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The Way Forward: Transforming Performance Management

Tuesday, May 24, 2016
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It’s been a slow, painful death, but it seems that the old performance management (PM) approach is breathing its last. I mean the PM that converts numbers to paychecks and career decisions, and is equated with appraisal and evaluation. The PM that HR drives, sometimes against the wishes of busy managers. The PM that reinvents itself into new forms and rating systems every few years, just to keep some energy and relevance in it.

We’ve known for decades about some of what has gone wrong. In the 1980s, W. Edwards Deming said something like, “Throw it out; punitive evaluation has no place in a quality-focused world.” Executives, exasperated by inflated appraisal ratings that don’t match business performance, have tried to fix what they see as the problem: “Ratings are too high, so let’s be sure there is a ‘normal curve’” or “Let’s rank order people—that will fix the problem.”

But are these really solutions? Is evaluation bad? In a world where you pay leaders to lead and manage—to influence results—shouldn’t performance be better than chance (the normal curve)?

Also, think about those objectives cascades that happen at the beginning of the year and dominate the year-end review. They lose luster because things change rapidly and people are doing more work on horizontal teams and within networks that are not part of the hierarchical flow. These out-of-scope activities often don’t make their way into performance conversations.

Some companies have tried to redress the wrongs by riding the pendulum to the other side. Only appreciation is allowed and valued. Links between performance and pay or career decisions are decoupled or at least masked. Managers become coaches, focused on individuals and how to optimize their roles. There are no ratings, only periodic conversations. Engagement scores go up, and fear levels go down.

These new directions are important parts of the solution, but they are not enough. In most companies, four troubling conditions continue to prevail:

  1. Performance management continues to really be performance appraisal. Even though there is a nod to goals and agreements, the real focus continues to be on the back end (it’s still often called “the appraisal system.”) 
  2. PM continues to be an HR-driven process—something done more for the people than for the business. In other words, it is once removed from overall business process management. 
  3. The people in charge continue to bear the main responsibility for performance-related conversations. 
  4. The link with the larger business—its culture, goals, and challenges—is often a secondary thought. Strategies and plans are set and evolve apart from the people who must bring them to life.

Most organizations would benefit from a clean slate. Here’s what I think needs to happen.

Business leaders and stakeholders must be very clear about the purpose of the practices that link what people do with what the business needs.

This rethinking should focus on three key areas of purpose:

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  • Alignment. What role must PM play in continually connecting people with larger goals and issues, and what are the key events or rituals to facilitate this flow? 
  • Culture. PM contains most of the key linking interactions between people and the business—interactions about goals and priorities, in-process problems and resolutions, quality of contributions, and needs for support and development. Inside these interactions resides the DNA of culture—and too often that DNA does not reflect the values on the wall posters. 
  • Transformation. Most organizations are on a transformation journey that goes beyond classic change management. Structures and relationships are changing. The view of the organization is changing. People are participating more in a network of work and conversations rather than primarily in a command and control hierarchy. They need to balance ongoing responsibilities with virtual and project work, and with the need for more agility, innovation, and continuous improvement. Introducing a new approach to PM can facilitate this shift. One aspect of this is a shift from “what I do” to “what I deliver.”

Create a new mental model of the business.

This model can show people in a network, in a supply chain to the customer, or in a functional or other hierarchy or home group. The cascading organization chart is the enemy of new thinking about accountability and relationships. Publicize a new mental model of the business that includes customers and suppliers. Post it everywhere. People’s mental models matter!

Equip and hold people accountable for managing themselves.

Many individuals are working on a variety of projects, so it is really individuals who are managing themselves. The first job of a supervisor or coach is to help every new employee to become an accountable self-manager. And it is the organization’s job to help everybody develop and use respectful, direct communication skills as part of their self-management role.

We don't empower people—they have it already. But we must help them take on their power. Any performance management practice should be viewed as a partnership. Individuals and managers (and other stakeholders) should initiate conversations about goals, problems, and accomplishments. They should solicit and provide feedback in ways that get both appreciation and useful critical observations. Because this shared responsibility breaks traditional command and control patterns, however, managers do have a special responsibility. They must set the climate and expectation for this kind of relationship.

Redesign the business management processes to fully integrate important performance management events that link people with the business.

Any business needs to be sensing the environment, diagnosing its capabilities, deciding its priorities, translating priorities into actual work on the ground, and keeping track of how it’s doing. Since a business is run by people, these tasks can’t be done mechanically. Communication and dialogue are key. So is clarity about decision rights and responsibilities. Everyone cannot do and decide everything.

It’s management’s job to be sure there are goals, strategies, resources, processes, and other elements of organization design in place, and to step in when people are having trouble delivering on commitments. But it is everyone’s job to be a business within the business—contributing information, identifying priorities, making sure goals are clear and priority conflicts are resolved or escalated, asking for feedback, and delivering on commitments in the interest of the whole as well as the self.

These are times of innovation in other parts of the business. Why not in the very process that gets the business done?

Please take a short survey of your current Performance Management to assess your PM as a business and people process.

About the Author
Pat McLagan’s life and career are all about helping people improve their performance and development. Her book On-the-Level: Performance Communication That Works focused on shared responsibility communication, Change Is Everybody’s Business helped readers learn about their role in change, The Age of Participation: New Governance for the Workplace and the World looked at the systemic issues of participation, and The Shadow Side of Power: Lessons for Leaders looked closely at leaders’ use of power. In 2017, she will publish a book with ATD to help empower learners in all learning situations. She has received awards for thought leadership, worked all around the world, and served in professional leadership roles. Her focus has been helping people unleash their power and work toward a higher purpose at work and in life.
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