Part 1 of Series 2
Performance Management (PM) is dead. The existing way of performance management has become increasingly bureaucratic/burdensome, costly, low-value to employees, managers and overall company growth.
You probably have read many blogs/articles on this. Everybody is talking about it, but nobody is talking about what is missing in current approach and what needs to be done to be future ready. By merely shifting the annual activity to quarterly will not help. And by just doing way from ratings will also not help, in fact, it can be counter-intuitive.
This blog is focused on how you to identify what is missing in your current approach to PM. And it will enable you to get ready for the future of the performance. There are two aspects when we talk about getting ready for future:
- Evaluation of Present Situation: It’s about knowing what is missing in current approach of PM and whether you are ready for a change in future or not. Part-1 of this post covers this aspect.
- Preparing for execution for Future: How to execute to get ready for the future. In part-2, we have covered this aspect.
Evaluation Of Present Situation
Purpose of PM
The primary purpose of PM should always be to enable and enhance organizational performance. And organization performance can only be increased when employees become more accountable towards driving organization strategy, managerial effectiveness is enhanced, and people feel more motivated at work to do their best at work.
The right point to prepare for the future is to find the purpose of your new Performance Management. The following could be the purpose of your PM:
- Compensation decisions
- Identification of the high-potential’s
- Future L&D initiatives
- Driving and bringing agility to company strategy
- Enable employee to perform better in future
The primary purpose of PM till date was to support the decision making for compensations and promotions. PM has failed to deliver on these two expected outputs(Compensation + Promotions). The core reason being the ‘Design Thinking’ was not right. The existing design of PM has resulted in ‘Recency Bias’ and has brought in too much subjectivity in the systems and processes. And because the entire exercise was not data-driven, it has led to more politics and favoritism within the teams; thus resulting in creating a more bureaucratic culture.
To prepare for future, you can answer following questions with respect to ‘PM Purpose’
- What should be the purpose of my future performance system?
- Is my purpose getting fulfilled with existing PM in a way that it reduces subjectivity and gives more data points for better decision making?
A strategy is a new management jargon which has come in limelight just 10 to 15 years back. In its simplest form, a strategy is about set of choices CEO and her leadership team makes about the business. These choices are primarily into following areas:
- How winning future looks like?
- Where will we play?
- How will we win?
- What capabilities are required to win?
- And what kind of systems and processes are required to win?
Your PM should support in achieving your organization strategy. It’s often heard that strategy is an execution + people problem. If that ‘s true the PM is the perfect system to support execution. And further support change in people behaviors to achieve those strategic priorities. And the strategy is not your goals. Strategy leads to your short-term and long-term goals and action plan with respect to those goals.
To prepare for future, you can answer following questions with respect to your ‘business strategy’
- Is my PM supporting execution of my business strategy?
- Are we able to drive the behaviors using our PM to achieve our company strategy?
Nature of Work
The nature of work has changed in last 30 years because of the growth of service economy. Employees are expected to play multiple roles during their company tenure and must deliver results at a much faster pace. This has resulted in more stress at work and the human brain is still getting adapted to new norms of speed, multitasking, and high levels of anxiety. At the same time, employees are demanding much more flexibility at work to reduce their level of stress
The kind of work which is happening in the companies’ demand people to work in teams and that to cross-functionally. Your PM should be supporting the team ecosystem to achieve your goals. And should support performance evaluation not just based on how the individual has performed, but also how the team has performed to which individual was part of. Once this approach is supported, you are giving a clear signal that team performance also matters.
To prepare for future, you can answer following questions with respect to your ‘Nature of Work’
- Is my PM support team performance evaluation plus individual performance evaluation?
- Is my PM supporting an individual to play multiple roles and evaluation is supported by those roles?
The service-based economy is mostly supported by new age employees also called millennials. Millennials are people who have joined the workforce post-1984 and have grown up with the social network. They don’t hesitate to share their views publicly. They have a very high quotient of finding a meaning of their life through their work. To find the meaning they need more feedback from your managers and more growth opportunities. And they can’t just work in a fixed role, which in-fact is good for you as an organization. They want to move horizontally and vertically. And they expect much more transparency from the organizations. In a nutshell, they are way more demanding.
Your PM should support transparency or at least improve the perception of transparency. And it should support frequent feedback in a very informal way. If you can achieve this, you will see more stickiness of this generation with your organization.
To prepare for future, you can answer following questions with respect to your ‘Millennial Readiness’
- Is your PM supporting in improving the level of transparency or at least improving the perception of transparency?
- Is your PM supporting the more frequent feedbacks, which should be enabled every day/week/month/quarter? And is the PM support feedback and acknowledgment even if the employee and managers are not sitting in the same location?
Organization culture is how work gets done in your company. And how work gets done depends on your culture and sub(hidden)-cultures. Culture a.ka how work gets done are of four types. And you need a good mix & balance of following types to achieve the success.
- Market-driven culture: where people are result-oriented, competitive and goal-oriented. The leaders are hard drivers, producers, and competitors. And the success is defined in terms of market share and penetration.
- Hierarchical Culture: where procedures govern what people do. The leaders pride themselves on being good coordinators and organizers. And the Success is defined in terms of dependable delivery, smooth scheduling, and low cost.
- Clan Culture: where people share a lot of personal information where leaders or heads of the organization are seen as mentors. And the success is defined in terms of sensitivity to customers and concern for people
- Adhocracy culture: where people are entrepreneurial and creativity is valued at work. The leaders are considered innovators and risk takers. And the success means gaining unique and new products or services.
Your PM should help you to achieve the proper mix of above-stated culture arch types. If you want to enhance the market-driven culture, whereas your culture is still inclined more towards Clan or hierarchical, and your PM is still supporting that, your chances of success will be far less.
To prepare for future, you can answer following questions with respect to your ‘Organization Culture’
- Is my PM supporting the kind of culture mix I want to achieve in my organization?
- Can I drive the behaviors using my PM that can help me achieve my right culture mix?
Cost of PM
The cost of your PM can be determined based on two variables, direct cost, and indirect cost. According to a study, one company has spent close to $11 million dollars in last 5 years in supporting the PM process(direct cost involving people + technology cost).And according to Deloitte, companies spend approx. 2 million hours of effort on completed the PM process which employee and managers don’t even see value in (this is an indirect cost). The indirect cost includes attrition post-performance review, negative employee morale and loss of productivity and overall employee brand image. Just make sure that the direct & indirect cost involved in conducting and completing the PM is justified.
To prepare for future, you can answer following questions with respect to your ‘Cost of PM’
- What kind of direct and indirect cost involved with PM?
- Is my PM enabling us to enhance the organization performance resulting in more revenue growth and cost saving?
Every change starts with evaluation or needs to change. You might be wondering can an impact so many areas. If you look at PM through the lens that its core is compensation, it might not. But if you look at it through the lens that its core is organization performance, the possibilities are immense.
The part-2 of this blog post covers details that when you have decided to look PM beyond compensation, and want to prepare for future, how to go about that.
- Start by identifying the primary purpose of your PM.
- Evaluate that is your PM supporting the execution of your business strategy.
- The nature of work has changed. Is your PM supporting the team evaluation + individual evaluation in a data-driven way.
- Is my PM supporting the kind of culture mix I want to achieve in my organization?
- What kind of direct and indirect cost involved with the current PM?