Performance management. Those are two words that define an activity that most leaders and employees begrudge. It’s time consuming, it’s usually (pre-Covid) done face-to-face, and it’s primarily focused on things that were relevant to business structures and strictures in years gone by.

Many companies handle performance management by measuring performance against job descriptions, others by parameters set by key performance indicators (KPIs), many against a recipe that doesn’t deliver success in the modern world.

It is time for organisations to change and innovate their approaches to performance management, to recognise that this has become crucial to long-term success, employee retention and engagement.

According to Angus Young, director at Prime Reason, relooking performance management is something that should have been done quite some time ago.

“Organisations need to embrace performance management as a route to innovation, as a way of recognising people, rather than as a way not to pay people their full bonuses,” he says. “Traditionally, it’s been linked to the 13th cheque, so if the company does well, people do well. Then it became a budget item and finance did the calculations based on the premise that only x% of people were allowed to be over achievers and y% needed to be underachievers.”

Disincentivising the majority

However, this strategy only works well for the upper 5% of the company. The rest, even those that work hard and put in the hours, don’t enjoy the incentive. Instead, this narrative implies that 75% of the company is made up of those whose performances are simply middle of the road and 20% are bad performers. This makes the work done, the time put in, the commitments made by these employees “invalid”.

“No employee wants to be considered an underachiever or wants to be seen as ‘less than’, so the old ways of managing performance with nebulous goals and additional workloads and complex measurements are just limiting their performance and wellbeing,” says Young. “These are factors that are measured subjectively, and what’s really needed is to measure performance quantitively.”

Align outcomes with objectives

Outcomes can be measured accurately, and these should be measured against the vision of the company, the achievement of strategic goals and the overall objectives of the organisation. These should be developed by leadership to provide people with solid frameworks that have both a long- and short-term impact on performance, for both company and individual. Managers should use these strategic objectives to determine what benchmarks they set for their people. In part, they should be measured against how their teams perform against these objectives. By aligning or cascading these strategic objectives all the way down, the performance management process becomes granular, current and strategically aligned throughout the organisation.

“This granular level of focus ensures that everybody has a renewed sense of purpose and energy,” says Young. “This can energise the organisation as every person is working towards a common goal; this one great thing that everyone is contributing to. This is a culture shift that, when done correctly, can provide a solid platform for employee recognition. It values those who have come to work every day and stayed at that same company for 20 years of service. It recognises an honest day’s work, not a vague performance metric that’s shifty in both measurement and achievement.”

Creating value

Performance management, done inclusively, creates accountability and gives people a sense of value. They feel supported, so they engage with the company at an emotional level – and the results show in customer satisfaction and in how the company is growing in terms of market share and capability. When people are inspired, they can achieve great things.

As an example, says Young, companies should “set objectives around customer satisfaction and retention, then break these down and find innovative or creative goals that inspire your people. Your vocabulary should be focused on how to get people to do more, how to be a better version of themselves, and how to achieve their goals. It’s about striving to do better.”

Companies can work with third-party experts who can help them to simplify and modernise their performance management processes. Systems should be very intuitive so that managers and employees don’t get frustrated. Systems create focus and visibility around the lead and lag indicators, and ultimately are a measure of the heartbeat of the organisation.

“Done right,” says Young, “performance management is a platform for employee engagement and sustainable overachievement for the business and employees.”

About Angus Young
Angus Young offers insight into all aspects of the human capital lifecycle. Read his views on recruitment, onboarding, the value of analytics and how to incorporate meaningful learning into corporations. His latest article on graduate recruitment can be found here.

About Prime Reason
Prime Reason helps companies unlock potential – intelligently. We provide you with a blend of market-leading talent acquisition and management expertise with next-generation platforms and toolkits to provide a boutique talent and HR solution that meets changing market needs. Find us on Facebook and LinkedIn.