How Performance Management Is Killing Performance – and What to Do About It by M. Tamra Chandler
Read the summary below and get the key insights in just 10 minutes!
- Why traditional performance management processes don’t work,
- Why performance reviews seldom provide satisfactory results,
- How you need to shift your culture to foster better performance management, and
- What new performance management processes HR leaders and managers should implement.
Everybody Hates Performance Management
Most companies assess employee performance using outdated methods: They evaluate workers once a year with a standardized assessment tool and ask employees to complete self-assessments. Managers and employees loathe annual reviews and believe they undermine improved performance. Unfortunately, leaders and managers rarely alter the Performance Management (PM) process, because they don’t know how to replace it. To upgrade your PM system, launch a “Performance Management Reboot.” Successfully managing a PM Reboot requires, first, understanding what’s wrong with your current PM method. The other two crucial elements are instilling trust among your employees by relinquishing authority over the process and customizing your PM by tailoring its procedures to fit the precise, unique needs of your firm.
“Doesn’t it seem a little crazy that we’re investing so much time and resources trying to create experiences that are unique to our organization’s wants and needs, yet we’re so often still grabbing that dusty, off-the-shelf performance management manual published in 1950 in hopes that it will get us there?”
“The Eight Fatal Flaws”
Traditional performance management systems are unproductive because they suffer from eight inherently faulty characteristics:
“Everything has changed. Everything, that is, except performance management.”
- No proof exists that the traditional PM system helps employees work more effectively. Instead of boosting employee engagement, ordinary PM processes can depress it.
- Traditional PM puts managers in a judge’s chair and puts employees on the defensive, thus discouraging frank conversation.
- Conventional PM invariably concentrates on employees’ failures instead of their successes. Supervisors rarely focus on workers’ strong points.
- Outdated PM processes focus on the person under assessment, not the entire company. PM should “build on the support structure around” the evaluated employee.
- All jobs are different, so “standardization of ratings” is “arbitrary” and unfair. Objectively “comparing performance” is difficult.
- Supervisors tend to score people inaccurately because ratings systems discourage honest feedback. To help managers make better decisions, restore “humanity” to the process.
- Typical PM pits employees against one another and undermines “collaborative culture.”
- Conventional PM relies on the concept that employees seek such incentives as increased compensation. However, workers most often want “nonfinancial rewards.”
“Our approach to performance management remains stuck in the world of Rolodexes and two-martini lunches.”
“The Eight Fundamental Shifts”
If your company wants to change its performance management methods, first it needs to make some important adjustments to its culture:
“We’ve put systems in place to make people work in ways that are contrary to their own brain chemistry and in support of behaviors that we don’t want to encourage.”
- “Open the door” – Make the PM process accessible and understandable. Never withhold information.
- “Give the steering wheel to your employees” – Provide them with “tools, information and knowledge” that help them do their jobs well. Invite them to embrace “career ownership” and to determine their professional destinies for themselves.
- “Change your focus” – Instead of concentrating on an employee’s past achievements, pivot the conversation to the future. Conduct a “performance preview,” not a “review.”
- “Abandon uniformity” – Let your departments and units develop their own PM processes. The HR office may set overall parameters, but allow managers to customize a “menu of options” that fit their specific circumstances.
- “Welcome more voices” – Create an environment of productive feedback by inviting input from your executives. Coach supervisors about using “open discussion and feedback,” implementing employee surveys and assembling “talent reviews” in which managers from different departments go over their objectives.
- “Stop policing; start empowering” – Relinquish power and let the process proceed. If you’re concerned about a low-performing employee, manage that person “by exception”; deal with such cases quickly and directly. Document job-performance problems as necessary, but when the process is going well resist the temptation to interfere.
- Give incentives for “collaboration” – Consider outlining group – as well as individual – objectives. A culture that promotes teamwork helps future leaders emerge.
- “Get real with rewards” – Standardized “merit” pay raises don’t improve employee engagement. Calculate the “market value” of your employees’ skills, and pay them accordingly. As they acquire more skills, pay them more. Consider providing benefits other than money, such as leisure time away from the office, responsibility for interesting new projects, opportunities to meet executives or more career education.
“The use of ratings…seems to draw the greatest ire from the critics of traditional performance programs.”
“Three Common Goals”: Learn, Reward, Succeed
Changing your corporate culture will help you reach three common PM goals: 1) helping employees learn and grow; 2) giving them appropriate, fair rewards; and 3) supporting your company’s success.
“From an employee’s perspective, equity is all about fairness.”
Provide regular feedback instead of hoarding it for a once-a-year conversation. Dispose of a numerical rating system that your compensation team might cherish but that employees view as unworkable and unfair. Revisit salaries in light of the marketplace. Align employees’ individual job goals with your larger strategic objectives. To “drive organizational performance,” help employees understand the roles they play and give them a stake in your company’s destiny.
“A strong alignment of purpose is the best foundation you can possibly have. It’s an asset that will pay off tenfold as you continue your journey.”
Achieving Your PM Reboot
Picture the three common goals as the frame of a “performance management bike.” If you’re riding the right bicycle for you and your firm, you can execute the five stages of your PM Reboot:
“The success of any journey depends on building a plan and inviting the right people along, especially when you want to be sure that you have the support of those who are funding the trip.”
1. “Mobilize”
“Plan, invite participants and get started.” Though few leaders possess expertise in performance management, your executives play a crucial role. You may need to educate them. To ensure their comfort with the idea of a new PM process, ask them to share their previous PM experiences. Help them understand how a PM Reboot will help their employees and the company.
“For people with satisfactory salaries, nonfinancial rewards are more effective than extra cash in building long-term employee engagement across sectors, job functions and business contexts.”
Time your new PM rollout carefully. For example, if you conduct annual reviews in December, have your PM Reboot ready “by the end of the third quarter of the prior year.” Consider your “design team” – the people who will help create the new process. Make sure its members are diverse and representative. They should reflect a variety of viewpoints across the organization.
“If you can’t visualize the way your solution will play out in the everyday work of your organization, then you’re going to be dead in the water.”
2. “Sketch”
Decide what your PM Reboot will look like. You and your team should take a “PM inventory” to make sure that you know what works and what doesn’t. Agree on your firm’s direction in five critical areas: “strategy, culture, structure, people” and “work.” Use these “dimensions” to gauge how the members of your Reboot group see the firm’s future and how well your new approach to PM reflects the future you envision. Ask if your company invests in its people. Consider how the way they work contributes to its goals.
“It’s far better for [employees] to leave your team for another one within the company than to leave the organization, full stop.”
When you and your team agree on a “shared vision” for the reboot, create your “design principles”: the “fundamental goals” and “desired attributes” that support the structure of your new PM process. How big will it be? How much can you spend? These answers provide the basis for future PM decisions and help you sketch out your plan for reaching the three common goals.
“Trust your expertise. Trust your gut. Trust your preparation. Trust your team.”
3. “Configure”
Develop a set of “PM Practices” to meet the three goals of teaching, recognition and corporate success in a way that aligns with your newly created design principles. Meet with your design team to outline your practices in six categories: “goals and alignment, feedback and performance insights, coaching and mentoring, career and development planning, talent review and insights,” and “total rewards.” In each category, select practices that “best deliver on those ideas.”
“Design first, technology second.”
For example, under feedback and performance insights, possible practices might include not requiring performance reviews, focusing on strengths and increasing the “frequency of manager…check-ins.” Decide how you will execute each practice. Determine who will participate, when the practice will take place, who is responsible for it and how you will rate its success. “Test your configuration” before implementation. Score each practice against “how well [it] meets each design principle.” Make sure you can do what you’ve promised.
Different kinds of organizations require different PM strategies. A nonprofit’s main goal might be to reinforce workers’ engagement with its cause. A global consulting company would tailor its PM methods to support its worldwide workforce. A tech firm could focus on keeping processes smooth and simple. And a retailer would want PM to enhance workers’ customer-service skills.
4. and 5. “Build and Implement”
“Build your solution” and “manage dependencies,” those activities your firm will change as part of its PM Reboot. The three most important dependencies in this phase are how you manage your talent, what “systems and tools” you’ll need and how to set up procedures that you don’t “own, such as strategic planning.”
For example: For the first dependency, analyze how your PM Reboot will mesh with your company’s other “talent management disciplines.” For the second, determine your IT requirements, but don’t let them dictate your strategies. For the third, note how your reboot will interface with procedures outside PM’s orbit. Adjust your plans throughout the process.
When you roll out your PM Reboot, craft a work plan and timeline, “create supporting content” like guidebooks and web tools, and determine how you will assess the reboot’s effectiveness.
Boot Up Your Reboot and Keep It Going
Creating and implementing an effective PM Reboot gives you eight major responsibilities:
- “Leading the change” – Commit to enlisting support from leaders and colleagues across your company and to keeping them involved. Meet personally with people in your firm’s departments and units to explain the PM Reboot and answer their questions. Managers and employees “need to know what is happening and why” and how it affects them.
- “Make the case” – Convince people that the time is right to take what seems like a radical step. Figure out the price “in real dollars and cents” that your company pays for using traditional PM processes. Does your firm gain significant return on investment on performance management? For instance, how many hours per year did supervisors spend on the old PM system; how much did it cost? How else could they use their time?
- “Plan the change” – Ascertain how the new processes will affect job functions, how and whether supervisors’ “expectations” of employee performance will change, and what “skill gaps” may surface. Estimate “the level of risk you’re taking on.” Don’t implement too many adjustments at once. Plan what you’ll do if “change fatigue” sets in.
- “Create your change plan” – Document your plan, addressing the “who,” the “what” and the “when,” so everyone gets on the same page.
- “Gather your change champions” – Make sure your team will promote the plan throughout the firm and will bring back any questions and concerns for full discussion.
- “Expect resistance” – People oppose change due to “fear of loss, uncertainty, surprise, change fatigue, fear of incompetence and fear of increased workload.” Address these fears up front. Keep your plan streamlined and easy to execute. Listen to people’s worries. Try to understand their reasoning.
- “Defend against the naysayers” – If managers claim that their superiors won’t support your change, schedule time with those leaders to explain the plan personally. If people claim their supervisors can’t handle trust, figure out if those people are in the right roles for the right reasons. Short-circuit resistance to abandoning a rating system by getting your compensation team on board “early in the design process.”
- “Build your courage” – Though you’ll build support throughout your organization, you will ultimately be responsible for your PM Reboot.
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