Performance management – the term conjures up images of annual reviews where management derides an employee for mistakes or missteps that occurred weeks or even months ago. It’s a frustrating process for employees, but also managers. Thankfully, performance management has officially stepped into the 21st century.
Gone are those much-hated annual reviews. Gone is the backward-facing feedback that was impossible to implement or use to fuel growth and improvement. Instead, PM is now agile, forward-facing, and designed to bolster understanding and engagement, while also enhancing performance.
Of course, that’s quite a paradigm shift from the past. It can be confusing for some managers and leaders to grasp the extent of the evolution here. We will break down what you need to know about modern performance management, how it’s changed, and what those changes mean for your teams and the organization as a whole.
A Quick Review of the Old Performance Management Method
Before we explore how performance management has changed in recent years, we need to have a firm foundation on which to build. That means exploring the outmoded PM method some companies are still following. We’ll break it down to make it easier to understand.
Reactive Performance Management
The first thing to understand is that older-performance management techniques were reactive. They were designed to address issues in a past-focused way. Because of that, they were very limited. While performance management will always need at least some degree of reactivity to it, it must also be proactive and agile enough that employees can use the feedback provided to make real, meaningful change today.
Not Particularly Useful
Another hallmark of the old performance management method was a lack of any real utility. Sure, you could look at a situation, extrapolate from it, and tell an employee what they should have done in the situation. However, if that situation was six months prior and has never occurred again, what’s the point? What value does it deliver? What’s the use?
There is none. With backward-facing techniques and a span as great as a year in between reviews, there is very little use or value offered. Employees are simply reminded of things they’ve done wrong, with no real way to change the situation. It becomes frustrating and demeaning, so it’s no wonder that most employees dreaded “review day”.
Tied to Their Ability to Live
On the surface, tying an annual performance review to an individual’s ability to earn a paycheck seems to make sense. After all, if their raise hinges on how well they perform, they’re going to be more motivated to perform well, right? Actually, that’s wrong.
When you tie raises strictly to performance, you doom your employees. A single misstep is all it takes in some cases to erase that raise, but it does nothing to address the rising cost of living. What’s the logical next step? The employee is going to be looking for a new job where they can make more money.
The issue with tying performance reviews to annual raises is that it creates a lack of loyalty. If an employee believes that you’re willing to sacrifice their life and those of their family on what might seem like a whim, how loyal do you think they will be? How long do you believe they’ll hang around waiting on the other shoe to drop? Not very long.
A One-Way Flow of Information
Finally, we need to realize that past performance review methods created what essentially was just a one-way flow of information. The manager spoke and the employee listened. There might be an attempt to ask the employee how they felt about the feedback, but this was often merely a formality.
The result of this was that it made the employee feel as though their thoughts, ideas, and feelings were valueless. If the company doesn’t value what an employee has to offer, then they’re going to disengage and are unlikely to remain with an employer for the long term.
As you can see from the brief introduction above, performance management wasn’t all that positive. It was backward-facing, punitive, and did not create engagement or foster long-term relationships. A change was definitely necessary. Thankfully, today’s model has addressed those major shortcomings and delivered critical benefits and capabilities.
How Has Performance Management Changed?
Performance management was forced to change – it had failed to achieve the very thing it was designed to do. Because of its shortcomings, managers were unable to encourage better performance in their team members. It took several decades for that realization to set in, as well as for the necessary technology to be developed, but it’s a brand new world today.
No More Annual Reviews
One of the most marked differences between today’s performance management and the PM methods of yesterday is that annual performance reviews have largely fallen by the wayside. Sure, there are still companies that follow the old model, but they’re a dying breed, in more ways than one. Companies failing to adapt and evolve will themselves flounder and eventually fail.
So, what replaced those annual reviews? The truth is that there was no single replacement. That’s because performance management isn’t something you can do once and then forget about it until next time. It’s something that needs to be baked into your daily routine. It needs to be part of the company’s very DNA. Otherwise, it’s an afterthought and it won’t work.
Actionable, Timely Feedback
Today’s performance management experts focus on many key elements, but one of the most critical is delivering actionable, timely feedback. In some ways, this was the old model’s primary failure. Again, with feedback coming once per year and often concerning events or decisions that were made months previous, real change and improvement were impossible.
Enter the quick feedback cycle. In this situation, you set very short intervals between feedback sessions, often as short as a single week. This provides you (the manager) with the ability to deliver actionable feedback to an employee based on things fresh in their mind, often having occurred just days, even hours before.
Because it is fresh in their minds, the feedback has greater import and impact. There’s also the fact that you can make real-time changes to employee performance and behavior. With quick, frequent adjustments, course corrections become relatively minor things, rather than major headaches that might ultimately affect someone’s ability to earn a living.
The benefits of actionable, timely feedback include the following:
- Simple course corrections to improve performance
- Greater value from employee efforts
- Greater alignment between employee actions and organization goals
- Improved relevance of feedback
- Improved engagement from team members
Another thing that has changed dramatically with modern performance management is the shift toward frequent check-ins rather than annual or biannual performance reviews. We touched on this above, but it bears further scrutiny since it’s more involved than just taking your existing annual review format and making it a quarterly event instead of a yearly one.
Perhaps the most important thing to understand here is this – these are actual, genuine check-ins, not reviews pretending to be something else. What does that mean? Simply put, it’s about being genuine and about meeting an employee on more level footing.
With a conventional performance review, the scenario looks something like this:
- The employee is notified of the upcoming review.
- They immediately become nervous and possibly defensive.
- Their performance is affected.
- The review is a one-way flow of (mostly) negative information masquerading as growth opportunities.
- The employee remains nervous and defensive.
- The review wraps up with action points that the employee needs to meet to comply with expectations.
- The employee emerges from the review, usually feeling undervalued, unappreciated, and stressed.
What part of that scenario seems like it lends itself to creating a positive work culture? It doesn’t. With employees feeling undervalued, disengaged, and unappreciated, it’s a wonder that productivity occurs at all.
Now, with a check-in scenario, it looks something like this:
- The employee is notified of the upcoming check-in and asked to come up with a few things, including:
- Areas they feel they need to improve
- Areas where they have improved
- The resources and tools necessary to see improvement
- Goals toward which they will work to improve their professional performance
- The check-in happens and the manager and employee sit down to discuss things on an even playing field.
- The employee presents their ideas and the manager balances those against their own findings.
- The two discuss things, set official goals, and end the check-in on a positive note.
You can see from the example above that check-ins are much more focused on creating positive change rather than punitive repercussions of actions. It’s about creating an environment that helps employees perform at their best by ensuring they have the right tools and resources, whether that’s additional time, more training, help in the form of other team members, or something else.
Creating a Real Conversation
Ultimately, the real goal of the new performance management method is to create a real conversation. That flies in the face of conventional performance management methodologies, which focused on using a carrot to encourage better performance and a stick to drive home the ramifications of failure.
Why does creating a conversation between employees and management matter? There are plenty of reasons, but one of the more critical is that it helps to show that employees are valued and appreciated. It’s about active listening and showing that you care about what the other person is saying.
In a conversation, both parties have a chance to speak, to listen, and to respond. This fosters a sense of trust and builds deeper engagement. After all, if an employee feels that they are being listened to and management acts on the employee’s feedback, they are not just more engaged, but they’re also more loyal, more likely to remain with the company for the long-term, and more likely to become even more valuable in the future as they work to improve themselves.
Yes, creating a conversation and then actively engaging can be time-consuming, but that’s the role of management. If a team leader or manager is struggling to balance engaging their team members with other responsibilities, chances are good that some of that workload should be delegated elsewhere.
Benefits of Performance Management When Done Right
When done correctly, performance management offers quite a few benefits. These include the following:
- Increased Employee Engagement: When employees are actively engaged, their productivity and efficiency increase, as does the quality of their work.
- Improved Customer Satisfaction: Whether yours is a B2B or B2C firm, customer satisfaction is critical to growth and stability. Performance management done right encourages better satisfaction levels across the board.
- Improved Employee Retention: Churn is incredibly costly, but it’s often seen as something that can’t be avoided. With modern performance management, you can reduce churn, retain key talent, and cut the costs of onboarding while ensuring you have the right people in the right positions at the right time.
- Ability to Grow Employees: Your employees want to grow and improve their skills. With performance management methods, you’re able to invest in that growth and help build them up to become the best that they can be. That has profound ramifications for all areas of your business.
- Improved Employee Autonomy: Performance management helps you empower your employees. One knock-on effect of that is that they can work with greater autonomy, thereby reducing the need for direct supervision and the need for leaders to micromanage them.
- Improved Workforce Planning: The ability to plan for workforce needs is important. With performance management, you can map out employee strengths and weaknesses, promote from within, close skills gaps, and more.
Frequently Asked Questions about Performance Management
To help you understand modern performance management, we’ll address some of the most frequently asked questions below.
- Should performance management still be tied to financial compensation?
You can and should incentivize some aspects of performance management. However, we do not recommend tying it to salary increases. Instead, think of alternative incentives. Some options could include additional paid time off, a cash bonus, profit-sharing plans, physical awards, recognition in front of the team or department, and more. Don’t be afraid to get creative here and remember that employees value things other than salary.
- How often should we schedule check-ins for performance management?
There’s no hard and fast rule here. The right answer for your team might be the wrong one for another team. Ideally, you’ll have a good grasp on the frequency with which issues needing correction occur, and you can base your check-in schedule around that. At a bare minimum, we recommend having quarterly check-ins, but monthly and even weekly check-ins work better. Remember that the more frequent the check-ins, the more timely the feedback and the closer to real-time the course corrections will be.
- What sort of punitive repercussions should be used in performance management?
We don’t recommend any sort of punitive action against employees. The point of modern performance management is to create a workplace that fosters a sense of increased psychological safety. Punitive measures, such as not receiving an annual cost of living raise, achieve the reverse, creating an environment of fear and apprehension. Employees are not able to do their best work if they are concerned that an honest mistake will cost them financially. We’ve found that teams work better in an environment of trust and equality.
- What role do peer reviews play in modern performance management?
Peer reviews can offer a lot of value, but it varies from organization to organization, largely due to culture. In a peer review situation, employees provide feedback and action points to coworkers based on their performance on the job. In most cases, this feedback is anonymized to encourage honesty and to prevent employees from leaving out important information for fear of reprisals. However, when not handled properly, peer reviews can be used for negative ends by those with grudges against the employee, or other team members may not see the value of the process and provide less-than-valuable information. We recommend that if you choose to go the peer review route, plan it well ahead of time and have a solid strategy in place. They can be highly beneficial but must be handled with care.
- Should employees be free to provide feedback about manager performance?
Yes, they should. In fact, this should be part of the wider conversation. Employees should be able to give actionable feedback about how they perceive the manager’s performance and the manager should be willing and able to take that information and apply it to their daily responsibilities. Doing so shows several things, including that the employee’s opinion and insight are valued, that the manager is open to constructive criticism and that the employee is an integral part of the organization.
Modern performance management varies greatly from what came before. It can be quite an adjustment, but you don’t have to do it alone. At eLeaP, we offer technology-supported solutions that enable better performance management and learning and development. Get in touch to learn more.