The Future of Performance Management

Performance management (PM) aims to maintain, monitor, and improve the performance of employees in line with the objectives of an organisation. Organisation’s today face a massive challenge in an ever-evolving world to define, stimulate, and manage performance of employees. French, concludes that companies must re-engineer their performance management frameworks to survive, let alone grow in today’s competitive business environment.

This essay will address the future of performance management by reviewing the current view on performance management, the factors impacting organisational decisions, implication of these dynamics to performance management and bodies of research shaping performance management of the future. Emerging trends in performance management practices will be covered and conclusion whether a new approach is required, or a fundamental rethink is needed.

Current View of Performance Management

Managers and staff in recent years view performance management as demotivating, excessively subjective and unhelpful. Performance management regimes do not have much effect on employee performance, but go a long way to undermine performance, as employees finds it difficult to deal with ratings and struggles to make sense of performance feedback. Over the past fifteen years many organisations have evolved and most especially, the recent outbreak of COVID-19 pandemic has made performance management practices increasingly blatant.

Employees in the public sector organisations such as Wolverhampton City Council are shouldering greater responsibilities daily in their interactions with business partners, and customers in way that performance management in the industrial era could not identify. According to Ewenstein et al., these Performance management strategies are outdated, yet majority of organisations still adopts the generation of scores for employees and use them as compensation decision tool. Public sector organisations are not able to grow and serve service user’s excellently because the performance management practices are more bureaucratic, rigid, and inflexible.

Factors Impacting Organisations Today

Mercer’s global performance management survey conducted on 1154 human resource leaders revealed that only two percent of organisations believe their current performance management practices delivers exceptional value. 71% of Employees’ agreed that their organisation’s approach to performance management needs a reboot. The question is what is wrong with these practices and how can it be changed. For example, imagine an organisation such (WCC) where managers and employees are energised when it comes to measuring performance. Some of the factors impacting performance management as suggest, are:

• Macro-Economic Environment;
• Globalisation;
• Increased competition.

The first three factors revolve around the business environment, this environment today demands companies to constantly anticipate changes based on innovation, business model disruption and technological advancement. For example, the COVID -19 global pandemic has forced employees and managers to work in a globally dispersed teams, this change in work pattern automatically poses a challenge. The competitive nature of today’s business environment has pressurised organisations’ to constantly innovate to survive or grow. To access the right talent, continuous changes and amendments must be made:

• Pace;
• Collaboration;
• Workforce.

The last three centres on the workforce and the processes within the organisation.

The pace at which demands must be fulfilled today is nowhere near the industrial era, and there is much greater collaboration among different organisations than ever before. The type of workforce today is fundamentally different from when performance management was introduced in the industrial era. Melnyk et al., suggested that employees are motivated by sense of fulfilment and engagement; millennials are always looking for more coaching and feedback to have a greater impact.

Implication of These Factors to Performance Management

Goal Setting

Latham and Locke, concluded that people who set specific, difficult goals performed better than those who set, easy and general goals. Locke proposed five basic principles of goal setting: clarity, commitment, challenge, feedback, and task complexity. Inference from this piece of work it can be suggested that there should be an extensive review of organisational goal setting and how it aligns to these basic principles of employees. The traditional annual goal setting and review is simply not in tune with modern service delivery. Setting goals individually with employees may not be appropriate when they are collaborating on goals together.

Source of Feedback

Managers typically, have been the source of feedback to employees, in an environment where employees are geographically dispersed, the manager in this instance may not be the reliable source of feedback. In more technical roles such as engineering, peers might have better insight into the skills and abilities of their co-workers than managers. Modell argues for organisations to consider feedback from other sources. Traditional performance management process has not dealt well with input from multiple sources.

Frequency of Feedback

The traditional process of providing feedback annually do not help with the retention and motivation of top performers. Bottling feedback till the end of the year, means that information vital to ensure the progress and successful service delivery will be lost. The change from periodic review to on-going feedback will help organisation achieve greater impact in performance.

Language and Labelling

Ewenstein et al., argued that employees do not want their performance managed by anyone, the term performance management is not fit for purpose in modern-day service delivery. Organisations need to evaluate this term, what it means and its impact on employees. The process of labelling employees through evaluation process will mean that those who are not in the highest category will lose interest in the system.

Influential Research and Its Impact on Performance Management

Neuroscience

Over the last decade neuroscience have contributed to the understanding of how to motivate and manage employees. Dr David Rock’s research on the brain and performance management concludes that the brain computes either it is in threat or reward state. Many elements of current performance management create a threat state, which shuts the creativity centre of the brain to new information. This implies that employees miss key information being passed to them in the annual reviews.

Goal Setting Theory

Locke and Latham, concludes in their research that setting difficult goals motivates employees than no goals, they need to receive on going feedback against the goals. Inference from this suggests that the frequency of feedback for employees is not enough for these goals to be achieved. This breaks down the current process management system.

Mindsets

Dweck, research on two mindsets (fixed and growth) and how it impacts performance, concludes that employees are hired based on talents, which do not change. Employees with fixed mindset avoid challenges and obstacles and anything other than excellent, whiles those with growth mindset embrace challenges and seek out all sorts of feedback to develop and help others. Inference from this research suggests that the performance management process should not be one that is fit for all purpose.

Emerging Trends in Performance Management

Wolverhampton City Council as part 2019-2024 has changed the term “performance management” to the professional conversation. Instead of an annual formal review, managers hold informal regular “touchpoints” with direct reports to update or set priorities that are based on customer needs. This has rejuvenated staff, most feel that they are being managed fairly and effectively. The approach relies on shared accountability and continuous dialogue.

Organisations such as Microsoft dispose of their annual performance management systems, for evaluation and testing systems that can offer continual coaching and feedback. Netflix do no longer measure its staff against objectives set annually, due to the fluidity of its operations which can change very rapidly.

Google on the hand have transformed its compensation strategies for top performers whiles trying an automated system that is fair and address the business needs. These changes and being made by organisations are varied, new and in most cases experimental. However, the emergence of these patterns highlights the need to rethink performance management from the roots up. French suggests that for organisations to survive in a competitive in today’s business environment there should be a shift from managing performance to developing performance.

Conclusion

Conducting annual ratings rituals based on the bell curve will not develop the workforce overall. Instead, by getting rid of bureaucratic annual-review processes—and the behaviour related to them—companies can focus on getting much higher levels of performance out of many more of their employees. That said, employee needs can't be adequately met in today's business environment using traditional performance management systems.

It's time to burn the boats, leave old performance practices behind, and create a performance management strategy that is adaptive, responsive and calibrated to the new workplace. This means that you need the fundamentals of good management more than ever: agile goals, exceptional coaching and high accountability systems. When the dust settles, you need to know who your stars were -- and you need to keep those people engaged. Static performance reviews, annual goals and infrequent feedback never really cut it before the crisis, but they certainly won't cut it now. It's time to make a change.

To succeed in today's business environment however, one of the few things you can be sure of is that this must change if organisations want to survive (let alone grow). If leaders want to begin re-engineering their performance management frameworks, managers must be given the resources, systems (that is Performance Management Software) and training they need to meet the new requirements for employee development and improved performance