What Makes Modern Performance Management Effective?

October 8th, 2019

Over the last decade, organizational leaders have focused on changing performance management practices to better respond to what employees want and organizational realities require (e.g., disrupted business models, greater competition). Given all the changes, we thought it was high time for an investigation.

In our latest report, The Makings of Modern Performance, we examined the impact of new performance management practices and asked — were they actually the magical elixir to an organizations' problems?

Let's take a look at some of the key findings.

What’s not working in modern performance management

Turns out (surprise, surprise), that modern practices aren’t always having the impact we had hoped – but probably not for the reasons you are thinking.

In the early stages of the research, we learned there are a few things fundamentally broken when it comes to the way many people look at performance management practices (and HR practices more broadly). Here’s what we found:

  • Many HR leaders tended to put too much weight on “best practices” versus identifying the broad levers that drive performance for their organization.
  • There is an over-focus on process and an under-focus on the actual performance outcomes organizational leaders are trying to drive.
  • There was a tendency, in this last performance management “revolution,” to throw the baby out with the bathwater, when it came to some core tenants of performance management, such as procedural fairness.

The three levers of effective performance management

So, what should organizations do instead? After an extensive literature review, of 50 academic and popular press articles, approximately 20 interviews with HR leaders, and a survey of 368 HR leaders and employees, we found some really compelling takeaways.

First, leaders need to be clear on the outcomes they most want to drive with their performance management and enablement practices. In our interviews we identified three that were of primary importance:

  • Individual performance
  • Organizational performance
  • Employee engagement

Then, organizations should focus their efforts on the activities – which we call levers – that can drive each of those. Specifically, our research finds three levers (see Figure 1) that drive performance and engagement:

Figure 1 What Makes Modern Performance Management Effective?

Figure 1: Three levers of modern performance management; Source: RedThread Research, 2019.

  • Culture: While it’s often a nebulous concept, our research uncovered the importance of culture in performance management. More specifically, performance management practices should support a future-focused culture that values fairness and feedback.
  • Capability of managers: As modern approaches to performance seem to hinge on the manager’s ability to conduct ongoing development and performance discussions, this lever is critical. Managers have to have to capabilities needed to move past evaluating performance and delegating tasks.
  • Clarity: Employees have to understand what is expected of them in the near-term and in the long-run. Improving upon performance, over time, requires that organizations provide insight into current performance and development needs, but also help employees understand what will be required in the future for continued career success.

The impact of focusing on these levers is significant. For example, organizations that scored high on culture were 32% more likely to experience high employee engagement and 97% more likely to experience high organizational performance. In the report, we identified significant levels of impact across the other levers as well.

In the report, we dive into each lever and discuss themes that are especially critical in each. For example, within culture, organizations should pay particular attention to providing fairness, feedback, and a focus on the future. We also provide examples of practices from our quantitative data that illustrate the different ways that organizations could align to the lever.

Learn more

For more on each lever we uncovered in this research we encourage you to download and read the full report.

Stacia Garr Redthread Research
Stacia Garr
Co-Founder & Principal Analyst