employees and their capabilities. Research on employee attitudes shifted to the importance of emotional commitment or engagement. Technology has been a hot button throughout. But largely ignored has been the role of middle managers and supervisors. Recent research shows that of all the factors that influence employee performance, managers have the largest impact. In knowledge organizations as well as those where the quality of service and individual craft skills contribute to success, managers and supervisors are instrumental in creating a work environment where employees perform at their best.

I find the frequent articles and columns critical of performance management (PM) disturbing. There are solid reasons not only to continue but also to actually give greater emphasis to this practice. It is clear that the practice is essential to effective people management. Furthermore, it is also clear that the problems can be solved or at least minimized. But what concerns me most is that we— HR—allow the problems to fester. The unfortunate reality is that HR is blamed for what is best understood as poor management. We should be shouting from the rooftops that managers need to be accountable for managing performance. We should also be working to convince senior management that when there are problems, simply adopting a new PM system is unlikely to be the solution. They also need to understand that making PM a priority is an essential step toward the solution. I have been responsible for managing the performance system in two large corporations and in hindsight as ineffective as anyone in that role. Of course, I made sure that managers were notified when appraisal forms were due and followed up if they were more than a week or two late. I reviewed the forms and kept track of the ratings. When managers or employees had questions, I responded. But I do not recall ever questioning a manager about ratings—I knew my place! Compliant administration does not add value. I’d very much like to erase references to “administration” in discussions of HR. From my perspective today, HR is remiss if it does not push for policies and practices that are known to contribute to high performance. There is a mountain of evidence confirming that people are capable of performing at higher levels. The management of performance is only one lever, among several, in a strategy to improve performance. Somehow, writing this editorial is like preaching to the choir. But I also do not find many defenders of PM systems. For reasons that are not clear, at least to me, the critics get far too much attention.

The budget shortfalls, layoffs and pressure for better performance have heightened the attention to government pay programs around the world. A thread that runs through every discussion is the question of how well public employees are paid relative to those working in other sectors. Although different methodologies have been developed, only one is practical and readily understood—the use of surveys make it possible to compare pay with the levels in other employers using benchmark, generic jobs. The public broadly is not willing to accept government salaries that exceed those in the private sector. This article discusses the strategies for developing market data and for planning new government salary programs.

Our public schools are a problem and compensation is a central issue. I fully appreciate the cost and tax implications but I also am aware that when the performance of our students is compared with other countries the US is now no better than average. That has long term implications for our economy. I certainly am not suggesting that pay alone is a solution but my experience has convinced me that it is part of the problem. First, for those who have not followed the media coverage of the comparisons with other countries, here are the facts, based primarily in data compiled by the Organization for Economic Development and Cooperation (OECD), a 34 country, Paris based organization that does studies for government.