The performance management processes found in most companies today pre-date 1990. Not surprisingly, companies often see limited strategic value resulting from these outdated practices. Fortunately for all of us who either manage or are managed, these traditional performance management processes are starting to be seriously challenged and redefined. I’ve found that this change is driven by two underlying themes.
First, as talent becomes more critical to business success, companies are appreciating the value of effective people management. In other words, sub-par management methods are not tolerated as much as they used to be.
Second, advances in mobile, social and cloud technology make it possible to conduct performance management in ways that were simply not possible before this technology existed. The result is that companies are rethinking both what’s possible and what makes sense when designing performance management systems.
Going well beyond the concept of the traditional once a year annual review, performance management actually consists of at least seven distinct phases focusing on different types of conversations and decisions involving employees, managers, and business leaders:
- Setting expectations
- Discussing progress
- Assessing contributions
- Planning development
- Evaluating performance
- Allocating resources
- Assigning job roles
These phases occur in every organisation regardless of whether it has a formal performance management system or not. The core challenge of performance management design is determining how to effectively guide, develop, evaluate and invest in employee performance across large numbers of people in a fair, consistent, easy to administer and well-understood manner.
Companies that have the most success are ones that carefully think through key performance management design questions and relate them to their business goals. After speaking to companies from around the world, the following five questions are among the most critical to consider. It is important to look at these for each phase of performance management that I’ve listed above.
Critical design questions associated with each phase of performance management:
When does your company carry out this activity? If it is scheduled is the timing based the calendar year or tied to the company’s financial or strategic calendar? If it is spontaneous, how do you ensure it occurs in an effective and consistent manner across the company?
Who is involved and how are they held accountable for doing a good job? Performance management actions usually involve employees and managers, but many also benefit from the involvement of co-workers, direct reports, human resources, senior business leaders, and outside customers.
What aspects of performance are being addressed? Employee performance can be defined in terms of three distinct elements: goals (what you achieved), behaviours (how you acted), and attributes (the skills, credentials or experiences you acquired). It often makes sense to focus on different aspects of performance at different phases of the process.
What data does it utilise and what data does it generate? The value of performance management comes from creating better conversations and decisions about talent. One of the ways this is accomplished is by ensuring performance conversations and decisions are based on accurate data collected through previous talent discussions and processes.
Does it vary based on individual differences in employees? This is a critical yet often overlooked question impacting performance management design. How different phases of performance management are carried may vary considerably based on the type of job, the motivational characteristics of the employee, and the employee’s past performance.
Steven Hunt is senior vice president of customer value at SAP SuccessFactors
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