THIS POST IS THE FIRST IN AN EIGHT PART WEEKLY SERIES ON PERFORMANCE MANAGEMENT.
Traditional Performance Management systems are in deep crises. Their industrial era approach is unable to meet the demands and thinking of 21st century people and organizations. Lean | Agile enterprises set the reset button and move from an administrative Performance Management process to a successful iterative performance flow.
The results of the SHRM Survey ”HR Professionals’ Perceptions about Performance Management effectiveness” show the hard truth: Only 2% of organizations attest their practice a grade ‘A’. In other words: a staggering 98% of enterprises are not satisfied with their current solution.
Other studies paint a similar picture and the list of complaints – from employees, managers, and HR alike – is long. Here are some of the most common ones:
Performance Management is driven by the need to calculate incentives not by defining meaningful and inspiring goals.
Goals usually are quickly outdated, obsolete and simply forgotten.
Goals cannot be translated into daily actions and don’t drive neither accountability nor engagement.
Cycle times are far too long for a fast-paced evolving business setting.
Reviews are all about appraisals and not (enough) about opportunities and development.
Annual appraisals are too ritualistic, and cannot keep up with the need for fast constructive feedbacks.
Bonus models undermines collaborative behavior and do not foster people values.
Reviews are wasted on explaining away a number and not used to reflect, learn, and grow.
The whole process is bureaucratic and time-consuming and yet organizational development is completely ignored.
Forced distribution/staked rankings are demotivating and wreck our best people.
So, no matter how you look at it: Current practices have long ago lost their intended ability to align goals, encourage joint efforts, and foster great results. They do not inspire meaning and growth, and there is no way they can keep up with the pace and energy of agile teams.
Rooted in the industrial era, traditional Performance Management approaches are not made for 21st century organizations challenges. We need to push that reset button – now more than ever!
Here are 7 steps how to move from an administrative Performance Management process to a successful iterative and inspiring performance flow:
#1: Shift to iterative, interactive process aligned with your optimal cadence
The accelerated pace of today’s business world makes it increasingly difficult to think in multi-year cycles and set rigid top down goals on an annual basis. You can handle that by reducing the cycle time and implementing an iterative, interactive process. That way you can deliver results while being able to adequately adapt to internal and external changes.
#2: Share understanding of vision, set inspiring goals and clarify expectations
We operate in a complex and highly demanding world with an endless need for innovative and mind-blowing results. Being able to inspire people to greatness is imperative. It takes a strong vision – not just a nice plague on the office wall – but one that people share. This is your anchor for a roadmap with inspiring goals that answer the Who/What/Why (but not the How).
#3: Empower self-organizing teams to plan and execute and hold them accountable
The digital age belongs to knowledge workers who think outside the box. No wonder, constricting processes and micromanagement are not going down well. Make sure to bring those talents together in collaborative, self-organizing teams and throw fast feedbacks, constant communication, access to data and knowledge, and decentralized decision-making into the mix. But don’t worry about accountability. Contrary to popular belief – Agile is a highly disciplined way of working. And agile teams proof that every day.
#4: Embed individual and organizational learning and development into your workflow
Companies must constantly evolve to meet new challenges and opportunities. Learning and development is a key part to that equation – not only on a personal but also an enterprise level. You must provide the time and space for people to inspect and adapt in order to create a learning culture that is supported by work practices and daily routines.
#5: Motivate through mastery, autonomy, and purpose not cash incentive
Due to the industrial era belief that money is the strongest (and only effective) motivator for employees, traditional Performance Management approaches are strongly linked to cash incentives. But ever since Daniel Pink’s “Drive” (and decades of scientific studies) we know, that 21st century knowledge workers are in fact intrinsically motivated and driven by mastery, autonomy and purpose. It is time to rethink your motivational theory.
#6: Eliminate performance ratings and annual appraisals in favor of open dialogue and continuous feedback and sharing
Companies excel at calculating ratings. They judge, force rank, provide infrequent and limited feedback and assess outdated, obsolete, and irrelevant goals. And then wonder why appraisals are so despised! Forget performance ratings and annual appraisals. Instead create a culture of mutual respect where candid dialogues, continuous feedback, knowledge sharing and learning is an integral part of the workflow.
#7: Accept that handling (poor) performance is a leadership mandate and don’t hide behind Performance Management
Organizations misleadingly believe that their Performance Management will miraculously separate your people into groups and reward the stars and deal with the low performers. They might even apply forced rankings to guarantee an adequate separation between the two. Stop pretending! You don’t need annual reviews to know who your players. Accept that handling (poor) performance is a leadership mandate. And no approach will (nor should it) take that responsibility from you.
This post was contributed by Fabiola Eyholzer, CEO of Just Leading Solutions, LLC. More information about Fabiola and the services of Just Leading Solutions can be found at www.justleadingsolutions.com.