Seven critical components of new performance management

The last few years have brought huge challenges to the world, governments, organisations, and individuals. Whilst some have reacted well, others have not. Many organisations are still applying outdated performance management processes, despite mounting evidence that they damage the health of an organisation and consume valuable resources that could be used for the greater good.

Indeed, some of the fastest-growing technology sales are for products that track, record, and measure the on-screen activity of remote-working employees; that support outdated goal setting and episodic reviews; and for training that focuses on handling difficult conversations. But, at last some have had a wake-up call and are now rising to the challenge and exploring better ways to manage performance, ones that tap into the inner motivations of each employee.

If COVID-19 has taught us anything, it is that some things simply aren’t simple. And, performance management is one of them. What most organisations refer to as performance management, simply isn’t performance management! It is only a simplified process of goal setting with some monitoring, reviewing, and evaluation.

Isn’t that performance management? No, not anywhere near! Those are the minimum elements that an organisation needs to be able to make decisions about people. But they will rarely have any substantial impact on cumulative performance.

We have known for decades that, whether or not they are designed, documented, or even trained, all true performance management processes have seven components:

1. Setting direction

2. Clarifying roles

3. Planning and aligning

4. Monitoring and measuring

5. Enabling and enhancing

6. Assessing and evaluating

7. Rewarding and recognising

Typically, organisations focus on a single subset and do not take due account of the interactions between all of them. 

Setting direction is about ensuring that every one of our staff truly understands why the organisation exists and why they are asked to perform in a certain way. It encompasses sharing the VISION (what the organisation seeks to achieve), the MISSION (why and how it seeks to do so), the STRATEGY (the operational choices it has made), the VALUES (the standards by which it seeks to live and be judged), and the core COMPETENCIES (how it believes employees should best operate).

Some organisations were able to shine during the COVID-19 crisis—those whose staff clearly understood the organisation's direction. These organisations were able to adapt agilely, as staff could make informed judgments about priorities and where to focus their time. Other organisations have struggled and only now are investing reactively in providing clarity to their staff about what really matters.

Clarifying roles is not merely about writing job descriptions. It is about ensuring that each individual understands the overall contributions that they are expected to make. In many cases, this is as much about clarifying the level of autonomy or empowerment as it is about defining precisely how they should operate.

Many organisations are now realising that employees want four things: Clarity, Assurance, Recognition, and Empathy. Clarity about their role and the expectations of them; Assurance that, if they meet those, all will be well; Recognition for what they achieve and how they go about it; and Empathy or understanding of their circumstances.

These organisations are also realising the importance of conversations between managers and remote-working staff about the relative priorities of what they are asked to do, and about the authority, they have to make decisions themselves.

Planning and aligning performance is about ensuring that every individual understands and is committed to meeting three types of expectations—WHAT they should deliver, HOW they should do that (in terms of behaviors, processes to be followed, and regulatory standards to be met), and the growth they should achieve (i.e., the development needed to meet current WHAT and HOW expectations, and to prepare for future ones). These expectations need to be understood and defined with each employee to a level of specificity according to their capability, their commitment, and their capacity, also known as the three 'C's' criteria.

With many aspects of performance, upfront clarity is needed about the target, standard, and minimum acceptable levels. General criteria such as “5 SMART Objectives” etc risk constraining top performers or providing insufficient clarity to poor performers or those in developmental stages. General organisation-wide processes should be seen by managers as minimum requirements, not the best.

Expectations should be calibrated for fairness at this stage—like setting a handicap before the metaphorical contest begins, not after the contest has ended.

Monitoring and measuring is about ensuring that both the manager and the employee are engaged in monitoring and measuring all key aspects of performance (WHAT, HOW, and GROWTH). Only then will each individual receive sufficient, timely, and useful feedback to support improvement. This element also ensures that future assessment can be evidence-based.

Enabling and enhancing is the key to performance management and oftentimes given insufficient attention. We know that every interaction between a manager and a member of staff can have a significant impact on that individual’s motivation and performance. We also know that around 70 percent of capability is developed doing meaningful work and a further 20 percent by observing or interacting with others. 

Many employees state that, during the COVID-19 crisis and through the use of virtual platforms such as ZOOM, MSTeams, BlueJeans, and others, they have had more contact with their managers than ever before. Hopefully, this will continue with managers taking more time to interact one-on-one with each of their staff and using those myriad interactions throughout the year to enable and enhance their performance. 

Many managers are also only just learning the power of asking, “What can I do to help you to meet the expectations I have of you?” These conversations are the heart of performance management—exactly what managers are paid to do.

Assessing and evaluating performance have always been confused. If expectations are defined, understood, and agreed upon sufficiently, assessment is an evidence-based, factual, and impersonal process that answers the question, “To what extent were the expectations met?”

Evaluating on the other hand is about answering the question, “Considering all of the circumstances, how good was the performance?” Factors such as external forces, changes in circumstances, complexity, matrix demands, etc then come into play and judgment becomes as significant as analysis. Evaluation demands that the manager is thoroughly conversant with all of those factors and courageous enough to make and stand by their judgments. Merging assessment and evaluation typically results in poorly calibrated evaluations that do not match with reality.

COVID-19 seriously exposed managers who do not have a firm grasp of how their staff are performing and of the difference between assessment and evaluation. The rapid increase in the use of technology to attempt to measure remote performance will hopefully be soon shown to be an inadequate solution. We have to upskill the managers.

Rewarding and recognising is about formal processes. Clearly, this element is important. However, many organisations still have to learn that linking pay and benefits to poor quality appraisal data; using financial incentives to try to improve performance; applying mechanised and impersonal recognition processes; and such practices not only do not improve overall performance but can even incur the unnecessary cost and lead to lower levels of employee engagement and performance.

COVID-19 demonstrated soundly the importance of timely, sincere, and personal recognition. Great managers are paying close attention to each of their staff, demonstrating consideration and empathy, asking about their wellness and feelings, keeping in close touch, and recognising good performance. But, they are doing this as part of enabling and enhancing, during every day short conversations, not waiting for some formal process or episodic review.

What's next?

COVID-19 was a wake-up call. But as the last couple of years demonstrated, it was not a singular event. The world is becoming more volatile and all organisations will continue to face new crises. They may not be as substantial, but they will demand precisely the same skills.

The above description of performance management may appear to be complex. But, as Albert Einstein said, “Everything should be made as simple as possible, but no simpler.”

People are not simple and performance management simply isn’t simple. But, delivering on each of those seven components can be very easy. We just need to:

• Prepare people for people management positions and equip them to decide if that is really what they want to do;
• Select the right people for those positions based on their capability to manage people;
• Recognise and reward top performers who are not suited to being, or don’t want to be, people managers in ways other than just giving them people to manage;
• Ensure that people managers understand what performance management really is, and hold them accountable for doing it. Simple!

This article was originally published in February 2021.