MOVING BEYOND ROADKILL IN THE MIRROR
Many organisations have broken performance management systems. In such organisations, staff dislike the system, and it doesn't generate high performance. At worst, such broken systems actively DEMOTIVATE staff and waste time. Employees and managers see them as unfair, complicated to use and useless. In other words, busywork that adds no value. If people in your organisation see performance management as a necessary but evil administrative task, that’s a clear sign of a failed performance management system. Some systems are used to administer promotions and pay. Some systems are used to decrease legal risk by documenting failure, justifying discipline or termination. But if those are your system’s most valuable outcomes, that’s a good reason to start again.
Other organisations get performance management right. These organisations are, according to a 2018 study by Bersin Deloitte:
170% more likely than the rest to delight their customers;
140% more likely than the rest to meet their financial targets; and
490% more likely than the rest to succeed at change.
With results like these on offer, scrapping your performance management system entirely is like bulldozing your entire house because you don’t like the fabric on the sofa. Instead, I’ll outline what the organisations that get performance management right are doing. That process is Strategic Performance Management, and I outline the why, what and how here.
Strategic Performance Management is about IMPROVING ORGANISATIONAL PERFORMANCE. It’s a continuous process of developing individuals and teams, using coaching, feedback, ‘FEEDFORWARD’, goal setting and review. It’s TECHNOLOGY-ENABLED and it’s useful for participants.
IIn an organisation where human capital is as or more important as infrastructure or financial capital, the only way to improve organisational performance and meet ever-greater stakeholder expectations is by this continuous process of improvement. The continuous process of Strategic Performance Management includes two types of process:
A SOCIAL/RELATIONAL PROCESS (‘HEART’) which involves and is enabled by the relationship between the manager and the employee, which, along with trust in the organisation, can motivate participants; and
A COGNITIVE PROCESS (‘MIND’) of accurate measurement, noting and recalling data, being fair etc.
The social-relational process (HEART) drives organisational performance. Heart is what characterises organisations that get Strategic Performance Management – it comes from the heart and from shared values. Leaders and managers in such organisations focus on IMPROVING PERFORMANCE and DEVELOPING PEOPLE rather than focussing on the process for its own sake (busywork). What’s more, those same leaders and managers visibly show their COMMITMENT to this social-relational process, by taking it seriously and making it a priority. If an individual senses their manager isn’t committed to a relationship, they’re unlikely to buy into a performance management system.
MIND, the cognitive process at the core of Strategic Performance Management, along with its focus on DEVELOPING people and teams, ensures that employees perceive the system as both FAIR & USEFUL. For example:
Do people know ahead of the year how they will be rated?
Do they understand why they have been rated a particular way? Are the conversations factual and based on observable and measurable behaviour and outcomes?
Are ratings based on actual evidence and are ratings consistent for all employees?
People also find it fair & useful because the system has:
VALIDITY: It measures what it's supposed to.
ACCURACY: It differentiates between high and poor performance.
There are many rating systems including graphic, numerical, and qualitative. However, ratings themselves can be a distraction. The moment someone puts a NUMBER on data, for example, it can be an invitation for some individuals to engage in an exhausting and fruitless debate about the number rather than the data behind it and what it means for the future. That’s why there’s a recent trend to RATING-LESS systems. However, even if your system is rating-less, you still need valid, accurate data.
I left out ‘administrative process’ from the list of processes. That’s because in Strategic Performance Management, TOOLS ensure the process is TECHNOLOGY-ENABLED, online and practical for everyone to use - so easy to use that people are less likely to mistake it for administrative busywork.
The purpose of Strategic Performance Management is to improve organisational performance by developing individuals and teams. That’s why your performance management system needs to develop your people. This includes a formal DEVELOPMENT PLAN, or less formal ‘FEEDFORWARD’. Feedback is a conversation about what happened in the past – like looking at roadkill in the rear-view mirror. Feedforward is a conversation about what should happen in the future – like putting the lights on high beam to see what’s on the road ahead. It’ll take you further, faster than keeping your eyes only on the rear-view mirror. Such discussions can be ‘in the flow’, on a daily, weekly, and monthly basis.
This brings us to CONVERSATIONS generally. At the heart of Strategic Performance Management is the social/relational process based on a variety of CONTINUOUS CONVERSATIONS between individuals and their managers throughout the year. The formats for these conversations include:
‘IN-THE-FLOW’ conversations, as above– something comes up, you talk about it that day. The best time to discuss performance is NOW, not in six or 12 months;
COACHING - training and development of an individual to achieve goals. May take the format of a one-on-one (see below);
ONE-ON-ONE - a regular, short (~30 min) meeting for: Guidance, feedback (and feed-forward) and solving problems; and
Half-yearly or YEARLY reviews.
Half-yearly or yearly reviews are least important in 1-4 above. That’s because, as conversations occur continuously across each year, nothing remains to be said in such reviews that has not already been said - in effect, no surprises. Hence the ‘continuous’. If you go further and take ratings out of the process, there’s even less to talk about at the end of the year. However, the half year or end of year can be a useful time for people to agree a development plan for the following year.
Delivering effective feedback/feedforward is a skill that managers can and should develop. The most important feature of continuous conversations, including feedback/feedforward, comes back to heart, purpose & values. Effective continuous conversations:
Take a problem-solving stance focussing on the 'Next action' – (feedforward);
Are never personal, but always linked to behaviour – what was the action?;
Are conducted with empathy and respect;
Build trust; and
Focus on the KPIs that matter strategically
The relationship between people is what matters most. Without good relationships between managers and individuals, you have a performance management system worth peanuts. Then, don’t be surprised when people act like monkeys.
The ‘Strategic’ in Strategic Performance Management:
Continuous conversations should focus on the KEY PERFORMANCE INDICATORS (KPIs) that matter strategically. If the goal of Strategic Performance Management is to improve organisational performance, then it must have STRATEGIC FIT - it measures what is strategically important to the organisation. Individuals' KPIs should relate strongly to organisational performance measures. If people aren’t working on things that matter to the organisation, sit and reflect why they’re on the payroll.
Putting People at the Centre
‘Why’ is organisational performance, and ‘What’ is relationships with heart, that focus on coaching and developing people continuously to do the things that improve organisational performance. ‘How’ you develop a system to support this is by putting people at the centre. Nothing is more important to your organisation than people. Start with EMPLOYEE ENGAGEMENT. Make sure you involve employees in:
DESIGNING THE SYSTEM: Employees need to be consulted on the design. How will you do this?
USING THE SYSTEM: Gathering data and driving their own conversations and development. Performance management should not be ‘done’ to employees, so they are merely passive recipients - this is demotivating. Instead, there should be useful outcomes for them, so they are motivated to own the process. For example, if development opportunities arise then that could be a motivator.
In Strategic Performance Management, it's the EMPLOYEE’S ROLE to:
Lead their own processes
Disagree and agree development goals
Self-reflect
It’s the MANAGER’S ROLE to
Coach the employee on effective actions
Describe the KPIs and what achieving them looks like
Oversee the employee's development. If they’re not developing, identify why.
Measurement and Ratings
While the trend to rating-less systems avoids the pitfall of arguing about ratings, I don’t have a strong opinion on this and the evidence for and against such systems is unclear. If you do rate, both the manager and the individual agree the rating together.
To get a wider picture, information can also come from:
Peers/colleagues
Customers
Direct reports
If you have an individual who wants to debate a rating, then a way to break the stalemate might be for you and them to ask such third parties directly for evidence that supports a particular rating. Regardless of whether you choose to rate, you still need to MEASURE – and measure CONTINUOUSLY throughout the year. You need to measure
BEHAVIOUR: HOW people work - this is observable - how are people working? What actions can you observe?
OUTCOMES: WHAT were the results – this should be combined with setting objectives and the KPIs
This approach provides a useful HOW/WHAT TABLE, shown here:
Strategic Performance Management measures both behaviour & outcomes (how & what) because sometimes outcomes are beyond the individual's control.
The How/What Table is fair and transparent because individuals and their managers will both have the evidence through their continuous conversations and will have agreed the KPIs and actions through continuous conversation during the year. No surprises, then. Note the unicorn in the upper right quadrant. That’s because individuals who fall into that quadrant are vanishingly rare.
Development & Goals
While I don’t put much store in the year end milestone, it can be a useful time for participants to set GOALS and agree a development plan for the year ahead. This is because development opportunities such as specific training will need to be planned and budgeted for. Goals for development should be:
Personal to the individual
Set by the individual
SMART goals
Relate to how the individual wants to develop
Remuneration, Reward & Recognition
Tying Strategic Performance Management directly to remuneration and reward may be a big ask. However, RECOGNITION is a different kettle of fish. Because Strategic Performance Management rests on the relationship between the manager, the organisation, and the individual, it is appropriate that managers and the organisation build that relationship through recognition throughout the year. Recognition:
Recognises high performance
Sits outside the remuneration framework;
Is personalised to the individual being recognised;
Relates tance.
Recognition can include tokens such as time off, vouchers, or personalised thanks (verbal or written).o the values and behaviours; and
Technology-Enabled Tools & Processes
The tools and processes that support Strategic Performance Management need to be easy to use and effective, i.e. TECHNOLOGY-ENABLED. For example, a Strategic Performance Management portal might:
Allow employees and managers to capture evidence throughout the year;
Invite third parties to provide feedback;
Record agreed future actions and outcomes;
Schedule meetings; and
Share and sign off documents such as development plans.
There are specific portals available for performance management. Further, some Human Resource Information Systems (HRIS) have built-in modules and some workflow management web-based solutions have templates. I can provide advice on various solutions.
Continuous improvement
Just as a Strategic Performance Management system aims to continuously improve individual, team and organisational performance, the system itself can be CONTINUOUSLY IMPROVED. Gauge effectiveness with survey questions such as:
"My coach/manager is prepared and on time for our one-on-ones"
"I understand how I am tracking"
"I receive frequent constructive feedback"
Summary
I’ve outlined the evidence-based approach of Strategic Performance Management. It’s the high-performance alternative to demotivating busywork. Employees are at the centre and need to be involved in every step, including design. When implemented it delivers outstanding organisational performance. However, managers need to build strong relationships with employees, lead with heart and have a real commitment to development for it to work. It requires a continuous, year-round commitment to multiple conversations that are future-focussed and empathetic. Technology needs to enable the process and you need to continue to measure and improve the process once implemented.