Events

In September 2022, we convened a roundtable for leaders to discuss how organizations should rethink their performance management practices within a hybrid work environment. This session was part of our ongoing study on modern performance management.

Thank you to all who participated, shared your experiences, and learned from one another!

The state of work

We started the discussion by setting a context around

• Changing employee expectations
• The struggles faced by managers
• Falling employee engagement levels
• The continuing challenges around retention and turnover

We shared our latest research on the topic, using our framework to help organizations think about performance management for a hybrid work environment—the “3C” framework.

Organizations should focus on culture, capability of managers, and connection.

Figure 1: The “3C” model for performance management in a hybrid work environment | RedThread Research, 2022

The overall discussion resulted in rich insights. To help understand how organizations should rethink performance management as they build long-term hybrid work policies, we focused on 3 areas:

• Culture: What is the role of culture in enabling employee performance in a hybrid work environment? How should organizations rethink their culture?
• Connection: What’s the role of connection between managers and employees in driving performance in a hybrid workplace? How can organizations enable such connections?
• Capability of managers: How has the role of managers changed, now that they are enabling performance in a hybrid workplace? How can organizations support managers in this role?

Key Takeaways

The roundtable generated a number of insights we thought worth highlighting. Here are our top 4 takeaways.

Understand the “Why” behind your performance management

A major theme was that leaders need to understand the purpose behind their performance management practices. Participants agreed that it was important for organizations to go back to their value proposition and be clear about what kind of organization they want to be. As one participant explained,

“Culture is where you start—not something where you add. You have to start with what culture you are enabling and what process or system you use to enable that culture. So often we do it backwards.”

Participants also discussed the powerful role culture plays in reinforcing desired behaviors and mitigating those that are not. By designing performance management practices around the culture and values important to the organization, leaders can drive employee engagement, enable constructive feedback, and provide deeper meaning and understanding of what they do.

Individuals have just as much responsibility for managing performance as managers

The role of individuals in their own performance management was a topic that came up frequently. Participants shared that managers and individuals need to be on the same page about taking equal responsibility for driving performance. As one of the participants put it,

“The age-old notion that the ownership of performance lies solely with managers needs to change.”

Individuals should also be accountable for building their connections. Participants agreed that while an organization can help identify which critical connections need to be built, individuals are responsible for building them.

Connections need to be intentional

Participants shared how connections have become integral to performance management in a remote work environment. Several of them spoke about practices that they have adopted to make connection building a part of their performance management and, as a result, part of their overall culture.

One of the participants explained,

“When we’re remote we tend to go straight to work. We need to be more intentional about how we’re spending our time and how we’re connecting.”

One of the leaders shared that their organization has created accountability maps that identify and tag the people that an individual needs to know to be successful in their role.

Technology can help build connections, but cannot be a substitute for meaningful conversations

Participants shared how they are using technology to drive opportunities for connection. For example, one of the leaders is leveraging tools to nudge people to have regular 1:1s and remind leaders if too much time has passed since they last connected with employees. Organizational network analysis was shared as an example of technology that can help organizations drive connections and uses metrics that show their impact on the business. One of the leaders explained,

“Organizations need to embrace the power of technology in helping drive connections and opportunities. With high burnout, relying on individuals to make connections can easily fall by the wayside.”

Another participant shared an example of a framework their company introduced to help managers establish trust and transparency and remove barriers that prevent employees from achieving their goals. They embedded the framework as part of existing processes through their technology, so that people don’t see it as an extra thing they need to do.

We were grateful for the open and vulnerable discussion during this roundtable. We welcome your suggestions, thoughts, and feedback at [email protected].

 

We reviewed more than 20 recent academic, business, and news articles and reports on performance management (PM) to understand the state of the current conversation. We limited our review to the past 12 months, as we conducted a literature review on this same topic last year.

This short article summarizes what we found:

• 4 major themes from the literature
• 5 critical articles we think you should explore
• A complete list of the articles we reviewed

Major Themes

From the literature we reviewed, we identified 4 major themes that reflect the current state of performance management, including how some organizations are changing it and where it is headed:

1. Performance management is starting to look more like performance development
2. Connections are becoming integral to performance management
3. Continuous performance management is here to stay
4. Organizations are unsure about how to move ahead

Performance management is starting to look more like performance development

Recent literature highlights the need for organizations to adjust their performance management (PM) practices to help individuals and teams perform effectively in a remote or hybrid environment. One approach suggested in the literature is to make career growth and development an integral part of PM. Recent findings reveal that growth and advancement opportunities are a leading cause of ongoing attrition. For example, McKinsey & Company found that employees leave when uncaring leaders don’t provide career development.

Another approach suggested in the literature is to provide clarity around organizational goals and ensure alignment through transparency and access to information. By being clear about desired outcomes, organizations can make sure employees are setting appropriate and achievable goals.

Connection is becoming integral to performance management

Recent literature, including our own, shows that the connection between the manager and employee has emerged as a critical factor for enabling performance in a hybrid work world. The role of manager-employee relationships in motivating and engaging employees has been highlighted by many in the past.

We also found articles that talk about the role of connections that employees have with their colleagues, leaders, and the organization in driving collaboration and, thus, enabling performance in a remote or hybrid work environment. The literature stresses the need for organizations to be intentional about fostering these connections, for example, by implementing performance management practices that encourage relationship-building.

Continuous performance management is here to stay

The pandemic accelerated the trend toward adopting a continuous approach to PM. We identified articles that shared examples of companies that eliminated or suspended the annual performance review and started conducting frequent check-ins and providing real-time feedback once they shifted to remote work.

The literature stresses the importance of communicating and providing development resources to employees in real time in a hybrid work environment, because of its positive impact on employee engagement. It also helps managers gain greater insight into their employees’ work and better meet their needs. Continuous feedback and employee check-ins are an integral part of this approach.

Organizations are unsure about how to move ahead

Quite a few articles covered companies returning to or updating practices around performance ratings and annual reviews to identify low-performers and areas of low productivity—practices that had been paused or replaced with frequent check-ins during the pandemic. In these cases, the practices are in addition to (rather than replace) the frequent check-ins and feedback practices adopted during the pandemic.

One explanation for the re-adoption of these practices is rising inflation and slow growth in some industries, resulting in the need to freeze hiring, cut the workforce, and reduce costs. As some companies double down on productivity and cost-cutting measures, it remains to be seen whether the frequent feedback and check-in process set during the pandemic will stay in the mix.

5 articles you should explore

From the literature we reviewed, 5 articles (listed below) in particular represent the 4 themes above and contain valuable and intriguing information.

Network effects: How to rebuild social capital and improve corporate performance

Taylor Lauricella, John Parsons, Bill Schaninger, and Brooke Weddle

“When teams feel connected, they tend to get more work done and do it faster… Social capital matters to an organization’s performance.”

This article highlights the vital role connections play in employee productivity and knowledge gain. Based on data collected in early 2022, the study shines light on the state of social capital, how it declined during the pandemic, and how companies can build it back.

Performance management shouldn’t kill collaboration

Heidi K. Gardner and Ivan Matviak

“Giving equal weight to financial outcomes and development underscores the importance of learning and growth.”

This article highlights the importance of cross-silo collaboration for employee performance and development, especially in sales organizations, and how current PM practices discourage it. The authors describe the common mistakes that undermine collaboration and provide steps companies can take to counter them.

How to conduct a great performance review

Frank V. Cespedes

“The biggest impact from performance conversations is often what happens after the review. Too often, nothing happens: The review is an isolated annual event and therefore has little real impact.”

This article is timely and informative, especially as some companies begin re-adopting annual and bi-annual performance reviews. It walks through the do’s and don’t’s of an effective review, highlighting the need to accompany it with ongoing feedback on progress towards goals and coaching for professional growth and development.

Why Organizations Are Adopting Continuous Performance Management

Lars Hyland

“The annual appraisal still plays an important role in the performance management process. It’s just not the only process anymore.”

This article explains continuous performance management and why it is important for organizations to adopt it. It then shows how companies can get it right and some the ways to incorporate it into the talent strategy.

Dump traditional reviews to better measure performance

Amy Leschke-Kahle

“It may be hard to imagine abandoning decades of tradition and big investments in old-fashioned performance reviews, but the world of work has changed. How we measure employee performance needs to keep up with the lightning-fast speed of change.”

This article examines how traditional ways of reviewing performance fail, as they often focus on whether an employee was able to meet their annual goals and are based on infrequent feedback and meetings. Instead, the author suggests organizations move towards measuring performance by collecting frequent quantitative performance data.

Wrap up

The current literature covers many emerging trends and provides information on how companies are adapting their PM practices. However, we found it lacks insights into the specific practices that impact employee performance in a hybrid work environment and how organizations can start to adopt them.

Complete List of Reviewed Articles

1. “How to Conduct a Great Performance Review”, Frank V. Cespedes, Harvard Business Review, 2022.
2. “Performance management outlook 2023: The shift towards performance enablement”, Mohamed Ameen, Talent Management, 2022.
3. “6 ways to ensure your team achieves corporate goals”, Andrew Kenney, FM Magazine, 2022.
4. “Performance Management Shouldn’t Kill Collaboration”, Heidi K. Gardner and Ivan Matviak, Harvard Business Review, 2022.
5. “Mark Zuckerberg braces Meta employees for ‘intense period’”, Alex Heath and David Pierce, The Verge, 2022.
6. “Proof versus potential: Why women must work harder to move up”, Katie Bishop, BBC, 2022.
7. “Women Aren’t Promoted Because Managers Underestimate Their Potential”, Kelly Shue, Yale Insights, 2021.
8. “Why it may be time to ditch annual performance reviews”, Arden Madsen, Fast Company, 2022.
9. “The Importance Of Performance Management”, Arijana Koskarova, Forbes, 2022.
10. “Performance reviews aren't dead – they just need a shakeup”, Amanda Woodard, HRD, 2022.
11. “Dump Traditional Reviews to Better Measure Performance”, Amy Leschke-Kahle, MIT Sloan Management Review, 2022.
12. Gone for now, or gone for good? How to play the new talent game and win back workers, Aaron De Smet, Bonnie Dowling, Marino Mugayar-Baldocchi, and Bill Schaninger, McKinsey, 2022.
13. “Goldman Sachs is bringing back its infamous performance reviews, but experts say it’s a poor management strategy: ‘Exemplary leaders are not going to give up on low performers’”, Aman Kidwai, Fortune, 2022.
14. “Google CEO tells employees productivity and focus must improve, launches ‘Simplicity Sprint’ to gather employee feedback on efficiency”, Jennifer Elias, CNBC, 2022.
15. Network effects: How to rebuild social capital and improve corporate performance, Taylor Lauricella, John Parsons, Bill Schaninger, and Brooke Weddle, McKinsey, 2022.
16. “Performance Development in a Remote or Hybrid Workplace”, MIT Human Resource, 2022.
17. “Redesigning performance management for a hybrid workplace”, Kat Boogaard, Culture Amp, 2022.
18. “6 Ways to Make Performance Reviews More Fair”, Paola Cecchi-Dimeglio, Harvard Business Review, 2022.
19. The Great Attrition is making hiring harder. Are you searching the right talent pools?, Aaron De Smet, Bonnie Dowling, Bryan Hancock, and Bill Schaninger, McKinsey, 2022.
20. “The three C’s of effective performance management”, Ian White, People Matters, 2022.
21. “Top Three Trends In Performance Management In 2022”, Jessica Kriegel, Forbes, 2022.
22. “Five Lessons In Building A Hybrid Workplace For The Future Of Work”, Jeanne Meister, Forbes, 2022.
23. “Why Organizations Are Adopting Continuous Performance Management”, Lars Hyland, Training Industry, 2021.

What does performance management in a hybrid work world look like?

Organizations have had to dramatically change their practices in recent times, especially when it comes to performance management (PM).

In this webinar, Stacia Garr and Priyanka Mehrotra answer questions such as how is PM evolving in current times, and specifically how is it different from 2019 in terms of philosophies, practices, and approaches?

Key takeaways from this webinar include knowledge of what PM looks like in an organization that has redesigned it, gain insights into how PM has changed since 2019 and PM practices that organizations should think about for the hybrid world of work.

 

 

 

Watch Webinar

Over the past few years, several orgs have dramatically changed their existing practices, including those around performance management. Our latest study on performance management trends compares our fall 2019, fall 2020, and new fall 2021 data on performance management practices. We also conducted a literature review of more than 60 articles, a roundtable discussion with over 25 leaders, and a quantitative survey of 621 HR leaders and employees and conducted over the summer and fall of 2021.

This infographic (click on the image below to get the full version) highlights key insights from our report Modern Performance Management Trends.

As always, we’d love your feedback at [email protected]!

As part of our research on modern performance management, we invited leaders to participate in a roundtable discussion on performance management (PM) for a hybrid workforce. The conversation focused on 4 main topics:

• Goals and assessments. How should orgs amend their goal-setting and assessment processes to meet the needs of a hybrid workforce?
• Capability of managers. How can managers be supported in enabling performance for a hybrid workforce?
• Feedback. How should orgs rethink their feedback approach to meet the needs of a hybrid workforce?
• Technology. How can tech be used differently to support the measurement and enablement of employee performance for a hybrid workforce?

Grounding Our Conversation: Our Previous PM Research

To start the conversation, we shared our previous research on the topic that consisted of findings from our Fall 2019 study, Modern Performance Management, in which we identified the “3 Cs” that drive performance—culture, capability of managers, and clarity. But PM needs to change for the hybrid world. Our 3 Cs model can be leveraged and applied to managing a hybrid workforce, as shown in Figure 1.

We also shared our findings from a recent extensive literature review based on more than 60 articles, blogs, and academic papers. Some of the key themes and hidden gems shared include:

• Orgs need to rethink bias and culture
• Managers tackle PM with empathy
• Recognition and rewards matter in hybrid work
• PM tracking needs to meet the ethical needs of hybrid work
• A more strategic role for HR

Key Takeaways from the Discussion

The roundtable discussion resulted in rich insights. The overall discussion focused on how current PM processes and systems can be redesigned to meet the needs of a hybrid workforce. Leaders shared their challenges and ideas around how they’re approaching the changing needs of their orgs. Some of our key takeaways from the discussion are:

• Orgs need to rethink differentiated rewards moving forward
• Leaders and managers should check for bias and intentionality when it comes to feedback
• Senior leaders and managers need to upskill to enable performance in a hybrid environment
• PM tech matters, but only if it enables those involved in performance processes

Orgs need to rethink differentiated rewards moving forward

2020 was the year during which empathy resurfaced as a crucial capability for managers and senior leaders. Some orgs put ratings on hold during the COVID-19 pandemic (to be resumed later) or completely eliminated them, as employees struggled to adapt and perform in a changed environment.

However, when talking about the future, leaders emphasized the need to adapt ratings for a hybrid workforce—and design a differentiated rewards system for high and low performers. As one leader explained:

“2020 was all hands-on deck, but at the end of the day we know some were pulling harder than others. If we do not find a way in this environment to account for that and reward people, we will run into problems, especially for high performers.”

Leaders acknowledged experiencing this challenge as they think through questions of whether to:

• Stay in this environment and enable performance to the best extent possible, or
• Go back to where they were before the pandemic and be mindful of the differential levels of performance

At the end of the discussion for this topic, leaders agreed—what’s important is that leaders strike the balance on what is good for the org.

Leaders & managers should check for bias & intentionality when it comes to feedback

Biases—such as recency (favoring those with whom recent conversations were held or work done) and proximity (favoring those working from the office or closer to the evaluator)—are likely to surface more in a virtual environment since managers can no longer rely on perceptions of who’s working the hardest based on physical presence.

This will increasingly become a bigger issue as some employees return to the office while others don’t. This is why assessments and feedback conversations should be reviewed carefully for such biases.

A few leaders shared specific examples of how they approach it:

1. Leverage tech that nudges leaders to give real-time and nonbiased feedback to employees
2. Plan to calibrate goals at the beginning of the year—and ensure people get the support and feedback they need throughout the year
3. Conduct a combination of training and performance audits to mitigate bias in performance processes—which include incorporating multisource feedback into the assessment process—so it’s not reliant on one evaluator’s appraisal

Intentionality of feedback was also highlighted as a crucial factor that needs to be assessed for a hybrid workforce. As one leader pointed out:

“People assume they know how to give feedback, but in a hybrid environment we don’t have as many opportunities to give feedback. There are fewer nonverbal signals, which is why we need to be more intentional about it and set up time to see where feedback landed.”

It’s extremely important for managers and leaders to be clear about their intent while giving feedback—and check how their feedback is landing in a virtual environment. At the same time, orgs should be mindful of how feedback is being received by employees.

Senior leaders & managers need to upskill to enable performance in a hybrid environment

The ability and need for senior leaders and managers to give feedback, conduct assessments, and work with employees to develop their goals was a theme repeatedly heard during the discussions. Several leaders mentioned that their orgs are actively working to provide managers with programs to help and empower them to have performance conversations and navigate the complexities of hybrid work.

As one of the leaders put it:

“Leaders have learnt it’s more work to manage a team that is completely remote. We have been working on helping leaders understand that and coach them in what they need—which is empathy and the understanding that knowledge workers have to balance work and personal life.”

Leaders shared some of the specific ways to help improve these capabilities, including:

• Providing structure to performance conversations and standard phrases to use
• Addressing how to open a performance conversation virtually versus face to face
• Providing access to collaboration tools to facilitate interaction
• Coaching and feedback to help managers lead a virtual team
• Training to help managers understand the different needs of employees working from home versus from the office

An example of how orgs are approaching this was mentioned by one leader as they shared how their Inclusion team set up virtual 1:1 training with leaders to help them have difficult performance conversations with avatars. The purpose is to train and prepare leaders for end-of-year performance sessions and guide them through challenging scenarios.

PM tech matters, but only if it enables those involved in performance processes

We heard some insightful remarks during the discussion around how tech can and should be leveraged for PM. Tech should enable managers and leaders to have better conversations and provide timely feedback instead of turning these into tasks for managers to check off their lists. One leader highlighted how tech can allow managers to think their job is done once they’ve entered something into the system:

“If managers don’t understand it is their responsibility to drive performance, conversations, and give feedback, no amount or kind of tech is going to matter.”

Another challenge associated with tech is the amount of friction created due to the increasing number of tools that orgs are using, which require managers and employees to input information in multiple platforms—resulting in a poor experience. As one leader put it:

“When it comes to tech, it’s so easy to add on. Sometimes less can be more.”

When it comes to enabling performance in hybrid work, leaders shared that tech can help by enabling teams to understand what everyone’s working on and how that work is progressing in a virtual environment.

Overall, leaders agreed that tech needs to be an enabler instead of just a record-keeping or documentation tool.

A Special Thanks

We enjoyed a highly engaging discussion full of interesting insights. Thanks again to those who attended and made it such an enriching conversation. If you missed out on the chance to attend the roundtable, you can still participate in the study by reaching out to us at [email protected]. If you’re looking for more resources on this topic, please check out our research.

As always, we welcome your suggestions, thoughts, and feedback at [email protected].

After we published The Makings of Modern Performance, we then hit the road to share our findings and learn from conversations with practitioners! After 4 interactive breakfast meetings, we came away with a few lessons. In wrapping up this project, we want to share with you the things we learned.

We're losing sight of the forest

Many organizations are hyperfocused on the tactics of performance management (PM) and have lost sight of the forest (why they do it) for the trees (how they do it). Many of the questions during our time on the road focused on identifying best practices or the “right” way to do PM and were similar to those we heard during our research (see Figure 1).

Figure 1: Questions We Heard During Our Research | Source: RedThread Research, 2019.

While some organizations have taken a step back to see PM as a holistic approach to developing talent and improving performance, many organizations still struggle to shift their focus. Leaders need to focus on this question:

What should my organization do to improve the performance and engagement of our employees, and the ability of us all to meet our business goals?

The following are some of the key takeaways from our road trip.

The fairness waters are a bit muddy

In our roadshow events, there was general agreement that fairness in PM is important, and some of the new practices have helped make it more so (i.e., more frequent conversations to address recency bias, involving more people in performance feedback to reduce managers’ bias). However, we discussed how other practices, such as removing ratings or implementing shadow ratings, have increased some employees’ perceptions of unfairness.

Our research found that creating fair evaluation processes – and connecting compensation to them in a transparent and fair manner – is an important part of performance management. In our (well-intended) efforts to address important concerns about ratings and evaluation methods, we might have muddied the waters. Our study gives some suggestions on how to address this issue.

A closely related topic that we also discussed was pay transparency, which our research found to be critical. Interestingly, session attendees had different levels of awareness on this topic, but one thing was certain: It doesn’t make anyone particularly comfortable.

The challenge is that pay transparency is not an all-or-nothing concept, but a continuum. At one end of the spectrum, employees have no insight into compensation philosophy, structure, and outcomes. At the other end, employees and individuals external to the organization have full access to this information and data.

Implementing pay transparency is full of “what ifs,” potential benefits, and some potentially serious drawbacks. However, employees are already having discussions about their salaries and these discussions aren’t just among colleagues in the hallway. People are more open to share the details of their compensation and benefits package to just about anyone (e.g., Glassdoor). As a result, organizations need to figure out how they will address pay transparency sooner than later.

Organizations have a choice – they can be a part of these discussions, helping to craft the narrative and using the information to better address rewards and benefits, or they can ignore it and miss this opportunity.

Engagement & performance: Increasingly intertwined

While we know that, in general, PM, engagement, learning, and career management are increasingly converging, our roadshow reinforced that the first 2 have grown particularly close. Performance practices, when done well, can engage employees by providing them with a culture in which they can thrive and with the clarity they need to perform well today and tomorrow (see Figure 2).

Figure 2: Three Levers of Performance | Source: RedThread Research, 2019.

To that end, organizations’ performance philosophies and practices need to be designed and executed to engage employees, in addition to helping them perform better. In the future, this likely means that organizations need a more nuanced and personalized understanding of what engages employees, and to then provide them with the insights, resources, systems, and metrics that are most relevant. This'll allow organizations to be more responsive to employees’ needs so they can do their best work.

PM is no longer about just measuring performance. It's about engaging employees – in a personalized and responsive way – in their work and enabling them to perform better as a result.

Where do we go from here?

While organizational leaders can certainly make significant and important changes to their PM approaches, we think there's a bigger question that can’t be answered just by changing performance practices:

How do leaders go about creating a more responsive organization?

This question is at the heart of another project: The Responsive Organization (read: the premise, the lit review, the report, webinar and slides, and the infographic).

In this study, we're looking at the changes the leaders should make to create an environment in which people – and the organization as a whole – can be more responsive to employees and customers. For example, we think that a more responsive organization will lead to changes in the following (at a minimum):

• Communication channels – Individuals at lower levels will have data and information they need to react to needs “on the ground”
• Power structures – Decision-making will be more decentralized
• Employee development – More autonomy and continuous development will ensure that employees have the skills and knowledge they need
• Metrics – Measurements of efficiency will begin to give way to other types of productivity metrics that focus more on innovation, agility, and responsiveness

Want to share your thinking on this topic? Feel free to reach out to us at [email protected] and we will find some time to talk! Also, if you want to talk more about performance management, we would love to hear from you.

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: 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.

It has been a tad shy of a decade since organizations began redesigning their approaches to performance management (PM). While previous approaches focused mainly on top-down, annual, staid processes, organizations now have to go beyond simply managing performance: they need to enable it. More specifically, organizations need practices that motivate, engage, and develop employees through a more collaborative, dynamic, and personalized process.

Yet, with all the changes made to PM, people are still unhappy, unmotivated, and disengaged. In addition, practices hailed as innovated and forward-thinking haven’t shown themselves to be the “cure-all” they may have been touted as.

So, the question remains – Where are we in the great PM experiment?

We have partnered with Glint to answer this question and looked at 40 academic and business articles, reports, and books for this literature review.

What we saw in the literature

Not surprisingly, the literature shows a general consensus that the traditional annual PM process isn’t enough. As it turns out, most traditional processes don’t drive engagement, often don’t encourage development, and don’t focus on the employee experience. While the research recognizes that some of the more traditional aspects of PM are still very necessary, organizations have experimented with ways to better engage employees in the process.

And experiment they have. We found literature on everything from completely ditching the performance review to facilitating continuous conversations, to adaptable goals. And while the sentiment is right, we think that there is an overemphasis in the literature on the process (i.e., the nuts and bolts of how we conduct performance management and its individual components), and an under-emphasis on the changing relationship between employee and employer (manager and up) and what that means for  performance. Specifically, four general themes emerged:

Traditional approaches are no longer appropriate

The traditional model of performance management – the one introduced in the mid 1990s and discussed ad nauseum as an evil necessity – is unlikely to yield the results organizations want because it doesn’t focus on feedback as an informal, real-time way to engage and develop talent. It also disregards the importance of developing and maintaining a relationship between manager and employee, and instead, rigidly sticks to a standardized cycle that is not aligned with how and when work gets accomplished or when feedback is needed.

A “one-size-fits-all” approach to performance management can’t handle the highly dynamic and customized world we live and work in because it doesn’t take into account the work type nor the people in the organization.

Because of this, organizations are shifting performance away from a complex, top-down system to a mechanism that can enhance employee experience – turning something that happens to the employee into something that happens for the employee.

Ratings aren't the problem – we are

Over and over again, authors, particularly in more recent publications, urge caution about removing ratings. In fact, some authors say that organizations have reached premature conclusions about ratings: instead of fixing them, they’re buying into the myth that they serve no purpose and should be removed.

However, the literature also indicates that removing ratings does not exonerate organizations from providing feedback or evaluation; and it may make it harder. Evaluation is necessary to provide meaningful and personalized feedback so employees can improve.

A bigger problem appears to be managers’ inability or unwillingness to diagnose and confront performance problems¹. This is particularly challenging in situations where ratings have been removed. And as organizations remove ratings, they need to rely more heavily on more frequent feedback in order to guide employees. Unfortunately, many organizations aren’t sure that their managers are either willing or able to have those feedback discussions². Which brings us to our third theme.

Relationships are increasingly important

As organizations have replaced annual performance reviews with more regular feedback conversations, there has been a necessary renewed focus on the relationships in organizations – particularly those between employees and managers.

To do this effectively, organizations have to trust their managers to move past just managing projects to truly managing people. This has expanded the role of managers from beyond simply assigning work to one that also includes motivating and engaging team members and holding individuals accountable.

The literature also addresses the growing trend of peer reviews – the practice of employees providing open feedback to each other. This has prompted organizations to begin to think about how best to create a “culture of feedback” where everyone is able to provide quality feedback.

Fairness matters

Finally, fairness. As organizations adopt more frequent feedback and more open conversations, they also need to think through how they create an environment of trust and fairness. More specifically, employees need to feel that the feedback they get is credible and fair – regardless of whether it comes from a peer or a manager.

The literature points out that in most PM processes, subtle forms of bias exist, and these biases can create different outcomes for different groups. For example, similarity bias may subtly influence a manager to provide slightly higher ratings for someone more like them (i.e., same likes/dislikes, same gender and race, similar background). These biases are particularly relevant when talking about the relationship between manager and employee. Most PM systems are not yet set up to protect against them.

Interestingly, removing ratings doesn’t remove the potential for bias – it can actually increase it. When organizations remove ratings, they often replace them with fairly ambiguous criteria for evaluation which allow for much broader interpretation. This broader interpretation can lead to perceptions of unfairness and violate norms of trust.

Articles that caught our eye

Of the literature we reviewed, several pieces stood out to us. Each of the following pieces explored ideas that we found useful and interesting. We found them helpful in expanding the way we have been thinking about PM, its challenges, and its possible solutions.

Performance Management: A Marriage Between Practice and Science – Just Say “I Do”

Paul E. Levy, Steven T. Tseng, Christopher C. Rosen and Sarah B. Lueke

“Spoiler alert: the fix is not to blindly get rid of ratings.”

This chapter discusses recent criticisms of traditional PM practices and reviews them in light of academic research. In an effort to reduce the gap between practice and science in PM, the chapter highlights what organizations can do to improve their PM practices and where scholars should focus their research efforts.

Highlights:

• Argues that practitioners are driving the criticism of PM and that the gap between science and practice needs to be addressed
• Suggests that solutions to address criticisms of PM should come from both a practical and research-based point of view
• Advocates that removing ratings should be the rare exception and not the general rule

"Re-Engineering Performance Management"

Ben Wigert and Jim Harter / Gallup, Inc.

“Performance management has buckled because organizations have prioritized measurement over development.”

This report presents research on why traditional practices are not working, insights on how to improve them, and expectations that today’s employees have for their employing organizations.  The authors recommend that organizations should create a culture of performance development by establishing expectations, continually coaching, and creating accountability.

Highlights:

• Presents the research behind why traditional PM is not effective in today’s organizations
• Discusses the changing nature of what employees expect from their organizations and how organizations can think through what (if any) changes are necessary in their approach to PM

"Straight Talk About Employee Evaluation and Performance Management"

Lucia Rahilly, Bryan Hancock and Bill Schaninger / McKinsey

“…there is still no substitute for the direct feedback and coaching that happens day in and day out…”

This podcast, with transcription provided, discusses recent research by McKinsey on what drives effective PM. The discussion focuses on the role of the manager to engage in quality performance and development conversations with direct reports, the need for some sort of evaluative component, and the finding that perceptions of fairness impact the degree to which PM is seen as effective.

Highlights:

• Discusses the current trends in PM and the necessary reliance on the ability of managers to provide coaching and feedback
• Explains that people still want to know how they’re performing and that some sort of evaluative component is likely necessary
• Illustrates the importance of perceptions of fairness in the PM approach

"3 Biases that Hijack Performance Reviews and How to Address Them"

Beth Jones, Khalil Smith, and David Rock

“…not all biases make us actively malicious. The key is how we manage our biases.”

The article discusses bias from a neuroscience perspective, highlighting that bias is our brain’s constant search for efficiency. While bias is not inherently bad, it can lead to negative outcomes if left unexplored. The authors discuss three biases – expedience, distance, and similarity – and how managers and organizations can mitigate their impact on performance appraisal.

Highlights:

• States that bias negatively impacts performance appraisal and briefly discusses the impact of three prevalent biases
• Provides high-level suggestions on how to mitigate the influence of these biases in performance appraisal

"Putting the System into Performance Management Systems: A Review and Agenda for Performance Management Research"

Deidra J. Schleicher, Heidi M. Baumann, David W. Sullivan, Paul E. Levy, Darel C. Hargrove and Brenda A. Barros-Rivera

"…much work is yet to be done in developing a body of scientific knowledge about performance management systems that can better inform practice."

While this article isn’t particularly provocative or stirring (it's why we put it last), it does provide a foundational summary of current PM research, which is helpful in understanding more progressive and innovative perspectives. The authors present a model of PM and summarize research from 1980 to 2017. Based on this review, they provide recommendations for future research in PM. This article is great for leaders and practitioners that want to geek out on the history of PM.

Highlights:

• Presents a model of PM to organize components of PM and to integrate perspectives
• Suggests that there are only seven core tasks involved in PM
• Illustrates the importance and value of both formal and informal components of PM
• Builds a case that we’ve excluded the examination of important variables in PM
• Argues that more research is still needed on PM

Overall Impressions

The literature on PM is vast and varied, and there are many, many smart people with different perspectives. We’re pretty sure no one perspective is the “right” perspective. That said, we’re starting to see large-scale agreement for the notion that traditional, top-down, annual-driven PM is less likely to reign supreme in the workforce of the future. With this shift, we think we’ll also see an increased emphasis on the role of relationships in organizations, the expectations of managers, and the importance of trust and fairness in PM approaches.

It feels like we have been talking about performance management forever. In our conversations, organizations are telling us that performance management practices are not just ineffective; in some instances, they’re painful. In fact, when we recently asked managers in one organization how performance management was handled, our two favorite answers were: “with a pointy stick” and “like it’s 1979.”

Why this is important:

We are at least 7 years into the performance management “revolution”, and yet, many (rightfully) have a healthy skepticism about whether the new approaches are any better than the old. In fact, recent research by McKinsey & Company found that 54% of respondents still don’t believe that performance management has a positive impact.

Despite myriad articles and case studies about simplified ratings (or no ratings at all), separate performance and compensation conversations, real-time feedback and the technologies that support it, agile goal-setting, and coaching and development as a part of performance management, most organizations would admit that performance management is still a struggle.

Today, we’re launching a formal research study, sponsored by Glint, into what organizations are doing with respect to performance practices and how effectives those practices are.

Hypothesis:

Peformance shouldn't just be managed; it should also be enabled.

The premise for this project is that we have moved from an era where organizations only had to concern themselves with performance management to one where enabling performance is equally as important.

In the beginning…

A hundred years ago, performance management was much less complicated than it is today. Organizations were looking for a way to understand the return on their people investment. During the first industrial revolution, as assembly lines and other methods for increasing efficiency made an appearance, people were plugged into those systems and processes.

The worth of an employee was much more easily quantified than it is today. Tasks had a “right” way, and because measures associated with those tasks were objective (e.g., cycle time, number of widgets), it was easy to determine how well an individual performed based on those numbers. It created a transparent and equitable way to compensate employees.

The times, they are a-changin’…

However, we’re not living through the first industrial revolution; we’re living through the fourth. And there are some differences.

First, the work organizations are asking employees to do is different and much harder to measure. There are increasingly fewer ‘right’ ways to do a task because employees are continuously adjusting to changes in both internal and external environments. Instead of a set way of doing things with a set way of measuring things, employees are often left with nebulous job responsibilities and organizations are left with even more nebulous ways of assessing them.

As a result, “performance” has necessarily become less of a technical term. Instead of objective measures, shifting goals and strategies make it necessary to use more subjective measures when appraising employee performance.

Second, employee expectations have also shifted. As our societies continue to evolve toward a knowledge and information economy, compensation has become only one of many factors that keep employees with an organization. Employees now choose roles and tasks, not solely based on compensation, but also on things like how interesting they find the work, whether there is room for growth, opportunities for recognition, and what types of skills they can learn.

These expectations have prompted organizations to supplement traditional performance management processes. They are no longer just worried about the outcome or throughput; if organizations invest in individuals, they also want to measure their propensity to learn and their attitudes as a part of their overall performance.

The result…

As a result of these changes, many organizations have implemented a hodgepodge of old practices that don’t quite fit current conditions, and new practices that are applied haphazardly. As organizations try to blend the old with the new, gaps are introduced that result in frustration and uncertainty, both for the organization and for their employees. We currently see that frustration in the market. Gaps include:

Focusing on management or enablement, but not both

It is likely that during this last performance management revolution that we threw the baby out with the bathwater. Performance appraisals are an important part of how organizations compensate and create fairness, and throwing them out has caused havoc in more than one company.

As we begin to adopt some of the new ways of doing things, it becomes doubly important that we figure out how we fulfill some of the more traditional reasons for performance management. (By the way, if you’ve managed to create performance management practices that balance both of these, we would love to talk to you.)

Treating performance as a stand-alone challenge

Currently, most organizations look at performance and performance management as a separate set of practices and measures. However, how employees perform is ultimately the culmination or result of all other people practices.

This means that incentives, recognition, compensation, wellness programs, career management, coaching and mentoring, and engagement programs impact the performance of the organization. Truly enabling performance means taking a holistic approach to people practices by looking at all parts of the organization and understanding how they impact individuals and their ability (or willingness) to perform.

Missing the perspective of the employee

Most modern performance management practices have been conceived of by leaders of organizations and management consultants. Strangely, a lot of organizations limit upstream feedback to engagement surveys and the occasional 360. In the case of performance management, we think employees are in a unique position to tell us what would be useful to them in order to perform better. As a part of this study, we will be asking them.

Ignoring inherent bias

Performance management processes as implemented in most organizations are inherently biased. Most processes are largely subjective, no matter how many times a year a conversation is conducted. While a manager’s and peers’ opinions are important and valid to appraise performance, new technologies and access to new data can provide additional information that may create more fairness in the process and provide the organization with much more information about who is performing well at what tasks and in what instances.

We want to explore that further.