Michael Schrage, Research Fellow, MIT Center for Digital Business
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.
The American engine of progress and prosperity is in serious trouble. Innovation has stalled. The number of good, middle-class jobs is dwindling. Wealth and opportunity are increasingly concentrated in a few coastal megacities. And cultural divides are widening. How do we turn this tide?
The answer lies in science — specifically, government-funded science. Investment in science is the ultimate pro-growth policy: It leads to more invention, higher productivity and broad-based economic development.
According to our research, if the U.S. government were to boost funding by $100 billion per year with strategic, geographically dispersed investments and initiatives, the result would be roughly 4 million new jobs.
One of the primary purposes of financial statements is to facilitate the exchange of capital between investors and companies. The extent to which investors rely on the information reported in financial statements depends on the credibility of those financial statements – that is, the trust or faith investors have in the financial statements presented to them. Typically, companies establish the credibility of their financial statements by having an independent auditor verify the accuracy of those disclosures. However, the effect of auditing on financial statement credibility depends on the independence of the auditor and the rigor with which the audit is performed. An increase in reporting credibility can increase the degree to which investors rely on financial statement information for both writing debt (and other) contracts that govern the terms under which capital is exchanged and informing investors about companies’ operations and performance. As a result, an increase in reporting credibility can increase the company’s access to external finance, which can increase its ability to invest in new projects.
Concern is mounting that the venture-capital model might be broken. Returns have been relatively poor in the past decade. More importantly, perhaps, the innovation outcome has been somewhat disappointing. As PayPal cofounder Peter Thiel complained, “We wanted flying cars; we got 140 characters.”
One key reason for this might be the way venture-capital funds are typically structured. Such funds have been organized for decades as limited partnerships, raising commitments among external investors to be invested and returned within 10 years.
What if I told you about an investment fund that diversifies your portfolio, shields you from fluctuations in the stock market, and earns double-digit returns? Sounds interesting, right?
Did I mention that this investment also creates potentially life-saving treatments for deadly rare diseases?
This fund doesn’t exist — at least not yet. I’m cautiously optimistic, however, that in the near future we’ll see the launch of an orphan disease “mega-fund” that finances early-stage biomedical research and drug development and is also a tidy investment. Read More »