Performance Management (PM) has become a core organizational strategy and management priority for many organizations. From Boards of Directors to front-line managers, PM can effectively be used to drive accountability, quality, productivity, competence, and rewards and recognition. Going beyond simply a tool to drive “appraisals” and incentive rewards, PM can be complex and not without risk but it can also drive a sophisticated quality and performance-based culture.
Performance management has also become both a strategic imperative and a challenge for many organizations in this data analytics day and age. As a core enabler of performance optimization and accountability, many executive and HR leaders view PM as a core management practice and a key ingredient to becoming a higher performance organization. As a result of various regulatory, methodological and technological developments over the past five years, however, PM has become a misunderstood topic that is confusing for many organizations, especially for those that do not recognize the interdependencies that cut across other management and human resources practices at the enterprise-wide, team and individual levels of performance.
Best practice performance management is clearly not a “one size fits all” endeavor. Rather, it needs to fundamentally reflect the unique contextual needs of one’s strategic direction, business model, workforce profile and leadership preferences. Best practice PM also needs to be thoughtfully configured, and in many cases, phased in and allowed to mature, otherwise, the policies and programs that it supports will collapse and be rendered ineffective – a management risk that could be quite damaging, ultimately constraining front-line performance and of key importance, customer satisfaction.
Why is performance management such an important and trendy topic these days? The answers are numerous and fundamentally include:
- A variety of inter-related governance and accountability developments over the past five to ten years that believe that PM is key to better oversight processes and outcomes;
- The ever-increasing availability and power of technology to produce relevant operational performance data and analytics;
- Recognition that effective PM can actually connect and translate strategic direction to front-line teams and employees;
- The need to better support and drive executive and employee pay for performance with focused and measurable value added metrics;
- Competitive pressures and the belief that PM can really impact and contribute to quality management, cost reduction efforts and improve the customer experience;
- Given the dynamic state of various labour market segments and the importance of top talent attraction and retention, a view that good PM can be used to inform employee and workforce performance, their engagement, career development and deployment; and
- An historical perspective that PM is one of the key means for validating the performance/compensation employment relationship.
The current trend and focus on PM these days is also being driven by a provocative point of view that is challenging the PM value proposition and a debate that suggests that individual performance ratings have had their day in the sun. This debate is certainly timely and is serving to raise the bar on how PM could be used and optimized, and what management and HR applications should PM actually be used to drive and enable. At a minimum, the debate is stimulating real and thorough discussions around the boardroom table and in the executive suite, with the net result that PM strategies and practices will continue to evolve and mature, albeit possibly in a different form.
This new “rating-less” form, however, is contextually unique to certain types of businesses – those with knowledge-intensive workforces, project and team-based work delivery, mature operational performance measurement systems that are woven into the fabric of work and job designs, increasingly sophisticated competency and behaviorally-based assessment practices, and an organizational commitment to ongoing performance dialogue and discussions between managers and employees, where managers have limited spans of control that are conducive to the necessary preparation and time for regular performance coaching sessions. Again, one size doesn’t fit all! Adopting and applying these characteristics [and trends] to all types of business models, organization designs and cultures would be folly and highly risky – as such, business and HR leaders truly need to understand context, choices and implications before they make strategic PM decisions that could possibly compromise enterprise value and people’s careers.
Finally, current PM trends are also being driven by the fact that we have passed the technological and information management point of no return – web-based technology systems and information management practices, social media and transparency of disclosure, and workplace automation and data analytics are fundamentally changing the way organizations plan, measure and operate. This profound change is and will increasingly drive foundational PM in the vast majority of industry sectors and businesses. Technologically-based workplace performance measurement is now becoming embedded in and inherently core to how work is done and how customer value is created. As a result, management across all sectors and enterprise sizes now have low cost and ease of access to measurement analytics, and more PM choice than ever before – the dilemma for many then will be why, what and how do they want to use more easily accessible, timely and accurate measurement data for PM? And as we all well know in this day and age, and to the consternation of many private and public sector leaders, if organizations don’t embrace and control the instant messaging and social media wave, interested or vested stakeholders will, in some shape or form, get access to performance data and use it to suit their needs and agenda in a very transparent and immediate way! So the bottom-line now is that more sophisticated and complex PM strategies and practices aren’t just the purview of high performance organizations and their controllable management systems!
So in the context of these trends, opportunities and implications, where is the interested business or HR leader to begin on the PM journey? Start by answering key questions:
- Why do you need performance management, how should it work, and what do you want to use it for?
- Do you have foundational planning and measurement practices and systems to support various PM applications?
- Given the nature of your mandate, business model and workforce, will more sophisticated PM practices contribute to better operational processes and productivity, marketplace results, employee engagement and motivation, and strengthened pay for performance linkages?
- What are the risks and implications of pursuing a contextually misaligned PM strategy or not executing the PM program well?
Like most core annual management practices, the risks and challenges associated with poor strategy and methodological decisions can be quite challenging, constraining and difficult to address in the short term:
- Strategy dilution and misalignment of focus, efforts, and ultimately, less than optimal quality outcomes and results;
- Line management and employee distraction and confusion;
- Low value added administrative time and opportunity cost; and
- Poor pay for performance, training, and career management decisions and investments.
Fundamentally then, and as the wise adage suggests – you need to be careful for what you ask for and aspire to achieve with PM! Do your homework and be careful about your aspirations, strategic approach, the implications and risks, and the intended consequences…but if you can contextually and successfully make PM happen, the benefits are enormous, ultimately contributing to a high performance culture and more importantly, sustainable competitive advantage and customer loyalty, and simply, a great place to work!