Performance management: Which approach suits your company?

How does performance management work?

How do I motivate and incentivise individual employees to align their actions with the company's goals? This question is a constant concern for HR departments in companies. It is often summarised under the term "performance management".

It is often associated with a process (unpopular in business) in which all employees are extensively evaluated in annual appraisals, and which ultimately has a rather questionable effect on the motivation of individuals given the small deviations in target achievement (+-5%).

However, performance management has many faces. Some companies follow the traditional pattern, others completely redefine the method and experiment with different approaches.

Systematics

Basically, the different types of performance management can be categorised into four archetypal systems, which are based on completely different images of people, corporate cultures and contexts.

Where do you categorise yourself?

Type 1
Type 2
Type 3
Type 4

The disappointing news

There is no magic bullet or system that works for every company. Ultimately, performance management depends on the corporate culture and the goals that are being pursued.

Trends

In recent years, many companies have made small adjustments and implemented the following trends:

  • Simplification of performance appraisals & systems
  • Increased frequency of performance feedback and focus on development
  • Greater use of multi-rater input
  • Greater focus on collective goals
  • Increased decoupling of performance and bonus

Conclusion

We argue in favour of thinking holistically about performance management. Individual performance management is only one component of a complex system for strengthening performance. This begins with fundamental questions ("How do we define performance?") and extends to institutional performance management and the establishment of a performance culture.

If you have any fundamental or further questions, please do not hesitate to contact us.

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Thekla Kovacev-Schmidt
Thekla Kovacev-Schmidt
Associate Principal

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