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Performance Management Can Be Fixed

What should we do and not do to fix performance management?
By Dr. Elaine D. Pulakos and Dr. Rose Mueller-Hanson – PDRI, a CEB Company

Performance management is profoundly broken. It is universally disliked by managers and employees alike, seen as low value, and has failed to meet its intended goPerformance Management Can Be Fixedal of improving performance.

What exactly should we do to fix it? Some organizations are taking a hard look at their performance management systems and experimenting with new approaches – for example, Microsoft (like GE and Ford Motor before it) announced it will be eliminating forced rank ratings.

Tweaking systems, though, will likely fail to increase returns on performance management investments to the degree that organizations need to compete in the New Work Environment. Over time, performance management systems have become increasingly bureaucratic, perhaps due to the assumption that steps and paperwork would drive the performance management outcomes we’re seeking.

For example, many organizations use formal goal-setting processes to set performance expectations, but the goals often become outdated in weeks or months. Elaborate rating processes are often used to differentiate employee performance, but they require fine-tuned judgments or splitting hairs, such as stack ranking each and every employee.

And steps and process certainly won’t help to improve satisfaction with performance management.

The best companies shift focus away from performance management systems to critical performance management behaviors. Performance management behaviors like manager-led employee development drive substantial gains in employee performance and employee engagement.

Manager behavior isn’t the entire solution, though, to better performance management: how an employee interacts and works with his or her larger network (which includes managers, peers, direct reports, and even customers) is a key driver of performance management success. In today’s work environment—in which organizations are more complex and matrixed than ever—setting clear expectations, providing timely feedback, and leveraging others’ skills and expertise become even more important.

It’s also important that organizations don’t leave their performance management system entirely behind. Although performance management systems do not function well today, they can be linked to almost every other talent management process an organization executes. This means that when changing performance management systems, we must evaluate the impact of those changes on related talent management systems and outcomes (such as compensation, high potential identification, and leader development), and potentially make complementary changes in these systems.

To learn more about how the best companies are approaching performance management reform to build and sustain high-performance cultures visit www.cebglobal.com/performance-management, where we’ve posted news articles, videos, and research reports that address today’s biggest performance management challenges.

And check back on www.cebglobal.com/blogs in the coming weeks for a follow-on blog in which we’ll profile Cargill’s performance management transformation.

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