By Tunde Oyadiran
The roots of Performance Management (PM) can be traced to the early 90s when companies started to link their employees, teams and departmental goals with executive management’s objectives to improve operational performance. The drive to establish this link birthed several concepts including the OKRs – an acronym for Objectives and Key Results – which helped large organizations (including Google) accomplish aggressive goals. At Inception, PM motivated employees and improved productivity however, it wasn’t built with today’s challenges in mind as the workplace has witnessed massive disruption over the past two decades. Traditional performance management systems (as it is now called) were designed in an era where most people held the same role for long periods of time. Consequently, it came under heavy criticism and scrutiny for its inability to evolve with time.
Available data suggests 1 of 5 conversations in today’s workplaces are related to the deficiencies and ineffectiveness of traditional PM system. These deficiencies range from the limited understanding of the concept, inability to drive optimal employee engagement and performance, to the internal obstacles HR Professionals contend with when attempting to optimize performance management systems. Often, performance appraisal is the only thing that comes to mind when performance management is mentioned. This is somewhat erroneous as PM consists a lot more including goal setting, competency assessment, ratings, data gathering, feedback mechanism, observation and documentations etc.
Traditional Performance management emphasizes annual updates over more regular check-ins and frequent real-time feedback. The annual review earned itself a bad reputation as it pressured managers to evaluate employee performance based on a little more than their own opinion. The absence of very clear criteria and robust measures implied that ratings became subject to personal perceptions and biases. In summary, traditional PM has been criticised of propagating an evaluation system that is largely protocol based, linked more to compensation and reward and less about productivity and engagement. Whilst some organizations have advanced their feedback system to more frequent engagements, compensation reviews have remained an annual affair.
Redesigning Performance Management Systems
These challenges have triggered calls by HR experts to redesign PM into a bespoke management model that is less about scores, negotiations and promotions but will become a veritable tool for sharing feedback whilst ensuring that employees remain motivated.
A recent Deloitte research revealed that the top priority of over 75% of HR executives is a holistic restructuring of performance management systems with 38% categorizing this under the ‘very important’ section of the quadrant. Also, 90% of companies that have redesigned performance management acknowledged direct improvement in employee engagement and 83% noticed significant improvement in the quality of conversations between employees and managers.
The redesigning process will involve a rigorous re-evaluation of every aspect of the organization’s PM system to align these identified changes with the business strategy and ongoing transformation of work. Full-blown revolution of systems will be required to achieve agile goal management, continuous feedback, regular and more frequent check-ins and a new model of evaluation and rewards. The thought behind redesigning performance management is to focus on accessing manager’s impact rather than task completion rate. The proponents of a redesigned system have argued that there’s an overarching need for performance management to de-emphasize performance measurement and focus more on performance improvement.
Organizations are waking up to the reality that traditional performance management is extremely rigorous and time-consuming. Specifically, a recent research at Deloitte revealed that the entire performance management process gulped about 2 million hours a year, that’s the exact time it would have taken Henry Ford to build 800,000 units of Model T Ford cars in 1914. Experts are clamouring for a system that invests in talking about performance and career improvement rather that expending massive time talking about ratings of past performances. Thus, an agile and effective performance management system will become a critical tool for communicating organizational objective to every employee, sharing feedback and most importantly, ensuring that employees remain motivated.
Effective performance management system must also become dynamic and evolve quickly enough to manage an evolving workforce dominated by employees that demand a process that acknowledges and supports their individual needs and talents as well as promotes a sense of purpose on the back of clear expectations and real-time feedback.
A suitable analogy for effective performance management system is that of a young boy getting his first bicycle. At that point, the child is only focused on learning how to pedal right, move forward, steer steady and brake when necessary. In this case, his requirement for a bike will be very basic. As he grows older and decides to venture into Mountain Biking, he’d require a more sophisticated bike with thicker tyres, extra shocks, a water bottle holder and stronger frame. If he decides to become a professional cyclist with aspirations to compete in Road Racing such as Tour De France, he’ll have to change his bike completely and invest in special cycling tyres, custom biking shoes, an aerodynamic helmet and a sleek carbon frame designed for speed and agility. This analogy highlights the need to redesign his bikes as he got older and his overall objectives evolved from basic to competitive. The dangers of using an outdated PM system to achieve organizational goals and objectives can be likened to using mountain bike to compete in Tour De France racing competition.
Google, Deloitte, General Electric, Microsoft etc. understand the concept of upscaling their bike appropriately if the intention is to achieve their set goals. Consequently, they deployed effective performance management practises on a wide scale and tweaked their model to enable them upscale measurement, evaluation and recognition of employee performance. PM, for them, has evolved into series of shorter but more regular formal and informal reflections, coaching and feedback conversations that support performance. Further discussions with these companies also revealed that the new system creates better relationship amongst teams, help teams work more closely and empowers managers. These companies study the behaviour of their high performing teams and assist other teams learn from the high performer using continuous performance management.
Deloitte did a complete overhaul of their performance management system by reframing the reviews to focus more on what the leader would do with each team member in future rather than how they would rate them for their tasks. In addition, it was established that accurate feedback was achieved when certain questions were asked differently i.e. the conversations were moved away from the skills of the appraisees to the intentions and future actions of the appraiser.
The process of redesigning performance management sometimes overlooks the need to ensure that employees have clear and unambiguous goals. Goals are the bedrock of effective feedback mechanism. Today, goal setting mechanisms that are more about process compliance and less about clarifying job expectation leave employees at risk of struggling to have effective coaching conversations with their managers. The process of goal setting must meet some criteria. Firstly, goals must be defined through dialogue between managers and employees. Collaborative goal setting is said to be more motivating and ensures that expectations are fair, challenging and relevant. Secondly, goals should define specific outcomes that mirror employee’s tangible contribution to the organization. Thirdly, goals should be made public as employees may struggle to effectively collaborate if they are unaware of each other’s goals. Lastly, goals should be dynamic and nimble enough for refining and modification in line with the overall organisational strategy at every point in time.
Feedback has become a key deliverable in the attainment of effective performance management system and is equally as important as goal setting. In the light of changing business needs, real time feedback has become a dominate component for driving organisational performance. Available data suggests that employees are 3 times more likely to be engaged and 3.6 times more likely to be motivated when they receive real time feedback from their managers relative to those that receive feedback once a year. That said, feedback must be specific, timely and meaningful as it offers employees the opportunity to apply lessons learned immediately.
Performance management should give employees the opportunity to provide bottom-up feedback and initiate conversations with managers. Real time feedback is a powerful catalyst for organizational success and growth.