Is performance management dead?

Managing people to perform is hard. To do this effectively, and at scale, you need a performance management system. And designing and implementing systems is hard, too. Herewith a couple of mistakes to avoid.

The employee should set their own goals. Don’t let HR or line management set the employees’ goals. Allow employees to write down their own goals of what they need to achieve and finalise these with discussions with line management. In that way you ensure that employees commit to the goals (rather than just receiving it) and that the content is aligned with the team through a chat with their manager.
Align the goals in the team and in the company. After goal setting, have sessions with the teams to share their goals and ensure that they are aligned. Look out for people doing the same thing, and either get them to team up, or choose who will do what. Check every goal against how it will achieve the company strategy. If it doesn’t help the strategy along, be ruthless in removing it.
Don’t use KPIs that are too far removed from what they do every day. Measuring every employee on retained profit or market share makes it difficult for people to correctly identify how they impact on the company’s performance. Yes, every employee should know these numbers and why they are important, but very few can make a direct impact through their day-to-day roles. Let them identify KPIs that they directly influence and ensure that they know how it impacts on the bigger company-wide indicators. I once asked a warehouse employee in an FMCG company why his job is important. What he said blew my mind: “I have to ensure that the right product gets loaded onto the correct truck,” he explained. “If the trucks deliver the wrong product to the store, and a customer cannot find our product, he will buy a competitors’. And then we lose money.” His main measurement was order accuracy because that’s something under his direct control.
Keep close to the goals by discussing it in regularly. In SABMiller, where I worked, we had 6-week reviews between every manager and employee. The goals were discussed in every meeting, the progress was reviewed, and feedback was given. I think that a 2 – 3 weeks review is even better. During thee 1 on 1s the employee can give feedback on how they’re performing, and the manager can coach and ask questions. In that way performance reviews are never a surprise.
Performance Reviews should not be used as a stick. If the goals have been reviewed regularly, the PR is easy and quick. There should be no surprises because both employee and manager would be up to speed with how things are going. Ensure that you include both quantitative and qualitative measures as well as developmental goals. Compare the performance against the goals and the KPIs and not against subjective measures.
Finally, when comparing performance in teams or across the company, do not compare people against one another as the main measurement. Rather use the goals and the job description as a starting point because that is an objective measure. People can be compared against one another to get an overall picture of the performance of a team or department, but the objective KPIs remain the benchmark.

There’s been a lot of discussion recently saying that performance management systems are “old news” and not relevant in today’s modern company. I disagree. There is no space for a performance management process that is unfair, removed from what employees do day by day or when it’s used as an excuse not to pay people what they’re worth. However, when performance management is done well – in a fair way, with buy-in and commitment and being objectively assessed – it is a critical management tool leading to company success. Good performance management is still very much alive.