The System is Broken – Why Today’s Performance Management Just Doesn’t Work
It’s no secret that many businesses are struggling with how to effectively manage employee performance. Traditional performance management systems are becoming increasingly obsolete, failing to meet the demands and goals of the modern workplace. The current performance management processes are broken. This blog post will explore why this is the case, the importance of aligning performance management with business objectives, the shift towards more agile practices, and the role of compensation in performance management.
The Drawbacks Of Today’s Performance Management
The classic performance management paradigm, with its reliance on annual performance evaluations, is not without its pitfalls. With a focus on examining past actions, it’s like driving while only looking in the rear-view mirror, neglecting the road ahead. This lack of foresight omits considerations for future potential or avenues for ongoing progress. Not to mention, this system’s susceptibility to subjective judgements can result in bias and discrepancies. These outdated practices can take a toll on employee morale, stirring feelings of disengagement and potentially fueling turnover.
Today’s way of work has changed so drastically since we started performance management. We have more complex teams, we’re global, we have different technologies and we have a diverse talent pool with unique skill sets. In addition, our world is changing so fast, we’re dealing with internal and external environments that have an unpredictable effect on our businesses. It’s not a one size fits all process anymore.
Let’s look at 2020, for an example. In December of 2019 and rolling into January of 2020, most companies had finalized their strategic plans and rolled out new goals for the year. Go team! Then, about a month later, there was some rumble of COVID spreading across the world. By mid March 2020, businesses changed the way they worked overnight. Employees were sent home to work remotely and those that stayed in the office or facilities had to work with new rules and restrictions.
This is a pretty drastic change, but I would wager a bet that in any year, pandemic or not, the goals you set in January for your organization, your teams and your employees would change within or soon after the first quarter. So, why are we setting goals and delivering reviews on an annual basis?
Today’s workforce isn’t content with a once-a-year review and a pat on the back. They yearn for constant dialogue, learning opportunities, and well-laid career trajectories. There’s a clear cry for a seismic shift from the rear-view mirror approach of old-school assessments to a more progressive, future-focused performance management style. One that nurtures continuous growth, fosters career development, and empowers employees to reach new heights. This proactive model is not just a people-pleaser, it’s a productivity booster, breathing life into your workforce, sparking engagement and fueling performance like never before. It’s not a ‘nice-to-have’, it’s a ‘must-have’ for any business aiming to flourish in today’s fast-paced, ever-evolving corporate landscape.
The other piece of the performance review process that’s broken is merit. It’s tied to someone’s performance, but in all reality, it’s tied to the leader’s perspective of your performance. In some cases, it’s generically calculated based on an arbitrary bell curve. Yikes! That’s not motivating. Also, on average, merit tends to hover around 2.5% or 3% for companies that give merit. If you’re a top performer, you’ve taken on additional work and projects, stayed late and gave up time with your family, would you be encouraged to keep going with a 3% raise? It leaves everyone feeling underwhelmed and underappreciated for what they’ve contributed.
A Call To Change
How do you change this and update your performance management process? I’d love to say, throw it out the window and start fresh. However, It’s not a change that happens overnight and you need both leadership and employee buy-in. Start by taking a look at your current process. Is it aligned with your culture and the way your business shifts? Is it agile enough to flex throughout the year and is it motivating the right behaviors to achieve your goals?
Performance management should never operate in its own bubble. It’s critical that it marches to the beat of the organization’s wider strategic goals. Why? Because when employees understand the direct impact of their performance on the business’s broader ambitions, they tend to amp up their engagement and motivation. They start performing at their peak potential. Consequently, performance management transforms from just an instrument to assess employee performance to a strategic key, unlocking the door to business success. A close-knit alignment between individual performance and business goals can serve as the secret ingredient in the recipe for a prosperous organization.
Introducing Agile Performance Management
Step aside, traditional performance management–there’s a new player in town. Agile performance management is swiftly gaining ground, setting the stage for a dynamic, engaging, and results-driven work environment. Forget about yearly evaluations; it’s time for regular check-ins and open conversations. In other words, “FeedForward instead of FeedBack.” With this ongoing dialogue, employees stay in the loop, armed with real-time feedback and a clear understanding of expectations. Beyond just fostering clear communication, an agile approach affords flexibility–keeping pace with changing business needs, ensuring your team’s goals are always in sync with organizational objectives. So, are you ready to take the leap towards agile performance management?
How Compensation Fits
Great! Let’s talk about how compensation ties into performance management. In an agile performance management program, it needs to be aligned, removed from an annual merit and tied to ongoing performance. This can be done through spot bonuses, promotions, salary increases, opportunities for learning and development and even time off throughout the year. Compensation should be benchmarked regularly to align to your pay strategy and base pay adjusted as needed to meet market demands. Making this a fluid process throughout the year is more effective and rewarding for the employee than the dreaded annual review.
A Performance Management Program For The Future
It is time to reimagine and rebuild our performance management programs. It starts with creating a culture of continuous feedback that is intricately woven into the day-to-day. This feedback needs to be tied directly to the strategic goals of your business, allowing everyone to see the value in their work. Embrace the agility revolution, replacing traditional annual assessments with regular check-ins and open conversations. Don’t forget about compensation—it’s more than just a paycheck. It’s an affirmation of an employee’s worth and a powerful motivator. Consider harnessing the power of technology to streamline these processes and ensure your management team is equipped to give effective feedback. With these strategies in place, we can foster a work environment that champions performance, inspires continuous improvement, and sets the stage for a prosperous future.
About the author
Michelle Strasburger is the Founder and CEO at The Wellness Value. At The Wellness Value our goal is to make the world of work a happier and healthier place. We work with small to medium sized businesses and startups to create a people first strategy through their culture, values, programs and policies. In short, we help CEOs sleep at night knowing that their people strategy is well. To learn more, visit www.thewellnessvalue.com