In the previous blog, “The Purpose of Performance Management: Redefining Aspiration,” we articulated what goals the performance management approach must accomplish no matter its design. Now, let’s examine how to significantly improve performance management in today’s dynamic, complex work environment.__ 

There is appetite for performance management reform, but the options can be overwhelming and expensive. CEB has identified the three shifts companies must make to significantly improve performance management that is both scalable and cost-effective: 1) reinventing how performance goals are set, 2) providing ongoing feedback, and 3) recasting performance ratings.  

Reinventing Performance Goals 

Many organizations use cascading goals in an attempt to tie organizational objectives to individual work. But because the cascade is sequential, it’s incredibly time-consuming and the intent of the original goal can get lost. SMART goals are flawed, too. They’re used to ensure all employees make progress against specific, measurable, achievable, realistic, and time-bound work. But applying a one-size-fits-all rule reduces differentiation among employees and often fails to challenge them. 

Instead, organizations should have business units and employees set their own goals by “linking up” to the organization’s objectives. This approach avoids having to wait for each level above to complete its cascade and allows for a more direct line of sight between an individual’s goals and the organization’s objectives. Furthermore, keep goals brief, meaningful, sufficiently challenging, and reasonable. Some examples:

• By X date, launch the webpage advertising the new product.

• Handle at least X service calls per day, with fewer than Y callbacks for the same problem.

• Enhance division visibility by publishing an article on X topic by Y date. 

Providing Ongoing Feedback 

Many organizations require mid-year performance reviews, hoping that formality will breed accountability. But getting feedback once or twice a year is too infrequent to impact behavior and performance. Additionally, formalized processes are viewed as burdensome and time-consuming and rarely yield performance improvement.  

The best companies train managers to provide “teaching-focused” feedback on an ongoing basis. Teaching-focused feedback is delivered informally and provides forward-looking coaching, which gives employees the guidance and structure needed to practice and solidify critical new behaviors in the context of day-to-day work. 

Here’s an example: “Let’s discuss how the meeting went. What do you think went well? Any lessons learned for the future? What would you do differently next time? I agree, Sam seemed to dominate the conversation—what techniques will you try next time to make things more balanced?” 

Recasting Performance Ratings 

CEB research has debunked several key myths associated with performance ratings. First, while many organizations assume that ratings provide the data needed for effective decision making, research shows that there is no correlation between individual performance ratings and business unit performance. 

The next myth is that employees want to know where they stand relative to peers. But because most employees believe they’re above-average performers, ratings tend to frustrate more than inform. 

Lastly, employers often assume they must rate every employee’s performance in case of litigation. However, less than five percent of employees in the average organization are poor performers, making extensive documentation for everyone a wasted effort. 

The question of whether to have performance ratings is complex and requires thoughtful analysis. Ultimately, the problem to solve for is reducing the performance review burden. To do this, the best companies:

• set challenging but achievable goals, and evaluate the impact of results

• reduce or eliminate documentation for performance that is meeting or exceeding expectations, and eliminate self-assessments altogether as they don’t actually help improve performance

• change the annual review from retrospection to a forward-looking career conversation. 

Formal performance management approaches often undermine the very behaviors that lead to high performance and can pit employees against each other, stifle performance conversations, and even result in manipulation of the system to achieve a particular rating level. Effective performance management provides meaningful, real-time feedback. More importantly, it ensures employees have clear expectations, can solve problems, and are coached to achieve their maximum performance levels. 

Editor’s note: The next installment of this blog series will discuss how to make and sustain behavior change. You can learn more about high-performance cultures at cebglobal.com.