Why traditional Performance Management is broken

What’s wrong with the traditional approach to performance management feedback?

We complain about the ineffectiveness of our annual performance reviews, our staff and managers hate them and research shows that linking development to a merit-pay-system can often create retention issues. The original intentions of the programme was track team member’s progress, encourage continual improvement and to reward employees based on their individual effort. Unfortunately the current “traditional” method is actually producing disengagement and staff turnover, exactly the opposite of what it was supposed to achieve.

Recent performance studies by Deloitte found that less than 10% of organisations believe their performance development system is an effective business tool, in fact almost 60% believe it is an ineffective use of their time.

We can’t just toss out performance management entirely as we still need to measure performance and have a method to fairly allocate compensation increases. We can, however, make it a more effective tool. These elements need to be taken into account when adjusting the existing “traditional” system to make it more effective:

1. Static performance goals create issues in a dynamic business environment.

Most organisations rate their employee’s performance on goals set at the start of each period. Business needs and market dynamics can change quickly and targets which are not dynamic can often have the reverse impact of what the were designed for. As new competitors emerge, technology changes or legal requirements change static goals may no longer be in alignment with the strategies needed to take the company forward. As the pace of business continues to accelerate this problem can compound issues if not adjusted. As the organisation’s strategic goals adapt so should the goals of individual employees. Development and growth goals should always be in alignment with the individuals needs as well as organisational and team strategic goals.

2. Performance management feedback needs to be given immediately and often.

We can’t manage six months (or heaven forbid a year) back. If someone makes a mistake it needs to be addressed immediately or the mistake may be compounded and become habits. Similarly we need to acknowledge success and good behaviour as it happens to encourage reputation of these powerful forces and help make them into habits. Certainty is a driving force in all of us, we need to know where we stand on a regular basis. When we avoid confrontation and don’t address performance issues as they occur, we are effectively accepting poor performance and missing an opportunity to improve performance. Worse still by not correcting poor performance or rewarding great behaviour when it happens we are cementing our culture – “the way we do things here“. We set the culture up as one of poor attitude and little gratitude through our own inaction.

3. A lack of time.

Unfortunately many managers blame “a lack of time” as the reason to hold fewer discussions on employee performance and development. So which takes more time? Correcting a mistake now while it is fresh in their minds, or after 6 months once it has become a habit? It may take a little more time initially but it will save a tremendous amount of time later and allows for a direct impact on the culture of the organisation.

Your culture is a result of your positive immediate action, or of your inaction.

4. The focus should be to help employees grow, embed a positive culture and develop in alignment with strategic goals.

When learning a new skill or servicing customers we cannot wait until the annual review, we need feedback now to ensure we remain on track. When we wait until the performance review we waste everyones time and embed poor behaviour into our culture. Great performance management is not instinctive, it is a learned skill. When managers are coached to address performance in the moment, change happens faster and we take conscious charge of our culture and become drivers of employee engagement. Managers and employees who have regular conversations around career goals, developing new skill-sets and future paths for success are statistically more successful and engaged than those who only have annual reviews.

5. Ranking systems actually reduce engagement and de-motivate employees.

Unfortunately these performance discussions often become almost pointless as they take a backseat to the ranking number that ultimately decides their compensation adjustment. Neuroscience research supports our innate dislike of stacked-ranking performance reviews. Using numbers to rate a our performance can create anxiety-inducing feelings that can derails the conversation and dramatically reduce the effectiveness of any the process. Our brain’s response to a negative number is the same type of ‘amygdala hijack’ that happens when we are faced with an imminent physical threat (e.g. a wild animal or bad driver). This neuro-brain response sets us up for a rapid chemical reaction (fight or flight) that is poorly suited for a reflective conversation that allows us to learn from a performance review.

6. Traditional reviews and rewards don’t treat us as individuals.

Many organisations use ranking based performance review process to drive compensation decisions. Unfortunately one-size-fits-all performance management strategies generally don’t recognise an individuals’ unique contributions. What motivates me is not always the same as what motivates you. One team member may love the attention of the spotlight (winning a trophy as an example) while other members of the team may hate the spotlight as they fear public speaking or may be an introvert (who prefers one-on-one praise). Additionally in practice a merit-pay-increase matrix has little to do with merit, but is used as a way for organisations to control growth in wages. This often frustrates your top performers and engaged employees who don’t want to be graded on a curve, or to be treated as “groups”, but who want to be acknowledge for their contributions. The standardised approach may have worked in an industrial age, but it does not work in a knowledge economy where we have come to expect personalised experiences and an individual’s contribution can have a greater impact. When our star performers aren’t being rewarded (in an appropriate way) for their performance they often begin to feel they can get better acknowledgement and rewards by leaving. To keep our top talent we need to provide top incentives to keep them, ensure they don’t feel like a number and give them the type of unique recognition they are looking for, so our competitors can’t poach them.Why traditional Performance Management is broken Infographic

Take an integrated holistic approach if you want to keep your best talent from leaving.

Why traditional Performance Management is broken It is time for change:

  • Setting goals and reviewing them once a year doesn’t work in today’s dynamic business environment.
  • Lagging performance feedback (once or twice a year) can limit your team’s performance and productivity – and even worse drive employee disengagement.
  • Our organisational culture is either created through our immediate positive action, or out of our inaction.
  • Traditional processes are often ineffective, producing negative results and are a poor use of managers’ time.
  • It takes more time to fix habitual mistakes than to correct current behaviour.
  • Most of us are just listening for “our number” and tend to ignore most of the actual performance review / development discussion.
  • Our top-performing employees deserve to be rewarded and supported not to be just another number that may end up alienating them.

fixing performance management feedback Use these tips to fix performance management feedback

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Richard Riche

Change Communication and Employee Engagement specialist at One Clear Message Consulting
Richard specialises in helping you build real human communication skills. Employee Engagement / Experience, Emotional Intelligence skills, building high performance teams and a great place you want to work. TED style speaking and presentation skills. Training, consulting and coaching.
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