The idea of aligning organisational objectives with an employee’s agreed measures, skills, competency requirements, development plans and delivery of results, started about 60 years ago. It has worked well for particular employees driven solely by financial rewards. But it hasn’t been so successful for employees driven by learning and development of their skills.
Company evaluation and recognition of employee performance has now evolved to the point where continuous measurement practices are widely used. The process of managing people has become more specialised. Organisations are now aligning performance management changes with their business strategy as a result of the changing nature of the way people work.
The traditional end-of-year appraisal is no longer effective. Recent research suggests managers and employees perceive annual reviews as difficult and painful. Performance management on the other hand, if implemented correctly with specific objectives tied to the strategic operational plan, will result in increased organisational outcomes. In fact, the process of performance management drives organisational performance outcomes. Employees who achieve the organisational goals are rewarded with favourable reviews and bonuses in line with their performance and contribution to the organisation.
Social media has probably played a role in the changes. People like to get and give regular feedback, and the tools are developing to allow routine discussions about capabilities and skills. Data is now informing important decisions on promotions, pay rises and positioning people in new roles.
The focus has shifted from talking about employees to talking with employees.
New performance approaches target development through improved discussions. And as organisations become more team-centric, performance management will shift from consideration of an employee’s individual achievements to evaluating contributions to a team and the team’s impact on driving and attaining business goals. Where there is a well-structured and effectively communicated performance management system, the employee and the manager enter the process with improved confidence because the “rules” clearly stipulate what is being assessed and how.
This requires different measurement metrics and new evaluation tools, and many of the new practices are being tested in real time through trial and error. But if the team wins, the employee wins, and if the team wins, the company wins. Under a well-structured performance management system, everyone knows the rules, better recording opens up communication, and then frequent communication reduces stress.
For the past five years, companies have been experimenting with new performance management approaches that emphasise continuous feedback and coaching, reducing the focus on appraisal. We are now at a stage where companies are moving beyond experimentation to deploy new models on a wide scale.
General Electric has actually built a performance management system shaped by and for its employees. One that focuses on work that matters, and requires trust and vulnerability. It is a far cry from legendary CEO Jack Welch’s stacker ranking system which was arguably considered highly effective at the time, but now likely to be perceived as out of date thinking (and probably frowned upon) by contemporary HR and leadership experts.
Even though HR technology tools have not quite caught up, new approaches to performance management are working, and they are increasing productivity and changing corporate culture. Leading organisations are rapidly heading to a stage of creating continuous, highly agile performance management for employees and teams as well as employees and leaders. New software tools will integrate performance management into daily work and use the greater quantity and richer quality of data that will be available. Continuous feedback flowing between employees and managers will replace the dreaded end-of-year evaluation. Growth mindsets will be cultivated and the fixed mindset approach to evaluation left far behind. Thank goodness.