The Fatal Flaws of Traditional Performance Management

Carolyn DEVELOP, PERFORM, RETAIN Leave a Comment

Performance management is broken. Here’s why, and what you can do to fix it.

I read this article this morning and it really resonated with me. The original is by M. Tamra Chandler  (the author deserved all the credit here) – I have summarised my main take aways…

This year the industry is buzzing about performance management. That’s because we’re starting to realize that the way we’ve been trying to drive employee and organizational performance for the past 60-plus years simply doesn’t work. But why doesn’t traditional performance management work, and what can you do about it?

The problems with traditional performance management stem from the fact that the fundamentals first emerged post-WWII, and haven’t changed much despite how different today’s business environment is from the average workplace of the 1950s. Today, the 9-5 workday is essentially a thing of the past. We’re always on, always connected, answering emails at midnight. Our offices have a generational range from Baby Boomers to Millennials and beyond (talk about different expectations). Often those offices are geographically spread across the globe; some working teams never physically meet each other. Add to that the astonishing pace at which business happens, and you have a whole new kettle of fish. It’s not surprising that performance management as we know it isn’t meeting the needs of today’s world of work.

In fact, a 2014 study by Deloitte shows that only 8 percent of companies felt their performance management processes drive a high level of value. And a recent CEB survey reveals that 95 percent of managers aren’t satisfied with their organizations’ performance management processes and 90 percent of HR professionals don’t believe their companies’ performance reviews provide accurate information. The same survey shows that 66 percent of employees say the performance review process interferes with their productivity. I could go on and on with study after study, but you get the picture.

There are eight main ways that I think traditional performance management has let us down. I call them the “Eight Fatal Flaws.”

Fatal flaw #1: A theory without evidence is just a (bad) theory

There is little to no evidence to link traditional performance management to improved performance. Because the process too often tends to disengage people, it may actually have a harmful effect on the organization and the individuals within it. After all, evidence does show that an engaged workforce is a key driver of organizational performance.

To fix this flaw, start by making the case to reboot your performance management. That means building your organizational courage to ditch the old ways if necessary. Make sure you understand what’s working and what’s not with your current approach.

Then align your leaders on what is most important to the strategic mission of your organization, specifically when it comes to the primary goals of performance management: driving organizational performance, developing people, and rewarding equitably. Once you have agreement on what outcomes you’re looking for, you can step back and design a solution that meets those needs, customized to your organization’s strategy, structure, employees, and culture.

Fatal flaw #2: Nobody opens up with the person who pokes them in the eye

Traditional performance management impedes the reception of feedback and limits honest dialogue. There is no way employees can have an open and honest conversation about their performance, hopes, fears, and goals with a person who is going to judge them, especially if the person’s judgment affects such important aspects of their life as salary, recognition, and promotion.

This one is simple: Move from judging your employees (and stack ranking them) to helping them develop. Rather than a once-a-year conversation focused on what they did or didn’t do well last year, talk instead about how they can build their skills in the year to come. Offer help in achieving their career goals and explore how their strengths can affect your team. Build a culture that provides them with any necessary feedback—both positive and negative—as it occurs, not once a year.

Fatal flaw #3: Nobody remembers the good work

Performance reviews generally emphasize the negative rather than focusing on strengths. Even employees who receive “good” ratings often leave performance discussions feeling downtrodden in the wake of an exchange that places too much weight on areas of improvement and too little on the strengths, contributions, and potential of the individual.

Once again, the best way to avoid this flaw is to switch from annual reviews to an ongoing conversation between manager and employee. Real-time feedback can help prevent bias to the negative. Also, consider ways to welcome more people to the conversation. For example, aim for more peer feedback and create ways to collect insights from others.

Fatal flaw #4: No man (or woman) is an island

It’s often impossible to separate the performance of the employee from the performance of her group, team, or the organization as a whole. Remember, the system and environment that employees work under have a large influence on their performance. Unfortunately, a performance review or employee ranking puts the focus solely on the employee, not the environment.

You’re never going to be able to judge the work of one team member completely independently. But here’s the thing: If you get rid of performance ratings, separating the system from the individual is less critical. Alternatively, consider turning your energy to the system itself. Create more team-based rewards to increase collaboration and celebrate great teamwork. Individuals will bring their best if you tune your performance process to creating strong connections to the team and its purpose.

Fatal flaw #5: We are not machines

We’re all human, and therefore biased and inaccurate—even the best of us. Can we really make ratings decisions down to a decimal point? Nope. There’s no way a human can achieve that level of standardization—nor do we want to. Humans have an appreciation for nuance that’s important if we want to have fruitful dialogues with our employees.

Fixing this flaw is easy: Ditch the ratings. A conversation about real issues between real people will allow a level of nuance and connection that far surpasses anything a number can tell us. Our goal should be to have a meaningful conversation with our employees, not just stamp them with a grade.

Fatal flaw #6: We are not machines, redux

Since we are not machines (see above), we shouldn’t rely on the output of nonscientific performance appraisals to make decisions on important business functions such as compensation management, succession planning, and development goals. Unfortunately, we often do.

Instead, to make better decisions you often only need to ask your managers. Most leaders can tell you with perfect clarity who their top performers are, who’s ready to advance, and who they’d be lost without. Underpin these discussions with the better insights on capabilities that can be captured if you focus more on development, and you’ll find your team will make better talent decisions with less fuss.

Fatal flaw #7: Let me introduce you to your competition—now play nice together

We want creative, agile organizations in which people with different skills and perspectives can collaborate in a low-risk environment, right? Therefore, we need to reduce those areas that foster competition unnaturally, such as stack ranking or ratings brackets. How is it possible to achieve great teamwork when you routinely compare your employees to one another?

Obviously, the quick fix for this is to stop ratings and stack ranking. But beyond that, look for ways to incentivize people to work well together. Build a performance management program that rewards high-performing teams with group bonuses, for instance. Or put in place tools so that employees can help each other grow and develop toward their career goals.

Fatal flaw #8: We are not Pavlov’s dog

Traditional performance management is based on the assumption that extrinsic motivators (those things you do to avoid punishment or get a reward) are the best way to get employees to work harder. But we know now that people are much more motivated by doing things they find personally rewarding. Pay for performance does not deliver improved performance.

Instead of focusing on incremental merit raises, consider linking base pay to the market value of an employee’s capabilities (the individual’s competencies, skills, and experience) and aligning other rewards to the things your organization cares about. This might mean a team or employee bonus for reaching key milestones, or it might mean rewarding through special work experiences or opportunities for growth and development. You must connect your people to the mission and strategic goals of your organization and find those little and big ways to ensure they feel appreciated for their contributions—and recognized for the part they play in creating success for your organization.

It’s time for a change

The time has come to move forward to a new era of performance management—one that’s based on a new understanding of motivation and behavior and built for the world we live in today, not a world that ceased to exist half a century ago. This may mean ditching years and years of tradition in exchange for something that might feel untried, and it will certainly take a fair amount of courage. But if we’re to truly drive performance in today’s world of work, we’re going to have to take the plunge.

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