In 2013, CEB research found that 86% of organizations had recently made significant changes to their performance management system, or were planning to. In 2014, a Deloitte survey found that 58% percent of companies surveyed did not think performance management was an effective use of time, and many media outlets jumped on the opportunity to air their grievances.
Finally, the rising wave of discontent seemed to crash in 2015, as a slew of large organizations like GE, Accenture, Netflix, and Adobe all scrapped their age-old annual performance management processes in favor of more continuous feedback systems. And many others followed suit.
But, was it the right move for everyone?
Last summer, I wrote an article on this topic myself, urging business leaders to really consider the implications of following these organizations. The issue, in my opinion, is not that these organizations did something wrong. Rather, the risk is that many leaders misinterpreted these stories to mean that they should abandon performance management altogether.
One thing is clear- the future of performance management in the American workplace is still very much in question.
For more insight into this important topic, I recently sat down with a handful of thought leaders in the performance management space, including Rob Ollander-Krane, Senior Director of Organizational Performance Effectiveness at Gap, Inc., Nigel Adams, Global Chief Talent Officer at Razorfish Global, and Amy Herrbold, Senior Director of Organizational Development at Kellogg. Together, we discussed the future of performance management to understand, from their perspective, why changes to this process are long overdue.
Major Challenges With the Status Quo
Most companies have traditional processes where goals are set at the beginning of the year, then they are pulled out again at the end of the year. The employee reviews them, and realizes that they need to justify their performance over the last year that relates to the goals they set months ago. Their boss then has to write a summary and assign a rating to the employee. Many of these rating systems are designed as force distributions where most employees fall in the middle, while a small minority fall to the tails of the bell curve, Ollander-Krane suggests.
Employees are put in a powerless position that leaves them anxiously sitting through their review, waiting to see what their rating (and compensation increase) will be for the next year. The end result is a dynamic that focuses much more on compensation than on performance.
“Current methods only give the illusion that employees will get feedback that is helpful in driving their performance,” says Ollander-Krane, “when it’s really designed to justify a ranking or rating that is tied to a compensation increase.”
Herrbold adds that the current methods of performance management are designed is such a way that they become an event rather than, “the intended reinforcing culmination of a years’ worth of focus and coaching.” She goes further to propose that the objectivity required to set goals and evaluate performance is difficult when evaluating knowledge workers. The pace of business today does not align with the common performance management processes that are in place today.
From my perspective, the question becomes one of alignment (or misalignment in the case of many organizations today). Does the culture of the organization align with the strategic direction of the company? Will the existing systems and processes (including the performance management process) help get you from where you are to where you want to be? Understanding the end goal, and the types of employee behaviors you will need to achieve it, is critical when adapting existing performance management processes to help drive performance.
A Philosophical Approach to Addressing the Gaps
Rob Ollander-Krane described his performance management philosophy as being derived from four primary sources, including the work of Daniel Pink, Samuel Colbert, David Rock and Carol Dweck. He believes that a one-size-fits-all approach to managing performance doesn’t take into account what drives employees. He also believes that the typical performance management process in many corporations creates a fundamental threat response. This response has massive negative repercussions in the dynamic between the employee and their supervisor.
For Nigel Adams, who oversees talent management on a global scale, the approach is firmly rooted in individuality. Understanding peoples’ individual passions and aspirations allows leaders to have ongoing career conversations with their employees. These transform the process into one that helps enable the career journey, rather than checking a box in an annual template.
Herrbold advocates for organizations to develop coaching cultures, where leaders are equipped to serve effectively as coaches for their team members. Furthermore, Herrbold feels that it is imperative that organizations need to be able to, “adjust goals, actively work priorities and calibrate on expected outcomes to manage work effort and remove bias in favor of the facts.” By clearly linking peoples’ individual goals and priorities to the larger strategy of the organization, leaders help drive value-add performance and feedback. Coaching conversations can then be grounded in activities that align with the culture and realization of that strategy.
Where to From Here? The Future of Performance Management
Ollander-Krane suggests that the future of performance management will evolve to more continuous conversations between leaders and their team members, rather than a once-a-year event. He also advocates for a system in which feedback, rewards and ratings are not combined.
Adams adds that “performance management must become more personalized, more real time, and more progressive in terms of updating goals that align to the rate of change in organizations. The process needs to focus on maximizing the career experience to achieve both business results and personal satisfaction.”
I asked these thought leaders to weigh in on their top recommendations for leaders who may be faced with evolving their own company’s performance management process. Here’s what they had to say:
Stamp out unconscious bias. Herrbold offers that business leaders must strive to reduce the amount of bias involved in their performance management processes. Since so many of these processes are linked to compensation, she advocates for leaders to be, “very critical about these decisions because the power of transparent proof points for employees can work for, or against, you as your work to realize your strategy.”
Focus on the future not the past. Understand how to most effectively coach for higher performance rather than focusing on rating and ranking past performance, Adams suggests. “The speed of business dictates that those who learn and grow will ultimately respond to business challenges the most effectively.” This approach lends itself nicely to a continuous feedback loop between strategy and individual capability. Competency will then develop in ways that fundamentally change the interactions between leaders and their team members.
Get everyone in a growth mindset. Ollander-Krane advocates that leaders create performance management processes that put people in a growth mindset. Stemming from Carol Dweck’s mindset research at Stanford University, he suggests that individuals who are operating from a growth mindset outperform those that do not. Culturally speaking, there needs to be more than one process in an organization that supports this. How is the growth mindset reflected in your company’s strategy? How can leaders role model these behaviors? And what other processes may exist that may reinforce this as a value in the culture?
Feedback and coaching over ratings and rankings. Ongoing conversations that provide employees with feedback and coaching have the most impact on results and career success, says Adams. With more and more companies either doing work globally and/or relying on geographically dispersed workforces, technology may also play a role in helping to facilitate this process. What types of platforms exist that may provide both synchronous and asynchronous feedback for your organization??
Separate the rewards conversation from the development conversations. Consider parallel processes whereby rewards and compensation discussions are clearly delineated from ongoing development and coaching conversations. Although this is a tough one in practice, separating compensation from coaching and feedback is a fundamental way to help change the boss/employee power dynamic.
The performance management train has finally left the station. For years, people have been realizing that the status quo, although designed with the best of intent, has created quite a few unintended consequences. As a result, researchers, thought leaders and practitioners have been exploring how leaders can enhance the performance of their teams in new, and much more effective, ways.
At the end of the day, a one-size-fits-all approach to performance management runs into a variety of challenges. In our fast-paced business environment comprised of a diverse set of workers, there is no silver-bullet solution. This discussion isn’t about judging how other companies choose to structure their performance management process. It’s about helping business leaders understand that their process must align with, and support the types of behaviors that are going to drive performance.Business & Finance Articles on Business 2 Community