New performance management approaches as a cure-all?
Due to its high complexity and partial lack of effectiveness, performance management is currently under critical scrutiny in many companies. Processes are being simplified, yearly performance cycles and ratings abandoned and bonus payments decoupled from individual performance. Modern performance management is expected to be a future-oriented and fluid development instrument which can be used in day-to-day business.
Our project experience as well as various benchmarking and round tables on performance management have taught us is that the perfect solution for performance management does not exist—although in cycles of ten to fifteen years, concepts alternating between rigidity and freedom have been crowned “the optimum” for a time. Instead of searching for the perfect solution, performance management must focus on the company’s concrete structure, its environment and actual work conditions, as well as truly motivating diverse types of employees.
However, concepts are only one side of the coin: The actual way in which managers are used in the company plays a central role for transforming a more technocratic system into a truly development-oriented performance culture, which is the real goal in many reform attempts.
From a tedious obligation to a useful management tool.
To anchor a performance culture which is both effective as well as considered useful by managers in their daily work, four basic elements must be present—and we offer support for their development, implementation and anchoring.
First and foremost, it is essential to create a clear and focused definition of performance together with top management. We assist in identifying the few (!) relevant drivers for the organization necessary to ensure performance management does not become a complex parallel universe separate from day-to-day business. It is also important to determine how the balance between results and behavior is organized when assessing performance, an aspect which is extremely important for corporate culture.
However, setting goals and indicators for good performance is only the first step. This requires an overall architecture which defines the actual implementation at different levels and in different business units within the company. To do so, we help our clients with such tasks as selecting target groups, linking performance with compensation, integrating with talent management and defining guardrails for the process. But this design cannot take place in an ivory tower; it must take place with the continuous involvement of all stakeholders.
Even the best performance management system is of no use if managers don’t embody it and employees don’t take it seriously. This is about more than simply filling out an evaluation form. Therefore, relevant processes must be developed together with managers who will ultimately use them as well as focus on complexity reduction. In our experience, processes such as goal definition, performance evaluation, feedback, development planning and management of consequence are imperative. However, they should not transform into bureaucratic monsters.
A good concept is one thing, while embodiment is usually another. To ensure defined systems and processes are truly anchored as a “culture” in the organization, we also conduct workshop and large group events. This not only enables communication and translation of advantages, it also develops competency formats for strengthening performance management skills of the manager involved in cleverly implementing performance management.
Every employee is motivated to achieve maximum performance in different ways. Financial incentives such as bonuses may seem like no-brainers in many companies. However, when employees sense little difference between the payout for what is perceived as either good or bad performance, this ultimately leads to a cynical attitude of those involved. We help our clients set up and establish a differentiated and effective compensation system. Other incentives, such as sabbaticals, flexible work models and high-quality training are gaining in importance. We develop incentive systems that motivate individually and contribute to company strategy.
Finally, additional career advances should also come from the demonstrated performance. The respective decisions should be as objective as possible and transparent and easy to understand for those involved. This is where performance management connects to talent management, an area where we have extensive experience.
The introduction of sustainable performance culture takes place under continuous reflection and improvement. Just because a company’s performance architecture worked well at a certain time does not mean that it must stay that way after conditions have changed. We do not believe in a one-time optimization performance management system. Instead, we believe in one that is continuously improving and sustainably promotes performance. For this, we conduct regular pulse checks with our clients.
By using a structured process to collect data via interviews, focus groups, benchmarks as well as desk research, we assess the performance management quality from the perspective of each individual stakeholder, both in terms of the systems and processes established to their day-to-day use. After this analysis has been made, we define action areas together with selected executives and determine measures to develop performance management and bring it one step closer to becoming “culture.”