Performance Management: Rebooted

Author: Georgina Barrick

Recently a video clip has been doing the rounds on Facebook that shows a conversation with Simon Sinek on ways to better manage ‘Millennials’ in the workplace. It’s funny, engaging and most of it really rings true. It got me thinking about how companies, in general, address Performance Management. From my conversations with top HR professionals, I’m delighted to report that the world of Performance Management as we traditionally know it, is undergoing radical change.

With multiple generations in the workplace, we all need to find better ways of managing, motivating and developing our people. Traditional performance management, which was pioneered in the 70’s and 80’s by companies like GE, focuses on performance appraisals, forced ranking, ‘public hangings’ and ‘culling the bottom 15%’. This may have yielded results 30 years ago, but a new and dynamic model is required for companies competing in the 21st century.

Performance Management 2.0

Today, performance management is being rebooted, with development-centred continuous performance management models replacing old methods of annual performance measurement.

As Anita Bowness from Halogen Software says ‘Performance management isn’t dead. The old way of thinking about it is.’

Why The Shift?

In essence, I don’t think companies really have a choice – the old tools are simply no longer enough for our fast-paced, digital and ‘immediate gratification’ world.

Old performance rating tools have become unreliable and unpredictable because they often boil down to subjective opinion.

In theory, the annual review where we evaluate, rate and (sometimes) rank employee performance to determine compensation is a good idea.

However, in practice – and according to research by McKinsey – it can undermine performance as employees struggle with ratings, worry about compensation and try to understand how they can do better on the back of vague feedback on past behaviour.

Reworking performance management is at the top of forward thinking executive agendas.

Traditional performance management is time consuming and many see it as a process to generate paper, with no real business impact. A Deloitte manager, writing recently for ‘People + Strategy’, declared that the review process was ‘an investment of 1.8 million hours across the firm that didn’t fit our business needs anymore’. Often performance ratings are highly subjective and, by their very nature, are biased. They’re your manager’s opinion of your work performance, coloured by factors like experience, race and gender – and they’re not necessarily based in fact.

The old way of performance management inhibits innovation and collaboration. Forced rankings foster negative internal competition, creating a culture of fear where people are too busy watching their backs to focus on their performance - and we all know that fear-based cultures seldom give rise to abundance.

The traditional model also focuses heavily on compensation.

Wharton’s Peter Cappelli found that the biggest limitation of annual reviews – and the main reason why companies have stopped using them – is that, with their ‘heavy emphasis on financial reward and punishment and their ‘end-of-year’ structure, they hold people accountable for past behaviour at the expense of improving current performance and grooming talent for the future’.

So what are the leading companies doing differently?

According to research by the Harvard Business Review, by the end of 2016, up to a third of US companies had already adopted a new PM approach.

Early adopters – like Adobe, Microsoft, Deloitte, Accenture and even GE (previously a role model for the traditional approach) – have implemented continuous performance management models.

These models – which are tailored to align business and people goals – focus on talent development and solving issues with current behaviour in order to improve performance.

The building blocks of a continuous performance management model are:

·        Continuous Feedback:

Driven by their experiences on social media, employees want to be able to give and get more regular feedback.

Adobe calls this ‘check-ins’, GE calls it ‘touchpoints’ and IBM has ‘checkpoints’.

Regardless of what it’s called, the goal is to implement a process that allows for continuous feedback, across the company, that can be requested by anyone (manager or employee) and is enabled by technology.

·        Focus on Data:

Research by Deloitte found that as part of PM experimentation, companies are looking for ways to apply data to performance measurement.

91% of companies that have adopted the new approach say that they now have better data for ‘people decisions, removing bias and discretion in promotion and advancement’.

Next generation software tools are key to being able to collate the data.

These tools:

? Enable more social, transparent and mobile goal setting

? Make progress tracking easier

? Provide continuous feedback and instant information

? Analyse data and send suggestions to managers that encourage coaching

? Support career development

·        Continuous Learning/ Coaching:

Employees expect continuous learning.

Continuous performance management requires leaders to shift to serving as coaches – or to move from being part time evaluators of performance to full time coaches in order to improve performance and develop skills.

Leadership development also requires greater emphasis, as a result.

·        Agile Goal Setting:

The ability to rapidly innovate is a key competitive business advantage – but also means that business no longer has clear annual cycles and goals tend to change quickly.

Continuous feedback and access to better data enables business to respond more quickly to changing goals and needs.

·        Team vs Individual Performance:

Abandoning performance appraisals, with their focus on individual responsibility and forced ranking, reduces internal competition and makes it easier to foster teamwork.

·        Change in Compensation:

Splitting performance management from compensation is an important step in reducing anxiety and returning the focus to performance.

A recent study by a Mid-East based tech company into what motivates its employees found that the single most important factor in motivation is meaning – seeing purpose and value in work. Compensation didn’t factor.

Finding the right performance management process for your business takes time and commitment.

According to McKinsey, the impact of continuous performance management is high.

90% of company’s experience improved employee engagement, 96% say processes are simpler and 83% have seen the quality of conversations between leaders and employees improving.

As Simon Sinek says ‘when people are financially invested, they want a return. When people are emotionally invested, they want to contribute.’