HR Strategy

Have Traditional Performance Management Systems Failed?

Every business claims a performance management plan. However, not every business can explain its effectiveness, so perhaps it is time to breathe new life into performance management
— By Sharon Ross

Performance management is often treated like a stagnant concept. A plan is put into place, and it is never revisited. In the meantime, generations come (think millennials) and go (think baby boomers) and the same tired plans are maintained. Is it any wonder employees are not engaged or buying into the business strategies? A performance management plan that is not kept relevant to the workplace and business environment is not much of a plan.

Performance management is an approximately 60-year-old concept. Originally designed to determine peoples’ compensation based on employee behaviours, the goal was to use money to drive specific outcomes. This worked well for people who were only interested in money, but that was soon replaced by programs that focused on eliciting employee behaviour based on non-monetary incentives. These included learning on-the-job, meeting objectives and so on. There is no doubt the new version of performance management that emerged, in which performance was measured against clear and mutually agreed upon objectives, was an improvement. However, it was geared toward baby boomers, and now they are retiring and behind them are millennials.

Reinforcing Rather Than Driving Behaviour
The ultimate goal of performance management is to engage and retain talented employees and improve organizational performance. In the past, performance management systems drove performance behaviour. In the present, the technologically savvy, more youthful and freewheeling generation coming behind baby boomers simply does not want to be hemmed in by old systems. So, instead of using performance management systems to drive behaviours, the new model says organizations should establish the desired behaviours first and then make sure the performance management system reinforces those behaviours. In this way, performance management is not just an appraisal system that requires managers to check off boxes that say things like, “met objectives” and “gets along with co-workers,” which creates a certain cynicism among staff.

Performance management should not be a periodic attempt to motivate employees through review systems. It should be a daily, ongoing process that influences employee efforts. Baby boomers do not have the same characteristics as the younger millennials coming behind them. Baby boomers were willing to work long hours, often unpaid, deal with organizational silos, work alone and defer to management direction with little input. Creativity was not a top priority. This is not intended to be an unflattering description of baby boomers, because they built a strong economic structure with successful businesses. However, times change, generations change, and so performance management systems must also change.

Millennials like autonomy, a chance to use creativity, the opportunity to multi-task, the use of technology and teamwork. Considering the differences between the generations, it is easy to see that the traditional performance management system is inadequate. The next question is: “How should it be changed?”

An Encouraging System Rather Than a Critical One
An alternative approach to conventional performance management systems turns traditional concepts upside down and around. Instead of the employer setting expectations, employees are encouraged to assume autonomy by using their creative talents and strengths. Employers recognize those strengths and assign and encourage work that maximizes their utilization. Employers should also address development needs based on employee weaknesses or need to build strengths further to improve performance.

In the new business environment, where people are encouraged to be creative and innovative, a new approach to performance management is needed. Good managers are not reviewers; they are coaches, mentors, communicators, and strategists who encourage employees to demonstrate their full talents and capabilities in their own ways through team participation and networking. This system depends on management being able to express a vision that employees can embrace and being able to help employees connect their team effort to career development and organizational performance.

Past performance management systems relied mostly on assessing individuals based on individual behaviors. In the alternative approach to performance management, employee performance is viewed within the larger context. Managers and employees must develop a new relationship in which trust, rather than authority, is the key element. When people are given more autonomy and allowed to become team members, trust becomes an imperative. The manager will provide the tools and resources for employees to do their jobs on a daily basis, and it is up to the managers to encourage and promote continuous improvement.

Some Elbow Room, Please
Naturally, this kind of performance management culture requires the right kind of corporate culture. The culture must respect creativity and excellence and encourage continuous learning that implies continuous feedback. Rather than managers sitting down with employees a couple of times a year, employees are encouraged, directed, developed and given regular feedback. This raises the connection between what the employee is doing and what the organization expects, which is just another way to say “engagement.”

In the conventional performance management system, organizational goals are set at the beginning of the rating period. In the new work environment that millennials are comfortable in, the jobs are more fluid. Organizations setting hard goals for jobs in advance fail to recognize the remarkable speed of technology or the dynamic nature of work today. Performance measurements need to focus on what is important, such as innovation, creativity and milestones, rather than simply what can be measured.

Clearly, traditional performance management systems are ineffective in today’s work environment, which is rapidly filling with millennials who think differently and have different expectations from their predecessors. They want ongoing feedback, the opportunity to network, managers who individualize goals and assessments, tools for facilitating change, the ability to make real contributions to organizational success, opportunities to reach beyond their comfort zones and the feeling of satisfaction that their talents are appreciated and encouraged.

Leaders must adapt to the new generation because it is not interested in stiff performance reviews, tedious demands or rigid expectations. In the new approach, employees are engaged through daily feedback, discussions, teamwork and ongoing expectations. The new generation is comfortable with the speed of technology, the ability to elicit rapid change and the belief that innovation needs some elbowroom, so to speak. Clearly, it is time to breathe some new life into performance management systems.