Strategy sets direction;
results are delivered by people

WHITEPAPER

Performance management is a business process that transcends the organisational hierarchy and has the ability to  create the organisational “buzz” that keeps everyone  focused on the things that matter the most. The essence of performance management is easy to grasp, but getting it  effectively embedded in the organisation as a value-adding process can be difficult. You will need to define a set of  principles and a process that matches the needs (and capabilities) of your organisation. The key to getting the most from performance management, however, is not in the  system or the choice of rating scale, but in how successful you are in positioning performance management as a key  element of everyday leadership.

Performance management means different things to different people. Ask someone from Finance, and they will talk to you about rolling forecasts and budget allocation; ask someone from HR, and they will tell to you about feedback and personal development plans. Ask someone in the line, a lot of them will tell to you about objective-setting, performance appraisals and bonus schemes. Unfortunately, a lot of them will also talk about performance management as a process that has been imposed on them from somewhere else, which is time-consuming and the source of a yearly motivational speed bump, the symptoms of which are disappointment and cynicism. In other words, organisations struggle to realise the full potential of performance management.

The challenges of getting performance management right are so pervasive, that they have given rise to whole books with titles such as “Get rid of the performance review”, and when we laugh at the substantial number of Dilbert comic strips on performance reviews, our smile often stiffens as we think “that…could…happen here”. In some organisations, performance management in the classic sense has been abandoned altogether to make way for a more ongoing feedback culture (and generally higher wages instead of bonuses). So, if performance management is such a perilous road to take, why take it at all? Could we not just skip it? Yes, we could. However, as one leader put it with a wry smile: “If we were to abandon every process that we do not master, we could end up with very few processes left”. The upside of getting performance management right is such a powerful force in delivering results, driving motivation and developing the people in your organisation.

The four performance questions

What am I accountable for?

Why is what I do important?

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How am I performing?

How should I develop to improve?

Performance management is simple

One thing that is so paradoxical about performance management is that it is so simple and so complex at the same time. The essence of performance management is simple: We want to align, drive and develop the performance of individuals towards the goals of our organisation. This can be achieved by ensuring that everyone in the organisation have concrete and specific answers to the four performance questions at all times:

  • What am I accountable for?
  • Why is what I do important?
  • How am I performing?
  • How should I develop to improve?

If we look at the four questions and imagine a conversation between a leader and one of his or her direct reports, it seems feasible to find specific and concrete answers to these questions. That is, if we assume that the leader knows what he or she is accountable for in the first place and is able to translate that into contributions from team members. With these four questions, we should be able to execute performance management across the organisation armed with nothing else than a pen and a piece of paper. A monthly 1:1 between leader and direct reports would enable us to stay up to date on the answers.

We have made performance management complex

However, we have a way of making things difficult for ourselves – for perfectly good reasons. We want to be able to compare the performance of employees, so we invent a rating scale, which in turn drives the need for defining objectives, KPIs and targets in terms of the rating scale. As if that was not enough, we go and link it to talent programmes, career progression and bonus schemes. Everybody becomes so focused on the score that inflation sets in, and so we invent calibration to ensure that scores remain differentiated. We now spend a fair amount of time training to set SMART objectives, give feedback and create personal development plans. And we enter it all into a performance management system that we use so rarely that even if it had been designed with an acceptable level of user-friendliness, we would still have to learn it over and over again each time we use it.

Getting performance management right

So how do you get it right? The answer, of course, is: It depends. It depends on what you have already done and succeeded with – i.e. your organisation’s performance management maturity level. And it depends on what exactly it is that you want to performance manage – i.e. your performance management scope. There is no one-size-fits-all. Therefore, whether your performance management idol is General Electric or Atlassian, you will do well in making a solid assessment of how far you want to go, and how far you are able to go. For most companies that have been successful with performance management, it has been a journey to get to where they are today. You need to build your roadmap and plan your performance management journey too. That being said, there are many things to learn from the experience of others.

Like to know more?

This was the fist charpter in our Performance Management white paper. Read the remaining chapters here