Performance system helps renew capability

Performance management is the process by which an organization utilizes its people resources to deliver on its organizational goals. In talent management terms, it is about how well people work towards achieving organizational goals, and how the organization continues to renew and rebuild capability year after year.

However, most employee surveys express dissatisfaction with performance management. This is because organizations are often caught up with the process rather than the purpose of performance management, tending to focus on rating, differentiation and compensation outcomes, instead of its primary purpose of continuously enhancing the value that people can deliver to the organization.

The bell curve is not a performance management tool; it is more of a compensation allocation tool. If one looks at the bell curve, one typically tends to conclude that that  success of the organization in meeting its goals was carried by the top 20 per cent of performers. However, it is hard for any organization to achieve results without the 70% population in the middle carrying its weight. A bell curve almost always leaves this critical mass of people demotivated.

A number of companies are now waking up to the importance of the significant middle and are looking at performance management as a way to invest in developing this group along with the top performers. Some organizations have done away with a rating system, particularly for employees at the entry and at the experienced professional levels. Performance management for these employees is instead all about goal and career conversations and action-planning with their manager, to understand what is expected of each other and how best to fulfil those expectations.

The “bell curve” is one of the tested ways to manage promotions and bonuses. However, it is important to understand, appreciate, and implement the spirit of performance management in a better way by finding connections between capability enhancement, performance outcomes, and consequently reward opportunities.