Let’s just tell it like it is…performance management is under stress and the people running the show even more so. Even in the most progressive organizations that have reportedly made the leap towards a more modern performance management program. Practices that are thought to be outdated (ratings, reviews etc.) are slowly being shown the door and more progressive practices like no ratings and continuous feedback are hogging the spotlight. 

Organizations are struggling with what happens when you take away decades of practices that managers and management were used to. What happens when the tools to make core decisions like promotions, compensation are taken away? How can organizations start making the shift towards a more contemporary Performance Management Program?

CHROs today are under pressure to link HR programs to the productivity gains that an organization expects. That’s what happens when you get a seat at the table, sometimes you are also expected to set the table. Performance Management is the catalyst that triggers talent activities within organizations. It informs recruitment on the kind of people that succeed in the company, it informs how the Learning Management program needs to be structured and it is the most critical input into the succession management strategies and tactics of an organization. These expectations along with multi-generational workforces and the need to drive growth in an increasingly complex environment have legacy approaches stressed. 

Shifts in the practice of performance management

There are 5 major shifts in the practice of Performance Management that we see today. These shifts are not only evident today but will continue to drive decisions around the practice of Performance Management over the next 2 to 3 years’ timeframe. These will test an organization’s ability to adopt and manage the disruptive and incremental changes that will follow. 

Shift 1: HR-owned to business-owned

Expectation from the practice is to move from softer behavioral aspects to more tangible business results. This means that the design of the performance program must allow execution at the level where the performance is taking place, at the level of the employee and the supervisor. As practitioners take a back seat on execution, they will be required to take a front seat on change management to ensure adoption.

Shift 2: Review-focused to feedback-focused

Businesses are worried about sustaining in the future; however, performance reviews focused on past performance may not have relevance for the organization in the future. It is increasingly important to recognize performance, when and where it happens. With this feedback loop in place, it can be expected that employees and managers will be able to move away from dissecting the past to planning for the future. Continuous feedback done well is a beautiful thing and can make annual reviews painless for all involved.

However, organizations need to be cautious that feedback not utilized can result in higher disengagement from the program and derail participation and adoption.

Shift 3: Subjective and opaque evaluation to an objective and open discussion 

The activity of performance evaluation is a stressful affair for everyone involved.  Often, important decisions are being made based on people’s memories of how they did than real data. Biases and opinions make the process even more hazy. Modern practices look to remove the amount of subjectivity caused by memory, biases and opinions. This can only happen if the design of the performance program enables the capture of information throughout the performance period. Taking the form of more frequent formal reviews or enhancing formal reviews with continuous feedback. The additional data brings in the objectivity required, and the focus can shift to a more open conversation about the future.

Shift 4: Focus on the result to focus on the way the result was achieved

There is very little discussion happening today around the activities that are helping the achievement of performance goals simply due to the lack of focus on immediate and relevant feedback. Due to this, the end of year achievement, good or bad, overshadows the bright ideas and sparks that may have been defining moments for the employee. All done within their daily routine. Doing your regular work well is seldom given the importance that it deserves.

Shift 5: Increasing the amount of differentiation of talent

Let’s face it – you can only have so many points on a rating scale. Organizations are focused on hiring the best and developing their people to be the best. Current practices are just not tuned to differentiating within a high-performance organization. It is becoming more important to introduce data points that help to separate the true standouts from the high performers. More contemporary performance programs are looking to leverage data from more sources to help take these decisions. The base of this remains that feedback and feedback providers can be anyone. Employees are being encouraged to seek feedback to help differentiate their performance.

Let's face it - you can only have so many points on a rating scale and current practices are just not tuned to differentiating within a high-performance organization

What this means for organizations looking to make the shift?

We are witnessing many organizations faced with the decision of making changes to their Performance Management programs. As they consider these shifts, organizations should keep in mind four very basic guiding principles.

• Development at the core: The intent of the Performance Management program should scream “development”. This intent is the core guiding principle for the design of the program. Sustained messaging around this principle will be needed to drive adoption. 
• Simplifying the performance process: Execution of the program will move to managers and employees. With adoption of the process being key, there will be a need to simplify. This simplification should cover all aspects of the Performance Program like the rating scale, the number of goals, the ease of launching and closing the process and the ease of access of reporting and dashboards. 
• Build managerial capability: The role of managers and supervisors is expected to increase exponentially. They will need to make two major changes in how they work. One, they will be required to elevate the kind of conversation that have with their teams and two, they will need to adopt a more digital work-style to leverage data, reports and dashboards that will be needed to support their conversations. A higher level of capability coupled with a cultural move towards digital will be needed.
• Investing and technology and higher order reporting: Organizations will be required to evaluate and select technology differently. Technology should be able to reduce the level of administrative burden. It should be able to increase the number of data points that advise performance and link effectively to other processes like Learning and Succession. As managers adopt the new program their dependence on data will also keep increasing.

As organizations consider these guidelines, a clearer picture will begin forming on the level of change needed and the amount of effort that will be needed to make that change and sustained over time.

Most organizations with existing Performance Management programs in place would benefit from incremental changes rather than try and disrupt current practices altogether.

Changes can be easily aligned to each of the four guiding principles noted above and advise the overall program philosophy as the organization makes the shift from Performance Management to Performance Development.