IS PERFORMANCE MANAGEMENT DEAD?
In part 1 of this exploration, we looked at the state of annual performance reviews and began to assess their relevance and value in today’s fast-moving digital economy. Now we look at evolving the model and whether better performance approaches could build high trust and higher performance — ultimately answering if performance management is indeed dead.
We know that the traditional performance management process isn’t giving HR professionals, employees and management the goods. From accuracy to usefulness, from objective insights to actually achieving high performance, the negative reaction is translated into action by the likes of Accenture, Google and Deloitte among many others – who are all instigating a step change in the way they measure performance.
Of course, measuring is one thing and managing is another. Before we get to that, it makes sense to look at intrinsic motivation— the very source of good, bad and indifferent performance.
LOSING THE CARROT AND THE STICK
Tastier carrots and bigger sticks are useless compared with understanding and leveraging the three building blocks of intrinsic motivation — Autonomy, Mastery and Purpose. These are the sentiments from author Daniel Pink. In the context of getting to high performance, there’s a logical move through the stages.
- Autonomy – the desire to direct our own lives. For high-performance motivation it’s nurturing the freedom to reach goals and objectives in everyone’s own way.
- Mastery — the urge to get better and better at something that matters. When we have the skills and tools in-hand, we’re in ideal shape to perform better. Ideally, that’s powered by careful feedback and on-the-job coaching.
- Purpose — the yearning to do what we do in the service of something larger than ourselves. In terms of meeting business objectives through performance, it’s knowing where we are through consistent feedback along the road to our objectives, and the wider goals of the organisation.
But there’s a fourth to add to push motivation and performance to the next level. And that’s trust.
HIGH PERFORMANCE THROUGH HIGH TRUST
In today’s digital economy, trust is at an all-time low. From the machinations of social media to ‘fake news’, to the lack of credence to certain statements inside businesses, there’re numerous factors that erode trust.
According to sociologist David Halpern, In 1960s Great Britain, 60% of the population believed other people could be trusted, today it is down to 29%.
Arguably, now more than ever there’s a need for business to be true to itself and the wider public with their actions inside and out. It’s not just lip-service to a CSR initiative for example, it’s the building blocks for trust and by extension, productivity and performance.
The compelling case for trust
As a quality to aim for, the bottom-line effects are significant.
GETTING TO HIGH TRUST
So, how do we get to high-trust?
Visualising the movement as a pyramid, the foundation for trust is acknowledging individuals and their strengths and weaknesses. When people are acknowledged for what they’re doing and how they’re doing it regularly, then we can move up the pyramid. It’s part of building a realistic performance measurement and management model that supports intrinsic motivations and the fourth which we’re exploring here.
The progression to respecting and ultimately liking an organisation — in terms of its values and wider objectives — is part of mastery and purpose in intrinsic motivation. It’s more than giving people the tools and the skills to reach company and personal objectives— it’s cultivating a culture of transparency and openness.
The apex of trust is underpinned by ‘liking’ the organisation and where it’s headed. And this is the sharp end of creating a performance management system that works for organisations of many unique shapes and sizes. All these layers grow trust along the way throughout people’s performance.
MANAGING VERSUS MEASURING
We’ve talked about motivation to get high performance and building trust as fuel for that journey so the question must arise— is managing performance almost more important than measuring it?
Millennials seem to strongly believe so – as exemplified in the stats in part 1 – with 74% feeling ‘in the dark’ about how managers and peers think they’re performing, with traditional performance reviews and 80% of them saying they prefer on-the-spot recognition over formal reviews. It’s realistic to say that millennials and indeed most people are used to a ‘now culture’ – where instant gratification in terms of information access, social media interaction and even entertainment on-demand is standard issue. They have a point— the need for more fluid conversations around performance with changing priorities and goals in line with the shifting economy and volatile market forces has never been greater.
To support this view, Wiley published a report in 2015 on annual performance reviews and found that managing performance is more important than measuring it, and in terms of general performance management systems, those set-ups with ineffective benchmarking are associated with lower performance. If a business hasn’t got its benchmarking right, then management gets pushed right to the top of the to-do list.
IS PERFORMANCE MANAGEMENT DEAD?
The short answer is— yes, but only as we know it. A more accurate response is— it’s evolving. And quickly. The Washington Post cites ‘To date nearly 10 percent of Fortune 500 companies have done away with annual ratings, according to Cliff Stevenson, a senior research analyst for the Institute for Corporate Productivity, a research network that studies management practices.’ That was in mid-2015. Now that number would be significantly more – perhaps in the mid-20% mark.
The move in the direction of change is clear with Adobe, Accenture, and Deloitte (and other majors) announcing ‘scrapping ratings’ in favour of performance review to the performance prediction. That’s on a functional level. On a cultural and holistic level the evolution and future looks to new models. As we’ve explored, these are having a profound impact on the bottom line — something I’m sure the 1954 model would have approved of.
The case also grows for the demise of annual performance ratings factoring what millennials want and need — the group that will comprise the majority of the world’s workforce very soon. A yearly review is far-too clunky, cumbersome, out of touch and HR managers aren’t following up on the results. It’s a system that eats time, energy and is quite simply not delivering.
Obviously, not losing sight of the intent is key and ratings in themselves aren’t bad, just the way they’re responding to today’s needs undermines their case. There is a fresh approach and that’s becoming clear through coaching, regularly defining what good looks like, and having courageous conversations when low performance has become an issue. There is no sense in not addressing underperformance as soon as possible, and not amid cumulative issues with multiple individuals at annual review time. Regular and frank conversations are also the key to an open culture, harnessing intrinsic motivations and adding to why we all get up in the morning.
The final piece of the jigsaw seems to be developing ways to build trust relationships and grab hold of the holy grail of the high-trust organisation. It’s up to the individual business to not necessarily find an entirely new model for performance management, but look at managing performance first, measuring it second, and do everything possible to open up the conversation around performance— motivating, enriching and building trust along the way.