Driving high performance in the desired direction requires different capabilities than ever before. From setting up individual employees for success, to fostering collaborative team-wins, to driving the strategic bigger picture, performance management has an ever-important role to play in business success. This, combined with the high employee expectations of today’s workforce, are compelling organizations to rethink traditional ways of performance review and assessment. Changing employee expectations, technology-driven ways of working and business dynamism are questioning the very fundamentals of performance management. How do organizations, then, foster success in the wake of these variables? The answer lies in continuous performance management. 

Performance management systems of the past 

The past decade saw significant shifts in performance management processes and systems. The demise of the annual performance cycle made big news, with certain organizations doing away with Annual Reviews and Bell Curve. Agile, continuous performance management, ongoing feedback, 360 degrees review became aspirational buzzwords. Technology ushered in change, with more mobile, anytime-anywhere PMS modules allowing real-time communication and collaboration for managing performance. Despite these changes, performance management as an HR construct did not seem to keep pace with the rate of change in business, as a whole. 

Just two percent of HR leaders globally believe their existing performance management system delivers exceptional value, according to the 2019 Global Performance Management Study, Mercer.

There lies immense scope for contemporizing performance management. The ask is two fold- employees want a curated, customized experience tailored to their preferences, and employers want a less laborious year-end process that is linked to other talent priorities. Here is how the Future of Work will drive a new era of performance management. 

Need of the hour and what to expect in the future 

The treatment of managing performance must evolve in line with the people and business needs. 

PMS as a critical, strategic business driver:

Performance management no longer remains a transactional function of assessing, measuring and ranking performance. It has risen to become a powerful driver of correct employee behaviours. Roles are becoming more complex and ambiguous, with employees increasingly applying cognitive and leadership skills to achieve their goals. According to Mercer, talent models will be segmented and aligned to each unit’s business cycle, and so will performance paradigms. As work becomes more collaborative and interdependent, soliciting feedback from different groups rather than one manager shall become important, giving weightage to 360 degrees feedback mechanism. Assessing potential, rather than performance will become priority. HR will need to curate the PMS design for a complex amalgamation of three factors: the criticality of the job, the performance of the employee and the potential of the employee”*. 

A powerful tool for employee engagement and retention:

Employee expectations of performance management too are changing. Young employees expect organizations to be open and honest about how performance gets measured and how it is linked to compensation and benefits. A culture which encourages open, multi-partite and ongoing feedback and transparent communication can help attract young talent. Millennials and Gen Z also expect clear career pathing and planning direction and guidance, as a part of great work culture. Equipping employees to outperform demands an empowerment-mindset, which motivates people from within. HR must create performance avenues by offering challenging assignments, global mobility, leadership roles etc. One can expect greater emphasis on a PMS design that has effective feedback and communication loops. The PMS of the future will also touch upon instantaneous recognition- programs that allow high-performing employees to select a reward through a menu of options. 

Tech-driven agile system and tools:

As technology transforms how work happens, managers as they are today will cease to exist, and artificial intelligence (AI) will play a bigger role*. Man is fast being replaced by machines, and we are increasingly seeing man-machine co-working and co-contributing. Certain questions will arise- “How can we measure and assess man-machine collaboration outcomes?”, “How can machines manage human workforce and vice-versa?” etc. The PMS design must factor in these tech-factors, for a realistic and adequate performance assessment. Real-time performance feedback will force organizations to make their PMS modules mobile-friendly and multi-device. A technologically sophisticated PMS system built on the values of openness, honesty, transparency, etc. will also help attract digital-native talent. 

Integration with the talent strategy:

There will be a dire need to integrate PMS with other HR arenas such as workforce planning, mobility, learning and development, career planning and pathing, total rewards, etc. Pay for performance will take on new meaning, as employees will expect to see clear linkages. For example, the annual merit pay is expected to come to an end and be replaced with market pricing and advanced performance metrics. With this integration, employees will gain visibility to what career moves would be best suited. 

Alignment with business:

The economic and business environment shall cause business goals to continuously evolve. The future will see HR focus on aligning talent and performance outcomes to match this dynamism, through agile goal-setting. For this, HR must deeply understand the business intricacies, and collaborate closely with business leaders to design a flexible PMS construct.  

Wrapping up

Performance management has become a core business function because of its ability to influence the most important organizational asset i.e. the people. This is especially true as we oscillate between the knowledge era and the collaboration era. HR leaders of tomorrow must grab this opportunity to make a real strategic contribution to business growth. For this, HR professionals must step up their own business acumen, technological prowess and innovation capabilities. People-performance and business performance feed off each other, and the rightly-skilled HR team can prove the game-changer in setting up and sustaining high-performing individuals, teams, and organizations.