Why performance management is changing

Written by
Stuart Hearn

17 Nov 2015

17 Nov 2015 • by Stuart Hearn

Performance management is broken

Over the past couple of years, companies have been telling everyone who will listen that performance management is broken. The overcomplicated, forced ranking systems have led to a tick box mentality that has meant performance management is often seen as another piece of paperwork to be completed.

Figures from a performance management report from Deloitte University Press show that 58% of companies feel that performance management is not an effective use of time. Only a small minority, just 8%, believe that their performance management process is of value.

Productivity crashes and lost morale

Not only do traditional performance management approaches not provide clear value for the company, they can actually be detrimental to staff morale and productivity levels in the workplace. All organisations know that success happens when staff are motivated and for that they need to feel they are valued.

No matter how well a company was performing, rank and yank systems – previously used by companies including General Electric, Microsoft and Accenture – meant that the lowest performing 10% of employees were periodically identified and culled or managed out of the business.

This type of system creates tension in the workplace, can prevent employees from building relationships and asking for help when needed, and in turn cause productivity crashes.

The case for change

We’re moving into a new age of performance management. Companies at all levels are scrapping their old performance management tactics in favour of new trends. Microsoft abandoned their ranking process back in 2013 because it caused “capricious rankings, power struggles among managers, and unhealthy competition among colleagues.”

Another of the big companies making changes is Deloitte, whose new performance management approach has cut out cascading objectives, once-a-year reviews, and 360-degree-feedback tools. Instead they are focusing on coaching and development for their employees.

By changing the overall function of performance management, companies are becoming more tuned into their employee’s needs. Companies are increasingly looking at ways that individuals within their organisations can excel by aligning SMART objectives with company values, using a coaching based form of management, and providing in-the-moment feedback.