Evolution of Performance Management Systems

Performance management is quite ubiquitous. The concept that people in order to improve need feedback isn’t novel. While this primary concept has remained constant, the way performance management is evaluated nowadays is quite different from how it was till a few years back. The evolution of PMS really began in the 20th century with computerization of big data, automation and the dynamic shift in the philosophy behind the way the HR departments functions. 

In the uncertain times of the pandemic coupled with the cut throat competition and the organizational battle for leadership. Performance management is a much broader and complicated function of HR as it encompasses activities such as joint goal setting, continuous progress review and frequent communication, feedback and coaching for improved performance, implementation of employee development programs and rewarding achievements.

Take for example how IBM changed their PMS system. In the old PMS of IBM, they followed an annual based performance review process. The objectives were set in January which was followed by an interim review mid-way culminating with an appraisal meeting in December with a single performance score.

Under the new PMS system of IBM, 'Checkpoint' maps the employees on 5 competencies. By using the ACE (appreciation, coaching & evaluation) app, employees can receive real time 360 degree feedback at any point of time. What was adapted from the old PMS was that the goals set during the start of the year could be changed accordingly and feedback was to be given once every quarter at the minimum. What was eliminated was the assigning of ratings and stack rankings. IBM further on integrated Agile methodology to make their PMS more comprehensive. So what was the impact of such changes. There was a marked difference in how employees and managers communicated. There was more transparency and regular feedback allowed for course correction even during the year. So the whole process of appraisal wasn't just motivated by incentives and rewards but also provided for genuine improvement.

In most organizations today, the appraisal process is more development-driven, target-based, participative and open instead of being considered a closed-room, confidential affair. It is estimated that nearly 1/3rd of silicon valley companies and other conglomerates in the US are abandoning the idea the traditional appraisal process and annual reviews with frequent, informal check-ins between managers and employees. The biggest criticism about the old system was that they hold people accountable for past behavior at the expense of improving current performance and grooming talent for the future, both of which are critical for organizations’ long-term survival.

The changes from a Taylorism approach (F.W. Taylor) to an ACR (annual confidential approach) approach to a more open PMS has led to an open, egalitarian and constructive performance management system, that seeks multiple feedback sources and assesses various different traits while reviewing an employee’s performance. The future is all about including employees in the goal setting process and empowering them in order to get the best out of them. It is going to become an outcome driven way of thinking about performance management. HR departments will empower employees with learning and development opportunities, engaging in ongoing performance management, keeping performance conversations forward-focused, and yet remaining adaptive. When employees are satisfied and have feelings of contribution, better business outcomes are bound to manifest and that is the real bottom line.