February 1994

Using Performance Appraisal to Link Strategic Planning and Training

The need for change in compensation and appraisal systems was highlighted at a recent Productivity and Alternative Rewards Forum in San Francisco sponsored by the American Compensation Association. Professor Gerald D. Ledford, Senior Research Scientist at the University of Southern California's Center for Effective Organizations, spoke about his research in the area of skill- and knowledge-based compensation.

Professor Ledford noted that all over America organizations are currently downsizing and delayering while they are expecting employees to increase their technical skills and contribute more to process improvement. The tools and techniques of performance management can be used to link strategic planning with skill acquisition and, ultimately, better agency outcomes.

Organizations need to adapt their performance management systems to successfully meet today's challenges. As organizations adapt, supervisory roles become even more critical. Supervisors will need to work with employees to identify new skills and knowledges critical for work unit improvement.

As an example, Professor Ledford cited one model that uses individual learning agreements as part of an approach to linking performance and pay. This allows tying individual skill and knowledge acquisition to agency goals. Key competencies needed for achieving strategic objectives are identified and then translated into potential learning contracts. Through the performance planning and appraisal process, employees commit to individual learning contracts based on the needed competencies. Fulfilling the contracts becomes the performance basis for granting pay increases. Ledford sees this approach as a way to attract and retain employees with high growth needs, but also acknowledges that such a system can involve significant investment costs that must be managed carefully.

(We are grateful to James Kirkland of OPM's Personnel Programs and Evaluation Division, San Francisco, for this article.)