Companies are increasingly confronted with different performance management concepts. How should this be handled and which approach best suits my organisation? We have looked at various performance management concepts and scrutinised them critically.
Performance management concepts
The aim of the performance process is to increase employee motivation and align their activities with the company's overarching goals. This should ultimately increase the productivity of the entire organisation.
In the traditional performance process, this is attempted by defining individual goals that are aligned with the company's objectives. These targets are assessed by the line manager(s) and a monetary payment is often promised for good performance. As described in the Specialist articles
Well-formed performance management
, traditional performance management is no longer appropriate for many companies. For agile teams, a rigid annual cycle and a quantitative assessment as part of a formal annual appraisal are often not appropriate.
Approaches such as informal check-in meetings during the year, new goal-setting methods such as OKR (Objectives and Key Results) or a continuous exchange among employees through differentiated feedback methods are required. Between traditional performance processes and agile concepts, there is plenty of room for manoeuvre to achieve the "best fit" between performance process and organisational culture.
Cultures and structures in the company
External drivers such as Digitization, rapidly changing customer behaviour and increasing competitive intensity promote the need for companies to be able to react faster and more flexibly to environmental influences. The rigid hierarchical structure is receding into the background and a network structure with agile teams is being sought.
However, this does not mean that all organisational units have to become agile straight away. In highly regulated and standardised departments (e.g. production departments with low complexity), solid, rigid structures are just as important as a high degree of flexibility and adaptability in highly innovative departments.
In reality, a company often has different subcultures and stakeholder groups with different requirements for agility. These different characteristics need to be taken into account when designing the performance process.
Which concept fits when?
Traditional
In departments with a strong hierarchical structure and where employees within a team perform similar tasks, it is possible for managers to make an accurate assessment of the performance of team members. They understand the activities of employees and can compare them with others. A traditional approach seems to make sense in this case.
Broadening perspectives
As soon as the activities of employees differ more from one another, an objective assessment of performance becomes more difficult. In this case, companies run the risk of line managers making errors of judgement. This danger can be counteracted by increasing transparency. This can be achieved if employees' services are not viewed in isolation within their own team, but are compared across teams.
Flexibility
In teams with a high degree of agility and a manager who mainly acts as a coordinator and coach, individual assessment by the manager is hardly useful. A continuous and efficient exchange of information is more important. This ensures that everyone understands their role in the overall construct and that the team can act in a coordinated manner. In agile departments, it makes sense for employees to have regular informal discussions with their superiors, for example as part of continuous check-in meetings. In addition, a feedback culture should be established that promotes continuous and direct feedback among employees. This enables employees to better assess, reflect on and improve their performance.
Know the needs of the organisational units
The performance process forms the basis for other Talent Management topics such as salary, bonus and succession planning as well as promotions. Therefore, in addition to the aspects mentioned above, the dependencies on other Talent Management topics should always be included in the decision-making process. Software solutions also play a decisive role in this context, as they enable the administration of processes and can make a significant contribution to successful cultural change. Platforms such as SAP SuccessFactors , which support different approaches and serve the various stakeholder groups in one system, are proving to be particularly useful.
To summarise, today's HR must ask itself what degree of agility its own divisions have and which performance management concept best supports the various stakeholder groups. This can also lead to compromise solutions in order to find a concept that can be used company-wide.
