Judging by the number of recent articles about performance management, it might seem that organizations are discarding annual appraisals in record numbers. Critics of traditional systems write them off as traumatic events that gobble up time, yet fail in a multitude of ways:

  • Performance feedback is not timely or believable.
  • Ratings are neither transparent nor perceived as fair.
  • Employee performance is not connected to the business.
  • Managers bungle performance discussions.
  • They focus on past performance, leaving no time to talk about career development.

Performance Management SystemSo what comes next? According to an article in the Chicago Tribune last week, high-profile players like Deloitte, PwC and GE, as well as tech startup Retrofit, are moving to “real-time, personalized and crowd-sourced feedback that caters to a culture of immediacy and high-octane change.”

Those are impressive words, but as usual, the one that got my attention was change. The author was referring to our relentlessly evolving environment, but another kind of change is equally compelling: How to transition managers and employees who are already suspicious of performance management from “the system they know” to “the system they don’t.”

Since the mid-1950s, organizations have mandated reviews and ratings of one type or another. These traditional systems have relied on policies, forms and rating scales that flow into compensation systems, delivering a performance score and a raise in one tidy package. Often driven by forced rankings and a merit matrix, these systems have left managers little latitude to influence results. No wonder the trends toward real-time feedback and employees’ growth and development sound so tantalizing.

As with all trends and fads, however, organizations may jump on the bandwagon without due consideration for “fit” and the factors that determine success. The odds increase when leaders view performance management as “just an HR program.” That is shortsighted and risky, because performance management is an expression of an organization’s culture and an important tool to communicate critical behaviors and objectives.

Adopting a new approach to performance management is—like implementing a new ERP or undertaking a corporate merger—a significant organizational change, complicated by the fact that it is also very personal. Along with its companion, compensation, performance management directly affects the livelihood and overall wellbeing of employees and their families. Faced with new policies, unfamiliar management routines and the uncertainty of outcomes, the workforce may cling to the imperfect process they know and profess to hate.

A new performance management system—in fact, HR programs in general—should be treated like any other implementation, using standard change management principles, frameworks and tools (see our Change Management e-book for more information). A thorough assessment of the following six organizational attributes will provide context and help build the case to move forward or not.

Strategy

An organization’s mission, strategy and goals should drive its choice of HR programs, including its performance management system. Adobe, for example, replaced annual reviews with a system of regular check-ins as part of a broader initiative to instill stronger accountability.

Culture

Organizational cultures sanction a wide variety of values, assumptions, beliefs, attitudes and behaviors. Among those required for new performance management approaches to be successful are transparency and trust, two-way communication, collaboration, empowerment and inclusiveness.

Structure

The organization of work and decision-making must be compatible with the performance management system. A decentralized, flexible, team-oriented structure is more suited to new approaches than one that is hierarchical and controlled.

Power relations

The leadership models that work best with non-traditional performance management systems emphasize accessibility of leaders to employees at all levels and intentional sharing of the organization’s objectives and goals—from top to bottom. Managers work with their direct reports to translate broad directives into individual performance objectives and provide ongoing feedback.

Technology

Web-based and mobile technologies are critical to new performance management approaches. Technology can help managers and employees collaborate by giving them visibility into each other’s goals; support the process of creating and monitoring detailed development plans, including the achievement of milestones; and make performance data easily available to all. Social media and specialized apps allow supervisors, peers and subordinates to provide real-time performance feedback.

Job characteristics

New performance management approaches are adaptable to people and their work, accounting for how results are accomplished as well as task variety, autonomy, task significance and job based feedback. Customization and personalization can increase employee motivation and improve individual performance.

Even if an organization concludes that they should move forward with a new performance system, leaders should be prepared for a challenge. Their success will depend on following a structured change management methodology, including these activities:

  • Building consensus among the leadership team
  • Developing a strong case to convince managers and employees that the change is warranted
  • Identifying change agents tasked with sharing with management their peers questions and concerns
  • Involving stakeholders in discovery and design
  • Communicating new management routines and explaining new policies, particularly with respect to performance and pay
  • Providing training to employees and managers, including how to give and receive performance feedback
  • Determining ways to measure the success of the change

Treating performance management as a significant organizational change will result in a program that communicates objectives, engages employees and drives results, with a lasting bonus: The opportunity to practice your change management skills and learn valuable lessons that will prepare you for the next major change that comes your way.

Change Management EBook