Why we need to reshape Performance Management

The creation of a new performance management framework offers business a great opportunity.

By embracing a new approach to Performance Management, companies can:

  1. ensure they aren’t making the same mistakes being made by companies all over the world; and
  2. adapt to a modern and rapidly-changing business environment that demands constant innovation.

Where we are now

Most companies, between 60% and 80%, are either actively reshaping their approaches to Performance Management or are thinking seriously about doing so.

There are three key reasons why companies decide their Performance Management needs a revamp:

  • companies are increasingly realizing that their existing work evaluation processes are out of step with their business objectives;
  • many iterations of the traditional Performance Management approach just do not satisfy the central objectives of Performance Management, that is, to facilitate and support the creation and development of an agile and learning organization; and
  • companies, including Adobe, Deloitte, Microsoft, Gap, Medtronic and Juniper, are acknowledging that they should be focusing on how to fuel future performance, not how to assess past performance.

Nonetheless, we shouldn’t throw the baby out with the bathwater. Some elements of traditional Performance Management still have value. For instance, the job matrix, which provides insight into what is expected of employees in terms of goals and competencies, still has a significant role to play.

A focused and simple list of a small number of goals and competencies helps people to get to grips with their role and responsibilities. A strong job matrix can act like a roadmap for employees, guiding them in their professional work.

Rather, when we and the companies mentioned above talk about revamping Performance Management, we are thinking about annual reviews, the use of one-size-fits-all solutions and cascading objectives.

A range of external and internal factors, such as market trends, insights provided by neurological research and the impact of traditional Performance Management on employees and their organizations, can all drive companies to think again about Performance Management.

In this blog, we explore the factors that have shaped new ways of thinking about Performance Management, what these factors have to teach us about the shortcomings of traditional Performance Management systems and what organizations need to do now.

Why do we need to reshape Performance Management?

Technological advances are a key driver of the need to reshape Performance Management. Social media as well as cloud-based and real-time solutions have transformed the way we do business and how companies interact with customers. In particular, social media and its rapid development offers a direct contrast to the fixed, annual performance cycle we are used to.

Also, new discoveries in neuroscience are shaking things up when it comes to HR solutions. For instance, we now know that people need to practice and repeat what they are learning or doing several times to master new knowledge or skills.

Repeating focus points, particularly out loud, increases the speed of learning and the ability to apply new knowledge. What does this mean in practice? Well, it means:

  • training must be conducted more than just once or twice a year to have the desired effect; and
  • we need to hold more than the customary one to three performance meetings every year if Performance Management is to be successful as a tool for creating a learning organization.

Advances in neurological research also reveal that focusing on problems and what went
wrong (appraisals) induces a ‘fear state.’ Annual reviews typically adopt a classical hierarchical approach. This approach undermines the employee’s sense of social status, certainty, autonomy, relatedness and fairness, which tends to induce a freeze or flight response.

Indeed, research shows that many organizations experience a peak in attrition following annual reviews, often losing valuable talent.

The need for a new approach

The need for a new approach to Performance Management is also felt on an organizational level. The annual cycle of traditional Performance Management has been subject to a great deal of criticism, with numerous companies suffering from current bonus criteria evaluation practices. For instance, organizations often apply an approach that is vulnerable to the ‘recency effect.’

That is, managers tend to focus on what their employees have done in the few weeks or months leading up to the evaluation rather than what they have achieved over the full year. Employees also report receiving a lot of unexpected feedback because there can be long gaps between the behavior requiring feedback and scheduled appraisal meetings.

Other sources of dissatisfaction in the traditional Performance Management process are bonus systems, stacked ranking and ranking. The typical solution here is to get employees to try and maximize their individual success often at the expense of their team. As people scramble to outperform their colleagues, the focus is on quick wins rather than long-term growth, and this cripples a company’s ability to innovate.


Did you enjoy this post? Our next one will discuss in more detail the future of Performance Management and how to implement it now.

About the authors

Nicolien Dellensen, Senior Consultant with Time To Grow Global is a behavioural and research specialist. Govert van Sandwijk is Managing Partner, specialising in Strategy Facilitation, Leadership development and Organisational performance.

As such both are and have been involved helping our clients reshaping their Performance Management approach.


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