Every organisation has an established performance management mechanism in place. However, most times, it evokes mixed feelings amongst managers and employees, and, more often than not, the results are called into question…

“To win in the marketplace you must first win in the workplace.” - Douglas Conant, Former President & CEO, Campbell Soup Company

 << How we got here

Performance Management systems have been in use for the last few decades to measure and manage employee performance. However, most corporate performance management systems are not optimum for today’s market scenario since they are rooted in models specialising and continually optimising discrete work tasks, and, do not entirely reflect the evolving market needs.

Every organisation has an established performance management mechanism in place. However, most times, it evokes mixed feelings amongst managers and employees, and, more often than not, the results are called into question due to insufficient time, effort, and investment spent on reaching the evaluation outcome.

According to a Gartner survey, 82% of HR leaders indicated that traditional performance management is ineffective at achieving primary business objectives. Many managers and employees alike think that performance reviews are very subjective. The lack of motivation and belief surrounding this process might impact a review’s ability to improve employee performance. In fact, performance reviews might end up having a negative impact on employees as they focus on the growth and compensation implications of the rating system and feedback. Many complain that performance management systems are cumbersome, bureaucratic, and highly time consuming to help drive any meaningful outcome. This leads to both managers and employees treating Performance Management as a necessary evil of work-life that should be minimised rather than an important process that achieves key individual and organisational outcomes.

Over the decades, historical and economic context has played a large role in the evolution of performance management. When human capital was plentiful, the focus was on which people to let go, which to keep, and which to reward—and for those purposes, traditional appraisals were prudent. But, when talent is in short supply, developing people is of greater significance —and organisations have to find new ways of meeting that need.

++ Changing paradigm

Over the years, the changing business scenario, shorter cycle times, changing workforce demographics, and the ever-increasing demand on performance has pushed organisations to come up with innovative ways to measure and manage employee performance. To manage these challenges, Performance Management has emerged as a powerful workforce management tool, especially in new age growing multinational organisations. Many organisations are redesigning their Performance Management process and are making them more meaningful for business. Instead of a backward-looking process with a once-in-a-year goal setting and feedback process, organisations are looking at a more forward-looking agenda that imbibes personalisation, agility, engagement, data and real-time interventions. The biggest challenge and opportunity lie in designing and implementing performance that are real-time, continuous, consistent, and intuitive. But, organisations across the board need to invest in this and rethink the purpose and value of performance management programmes, if they intend to stay competitive in a highly disruptive market – where a hybrid work model is a norm and with a competitive workforce that aspires to be people first, not employees alone.

This apart, more and more positions need employees to be highly collaborative, have rich expertise, independent thinking, and problem-solving skills. Employees are expected to live up to higher expectations with each year. Therefore, traditional performance appraisal processes are not inherently practical for the modern employee.

Getting ahead of the curve >>

“In the future, leaders and managers will move beyond just measuring employees’ outcomes and consider the context in which employees’ outcomes are achieved: their personal goals, the circumstances in which they work, the teams to which they belong and the type of work they complete” - Blakeley Hartfelder, Director, Gartner

While it may not be required to reinvent the wheel entirely when it comes to new performance management systems, the key is to adapt to current org and workforce requirements and adopt a context driven approach that leverages empathy, transparency, technology, and data to improve employee experience and business outcomes.

The best performing companies are shifting away from a rigid performance management system toward a more flexible approach that reinforces critical behaviours that matter every day and align individual work with organisational goals. Effective performance management includes going beyond a performance review and providing meaningful, real-time feedback. This ensures that employees have clear expectations and can achieve their maximum performance levels.

Performance Management in many future-focused organisations is moving towards customisation, flexibility, and agility. Following are some of the key changes that will be considered essential for any progressive performance management system.

Tailored Goals

Instead of having a top-down approach in setting SMART goals set annually, set flexible goals that allow format and timing to be tailored to the work and/or project-based. However, it is also unrealistic to establish goals that do not include personal goals and behavioural expectations. An employee’s personal aspirations/expectations need to be factored into goals to enable them to evaluate their own progress, while it is important to set behavioural expectations because the behaviours need to be aligned with the organisational value system, apart from assessing how the individual collaborates, communicates, and mentors others.

Decision Criteria

 9 out of 10 organisations worldwide link performance ratings to every other decision related to the employee. However, using different criteria for different decisions ensure ratings are fair, instead of using performance ratings as the basis of all talent decisions, compensation, and promotion. it is important to understand that the objective of any performance management system is primarily to ensure alignment with organization goals, objectives and value systems; while creating an ecosystem to maximise employee potential.

Performance Measures

Organisations are not about individual performance anymore. How an employee performs within a team and within an organisation is what defines success. Organisations that focus on team or project objectives perform far better than those that focus on individuals. As teams adjust where, when and how they collaborate in hybrid and distributed environments, team performance will emerge as a separate focus. However, empathy needs to be imbibed in healthy measure to ensure the human element is factored in.

Ongoing Communication & Feedback

Giving feedback is a crucial part of the performance appraisal process since the feedback is more relevant and effective when it is given when the event occurs, than to be given at the end of the year as a post-mortem. Regular check-ins and internal discussions on performance and development change the focus to building the workforce for the organisation needs to be competitive. An informal communication between the manager and employee gives the manager a chance to check-in on the employee’s performance, while giving them an opportunity to discuss priorities and ensure goals are aligned. Additionally, it also helps to crowd-source continuous feedback from peers, colleagues, partners and clients so employees and their managers to get a holistic view of capabilities and gaps.

Integrating Technology

Organisations that integrate performance tools into the real workflow are much more likely to see positive results from the process. Leveraging performance tools that are integrated into the workflow not only automate activities, freeing up time that managers and employees would have otherwise spent to gather data, but it also gathers more meaningful and insightful feedback.

Data Relevance

Good data is very important for a fair evaluation. Performance data that is gathered through the year gives much better insights and a much better chance at a fair evaluation. Automated data collection and analytics around employees’ activities can be powerful for helping individual employees understand how they are performing and where there is room to improve. Infusing technology into the entire automates the feedback process and provide timely, data-based feedback to employees. Further, Leveraging AI and machine learning to gather continuous, real time information, improves the quality of data exponentially, and helps in making precise decisions.