3 Actionable Tips for Better Performance Management for Agile Companies

Congratulations! Your product teams are agile, delivering product increments that delight customers every few weeks. 
Still, these teams could be happier. The current, yearly goal-setting and top-down performance evaluation seems to not match the transparency and fast feedback nature of agile teams. It is disappointing to have managers - who are not closely working with the team any more - evaluating team members, rather than evaluating themselves.
As an agile coach and agile leadership trainer, I often receive questions from companies how to improve their performance management process - in synch with agile company values. While there is no one solution to this question, I will give you 3 tips to get started in shaping performance management in your company.

The first question to ask is what purpose is your current performance managment process serving. Possible reasons could be:

• to align everyone behind common goals
• to get clarity on what people are working on
• to get timely feedback on team and individual performance
• to create a feedback culture and regular dialogue between management and employees on what "good" looks like
• to manage expectations and career development
• to keep a paper trail for promotions and firing scenarios
• to motivate employees to perform better and to learn, develop themselves and to develop teamwork

Once you have listed all your possible reasons, rate on a scale of 1(bad) .. 5 (great) how the current process is able to fulfill these goals for you. This quick assessment will tell you where to look for improvements.

The second point to consider is that improving the performance management process is closely linked to improving other HR processes and approaches in your business. There seems to be a priority order in which you need to revise and rebuild all of these for an agile company.
For example, performance evaluations will not work without a regular, frequent goal setting and goal alignment across your business on all levels down to individuals. Visioning workshops and company-wide goal-setting are a great process to start with in your business, which later can be a strong base for improving performance evaluations as well. One very successful way to do this is the OKR (Objectives and Key Results) practice used by Linkedin, Google, Zynga and many more companies by now. The Weekdone blog has a great infographic on OKRs.

The key idea of OKRs system is that goal-setting happens quarterly across the business, with each individual setting their own goals linked to the companies' vision and their team's objectives. The alignment of goals happens through transparency of all employee goals and discussions with peers, teams and managers of the individual. The purpose of this goal setting and measurement system is learning and sharp, focused operational execution along aligned objectives. OKRs are not directly linked to bonuses or rewards across the business, however can be used in performance discussions as one element. The great things with OKRs is that it is low risk to introduce: regular goal-setting and evaluation is not unfamiliar to many agile teams, who use goal setting to improve their performance and retrospectives to reflect on their progress. There are tips and templates to get you started here.

My third advice is relying more on continuous, peer-to-peer feedback. We all know that the yearly performance evaluations tend to consider performance of the last few months as that's what people remember. The peer-to-peer performance evaluations practice called Merit Money breaks this yearly period down to monthly evaluations and continuous peer feedback. I came across this idea working with Jurgen Appelo and the Happy Melly team - you can read their story on Merit Money here. Since then, I have introduced this on my training workshops with participants, client teams as a complement or part-replacement to yearly evaluations and bonuses. The Merit money is a system thinking approach to performance evaluations. Every team member starts out with 100 credits and over a fixed period - eg. one month - need to distribute all their 100 credits to their colleagues every time they feel a colleague really contributed to the team's or organisation's goal. The contributions are not anonymous and always have a feedback attached to them, i.e. what did the recipient do specifically to earn it. The final scores are saved at the end of the month, and summarised transparently to all with all the feedback attached. Besides an opportunity to distribute bonuses based on these peer feedback scores, there is huge - HUGE - value in receiving regular, timely feedback from all your colleagues on their perceptions of your performance. I know, I have been on both recipient and sender sides! The system - organisational network, teams of teams - thus has the opportunity to adjust, each individual can do better based on the feedback in the next month. And so it goes. Bonuses can be distributed at random times based on the total virtual credit scores of each participant and turned into real dollars (or pounds). Zappos has a great blog on how peer-to-peer rewards help build a great team spirit. Through continuous feedback and adjustment, team members can learn to collaborate better, communicate better and have transparency about their performance across the business. 

While not stating that these 3 practices will give you the final solution, they are surely seeds for experimenting, that have worked well for other businesses in various contexts. As managing organisations is managing a complex adaptive system, a good approach is to start small, try out these practices with a few teams, learn and adjust to eventually scale your solutions to your whole business.

Andrea is a lean agile coach, trainer, working with businesses on innovation, growth and agile product development. She is a Happy Melly supporter and a Management 3.0 facilitator, fascinated by new ways of HR and leadership in organisations. She is reachable at [email protected] or Twitter @adarabos.