How Performance Management Has Changed In The Last 10 Years, And What's Next...

Looking back to a decade ago, when Engage For Success (EFS) was founded in 2011, most HR practitioners accepted the design of performance management as pretty well established and well understood. Performance management policies were frequently based on setting SMART objectives at the start of the year, a mid-year review, and an end-of-year review of performance against objectives. This would then be aligned with a set of ratings and rankings which would be calibrated across the organisation with some form of link to merit pay or bonuses and potentially promotions. This was a widespread approach to managing individual performance and was thought to contribute to organisational high performance.

What had initially started as a process where the intention was to improve performance by engaging and motivating employees had become systemised in an attempt to deliver this wholesale across organisations.

There was little thought to the possible downsides of this approach. Many managers, employees and some HR practitioners, however, were starting to have some doubts about this approach.

Performance management began to come under fire. The once a year, dreaded conversation about staff performance was seen as the wrong way to manage people because it created a host of problems.

From 2014 onwards articles started to appear which questioned this approach to performance management as it became apparent that it came with a whole set of unintended consequences. For example:

The time and resources taken to carry out the requirements of the typical HR performance managemental approach seemed far too onerous and was not considered to deliver value for money.
Managers and employees expressed considerable dislike for the policy and the nature of the conversations it was forcing them to engage in.
Managers were not generally equipped to hold difficult conversations.
Managers were waiting until the once-a-year meeting to highlight all the problems and frustrations that may have built up during the year, instead of having dealt with them earlier.
There was conflict over ratings especially when aligned to pay scales and bonus pay-outs. This was because the rating and ranking approaches were thought to demotivate the vast majority of employees and only motivate and engage the small elite with the top rating.
Setting meaningful objectives was not as easy as it may have first appeared. A small number of objectives and measures did not effectively capture the complexity and changing nature of many jobs in organisations.
The traditional performance policy did not seem to have a link to the growing interest in employee engagement as a way of improving organisational performance. Instead, traditional performance appraisal appeared to be disengaging employees.

There were a raft of articles published in journals such as Harvard Business Review, management consultancies such as CEB, and McKinsey and Booz who prepared articles on why performance management needed to change whilst other organisations such as Adobe, Microsoft, Deloitte, GE, Accenture and many others reported that they had scrapped performance management / appraisals all together, although the reality was that it is carried out in a very different format. One study by Deloitte identified that 70% of organisations were well on their way to re-inventing their performance management approach by 2017.

All these organisations were realising that the previous approach to how the performance management tool was being used was faulty. The systems and policies had not kept pace with the changing work and environmental situations. There had been significant changes in how work was undertaken, which the traditional performance management approaches did not align with. Examples of these changes include:

There is a greater requirement for more judgement and creative input in jobs. This can mean roles are not as well defined which leads to unintended consequences from the traditional / previous approach. This nuanced position, where many jobs require employees to exercise considerable judgment and use of specialist knowledge and skills, is not easy to capture if only a few job objectives are being measured.
There is a greater requirement for emotional and social labour to manage complex interactions with customers and clients which can be difficult to summarise in a few objectives.
Other jobs are becoming more transactional and precarious. The performance controls are built into the operational and service delivery mechanism of these jobs – such as in customer contact centres, logistics warehouses, app-based services, such as Uber, Deliveroo and others. An HR performance management policy is not necessarily appropriate to these types of jobs and processes.
Growth of freelancers /talent leasing /gig economy leading to more people having a potentially short-term relationship with the organisation or their role, which meant the timescales for the traditional /previous approach were inappropriate.
There are fewer roles where it was easy to compare performance of individuals against and therefore people undertaking performance management /appraisals need to have a different approach to measuring success.
Work is becoming more agile with a requirement to adapt and change at pace. Discussing progress against targets needs to be more frequent to adapt to changing work place requirements. These discussions also need to allow for more input from the employee to provide information on how the changes can take place.
An increase in matrix working, where employees can be part of multiple teams leading to an increase in the use of 360 degree feedback.
A greater appreciation of the importance of the overall ‘employee experience’ and social and environment impact with B-Corp, and how this impacts levels of engagement and therefore productivity.
A greater interest in the organisations’ purpose with a focus on values and behaviours as opposed to just tasks.

From an environmental perspective, there have also been changes that impact on perceptions or work that impact the need to update the traditional /previous model performance management approach including:

Growth of social media platforms and usage has led to an increase in expectation and frequency of feedback. People can receive ‘likes’ on posts within minutes, and therefore they are no longer prepared to wait months for feedback on their work.
There is a greater range of technology available to support the delivery of PM tools and it no longer needs to be completed on word or excel documents. The development of software and apps allow for much easier access on various devices.
More recently, the pandemic has meant that the regular performance conversations are not able to take place in person. They are either being held virtually, which can impact on the quality of the conversations, or they are not happening at all.

For those organisations who are looking to improve their performance management process and outcomes, there are some tensions that have surfaced which need to be understood clearly to help identify the best approach to performance management, such as:

Should performance management be approached as a forward or backward looking tool?
- There is a link where those who use the performance management process to agree annual pay awards will predominately link to backwards looking as those being appraised will want to achieve best financial outcomes possible.
- Managing performance is really a forward-facing activity, you are hoping to influence the results you will achieve in a task in the near future. Therefore, ideally the discussion needs to be about what enables future achievements and what can be learnt from past attempts to complete the task that can help inform future achievements.
Is the employee involved in agreeing their own goals, or they being handed down from the finance teams for teams and individuals to achieve?
Is the performance management tool seen as an administrative approach to gauge broad performance and compliance, or as a development tool to support the development of individuals?
Frequency of feedback is seen as being essential to successful performance management. Some performance management processes do not incorporate or believe frequent 1-2-1’s or check-ins can it be used instead to feed into an annual review?

When developing a new performance management process, considering how the EFS four enablers are reflected in the process could prove beneficial, especially when reflecting proven practices in organisations with high engagement levels. These would include:

Strategic Narrative – can the employee see a clear link between the work they are undertaking and the strategic narrative or purpose for the organisation? Are the objectives broader than just tasks and instead including objectives that are aligned with encouraging the employee to deliver the strategic vision in their role?

Employee Voice – can the employee be involved in joint development of goals and targets or the constructive nature of forward-facing conversations, that see performance as an outcome of more than just individual efforts, but part of a collective assemblage of processes, skill, knowledge, tools and resources to create and deliver a product or service?

Integrity – For the process to be open and transparent, can data be used to inform actions and decisions within a context of building organisational justice and fairness?

Engaging Leader – Getting the right process could potentially only be the half of the challenge. Organisations have seen that even with what they believe to be the ideal process, their preferred approach can deliver different levels of engagement and the associated benefits that come with it. The work that the EFS Performance Management TAG have been undertaking is to further understand what managers of highly engaged teams are doing with these performance management processes, compared to managers of poorly engaged teams. From the initial research by the TAG, one of the key findings was that managers of highly engaged teams only use the performance management tools in a way that is most appropriate to their team, or adapt them to fit bespoke operational needs. They don’t just overlay it on top of, and potentially in addition to, existing operational processes, they select the elements that are actually going to add value in order to get the best from their team and tailor the delivery to the team. Whilst this contradicts the approach required to gauge whole organisational performance, from the initial research it is found to deliver greater engagement and benefit.

These inclusions would also help to address the criticisms of the traditional performance management methods and build on the revised approaches to manage performance. Other elements that would assist with this would include:

Making rating and rankings equitable and fit-for-purpose, if and when used
Moving to regular check-ins
Using peer and customer feedback
Discussing development and skills

Whilst organisations have been able to adapt the changes over the last 10 years, the pandemic has forced an accelerated level of change in how businesses work and the new hybrid world of work that continues to evolve, which will need organisations to continue to adapt their performance management methods to be supported in achieving objectives that drive their organisations forward.

But what will that look like? What will the world of managing performance virtually look like?

The Performance Management TAG will be holding some open meetings with those involved in managing performance to share their learnings and experiences in helping adapt and develop tools to maintain with the pace of change. Look out for the posts!

Alternatively, it you would like to find out more about the performance management TAG and their research, or would like to be part of the research to understand how highly engaging managers are utilising the performance management process, then please contact frazer@e-trinityconsultancy.com in the first instance.

Authors: Frazer Rendell, James Court-Smith, Geoff Boot, Paul Beesley and Willorna Brock.