Performance Management

Traditional performance management and its challenges

The aim of classic performance management is to measure the organisation's performance in a past period and derive measures from this. This approach dates back to a time when current issues such as the shortage of skilled labour and the labour market did not pose as great a challenge to companies as they do today. What challenges does this classic performance management approach face today?

• Interval of appraisal interviews: In today's BANI-influenced times, it is becoming increasingly difficult to plan accurately on an annual basis. The BANI model, which describes current challenges in the business context, stands for a brittle, anxious, non-linear and incomprehensible world. So is an annual appraisal of objectives still sufficient today?
• Subjectivity in the assessment: A manager assesses performance subjectively, which could be strongly influenced by recent events. This harbours the risk that objective assessments will fade into the background.
• Ratings and extrinsic motivators: Performance ratings can lead to employees focussing too much on the "grade" and ignoring constructive feedback. This can affect employees' intrinsic motivation and commitment.
• Focus on the past and limited influence of the individual: An assessment of goals over a period of time is always related to the past and factors that cannot be influenced can also play a role in their achievement. However, it can lead to frustration among employees if individual development and current influences are not adequately taken into account.

The future of performance management

How can we as HR meet these challenges and establish performance management in the company that covers the current needs of employees on the one hand and also offers added value from a company perspective on the other?

• Flexible, target group-orientated processes: Annual target setting and appraisals are no longer sufficient. Managers must be empowered to conduct regular check-in meetings. It should be possible to discuss topics such as current workload, current well-being and progress in achieving objectives or any adjustments to objectives at this time.
• Situational and immediate feedback: Feedback is best understood and implemented when it is as immediate as possible. A company should therefore promote an open feedback culture and encourage employees to give each other constructive feedback at any time. In order to obtain an even more differentiated picture, it is also advisable to obtain feedback from third parties.
• Sensible use of targets and assessments with a focus on milestones: Individual targets are only useful if employees can have a direct influence on their achievement. To encourage greater commitment, employees should be involved in the process of setting their own goals. Short-term activities or milestones can help to make the goals more tangible for employees. If a numerical rating system is used, it is important that ratings are not given without context and justification.

Concrete recommendations for action

When establishing a (new) performance management system, the corporate culture should always be considered as an important component. You can use six decision criteria to define the right performance management system for your company.

1. Define a clear vision and goal for performance management: Formulate precise goals and a clear vision for your performance management. This will also make it easier to organise and align the process.
2. Define target group and know their needs: Analyse the needs of your employees precisely in order to define the appropriate tools for a successful process. A targeted analysis of expectations is crucial.
3. Empower managers: Managers play a central role. Provide training and support to give them the right tools to implement target and target group-orientated performance management for their employees.
4. Involve employees and create solidarity: Provide employees with tools that promote effective collaboration. Involving employees helps to strengthen their commitment to the performance management process.
5. Digitization support: Implement digital solutions to make the process easier to manage, track more efficiently, save time and evaluate data at the touch of a button.
6. Monitoring, review and continuous improvement: Establish a mechanism for regular monitoring and feedback. The implemented process should not be static, but should be continuously improved based on feedback and monitoring.

Summary & key messages

The traditional approach to the performance management process no longer meets today's requirements. Putting employees and their needs more at the centre is the modern approach. Shorter intervals for discussions, situational and immediate feedback from various sources, the active involvement of employees throughout the process and a focus on day-to-day activities are crucial. The shift towards a more agile performance management strategy that puts employees at the centre is essential in order to attract, retain and successfully develop new talent.

Outlook for the next Specialist articles

In the context of the previous Specialist articles on the topic of New Talent Management, the need for effective succession planning is becoming increasingly apparent. The discussion about long-term organisational success is emerging as a complex web of processes that goes beyond the simple recruitment of talent. At a time when competition for skilled labour is intense, the long-term commitment and development of employees is becoming increasingly important. In the next Specialist articles, we will look at how companies can organise meaningful and future-oriented succession planning in order to meet the complex challenges of the modern working world.

To the specialist articles

• Turning point
• Recruitment Management
• Onboarding
• Development & Learning
• Compensation & Benefits
• Succession Management

Sources

• HR Futures 2030, a Design for Future-Ready Human Resources
• https://hbr.org/2022/07/how-to-conduct-a-great-performance-review
• https://hbr.org/2016/10/the-performance-management-revolution
• https://www.gallup.com/workplace/249332/harm-good-truth-performance-reviews.aspx
• https://www.betterworks.com/magazine/leading-way-performance-ratings/
• https://lattice.com/library/the-pros-and-cons-of-ratings-in-performance-reviews
• https://iocscience.org/ejournal/index.php/mantik/article/view/3919/2796
• https://www.researchgate.net/profile/Tatjana-Mamula-Nikolic/publication/343152520_The_Role_of_Feedback_as_a_Management_Tool_in_Performance_Management_Program/links/5f1956cb299bf1720d5ca4d2/The-Role-of-Feedback-as-a-Management-Tool-in-Performance-Management-Program.pdf
• http://u.camdemy.com/sysdata/doc/4/4a6b816a1fb5cebb/pdf.pdf
• https://www.risely.me/success-with-goal-setting-in-performance-management/#:~:text=By%20setting%20clear%20and%20measurable%20goals%2C%20employees%20and%20managers%20can,drive%20increased%20engagement%20and%20motivation
• https://www.personio.ch/hr-lexikon/performance-management-prozess/
• https://www.forbes.com/sites/jeroenkraaijenbrink/2022/06/22/what-bani-really-means-and-how-it-corrects-your-world-view/