From HR People + Strategy
The business value of traditional performance management models is collapsing. Instead of clarifying expectations and building morale, legacy annual appraisal models of performance management can alienate talented and typical employees alike. While personal and enterprise tools and technologies for performance enhancement have radically improved; performance management systems have not.
Recognizing these realities, growing numbers of companies are tying performance management more closely to operational success and less closely to their operations’ calendar. This shift—toward making performance management more business-value relevant—is having a dramatic effect on how human capital is managed in the enterprise. Findings from the 2019 Performance Management Global Executive Study and Research Project, sponsored by McKinsey & Company, identifies five key facets of smart investment in performance assessment, accountability, and capability:
1. On-Demand Feedback
Formal feedback processes have typically been periodic, perfunctory, and problematic. Continuousness is now becoming king. Just as people rely on Google Maps or Waze to manage real-time expectations around travel, employees need to be able to manage real-time expectations around work.
Performance management tools and platforms should facilitate ongoing feedback on individuals’ progress, growth, and development opportunities. Feedback will increasingly be automated, customized, visualized, and communicated in different ways. Executives must determine how best to define the feedback experience for their workforce. Culture will matter more. Senior management must develop shared perspectives on performance management’s purpose in their organization.
2. Going Beyond Today’s Performance Criteria
Performance management now means cultivating new capabilities (such as skills and innovation), not just improving existing efficiencies. This distinction cannot be minimized or overstated. Some organizations measure employees on skills development; some measure managers on whether they are exemplifying company values; and some measure executives on their progress with digital transformation.
Prioritizing and facilitating interaction around these different factors forces top managers to revisit their leadership styles and substance. At Ceridian, for example, “We’ve given people the ability to take risks and not be penalized for taking risks,” says Lisa Sterling, executive vice president and chief people and culture officer. She describes how the company’s CEO, David Ossip, supports a top-down change in company culture. “I often tell people, ‘I’d rather you make a decision that is aggressive and innovative and forward-thinking and fall flat on your face than do something that makes you feel comfortable.’ When your CEO supports that kind of bold experimentation, people’s decision-making changes.”
3. Team Assessment Matters More
Value-added processes and deliverables—particularly ones touching customers and clients—increasingly depend on cross-functional teams. Given mixes of full-time employees, part-time staff, gig workers, and geographically dispersed contributors, performance management must still be assessed in the context of team-based outcomes. Credibly measuring team performance matters as much as measuring individual contribution. This remains elusive for many organizations.
“The big challenge for a lot of companies and for HR as a function is how we transition from a philosophy and a whole infrastructure we built around individuals to an environment where it’s about teams and collaboration,” Anna Tavis, clinical associate professor of human capital management at New York University, observes, “We haven’t figured out how to measure and how to value collaboration.”
Read the full post at HR People + Strategy.
Michael Schrage is a research fellow at MIT’s Center for Digital Business.
Bryan Hancock is a partner and leader at McKinsey & Company.