Many organizations realize they need to revamp their performance management practices.  But they struggle to shift from traditional standards-based procedures to more flexible hyper-personalized approaches.

Yet this transition is vital. The fast pace of change in the digital economy and the growing diversity of work, and of the workforces that perform it, are rendering many conventional practices ineffective.

Our research shows that most organizations recognize the flaws in traditional performance management. Nearly two thirds of the more than 2,000 leaders and employees we surveyed around the world said their performance management practices often exhibit ‘top-down’ control. They also tend to focus on assessing employees’ past performance rather than developing them to perform better in the future.

Most respondents advocated more personalized performance management. Our survey identified five important steps to revitalize performance management. They can help organizations move from merely managing worker performance to constantly improving it.

These key steps are:

  1. Develop people through constructive conversations and coaching. Frequent conversations and focussed coaching are crucial to effective performance management. They ensure that vital information flows between business leaders and relevant workers throughout the organization. Where possible, conversations and coaching should focus on worker strengths, rather than correcting weaknesses, and point to future goals.
  2. Create a culture of openness and transparency. Workers are usually suspicious, and often demotivated, by performance management practices that are secretive. Around 79 percent of the business leaders we surveyed, and 69 percent of employees, believe performance management procedures should be transparent to employees. Some organizations have begun disclosing staff compensation to all workers to promote greater openness and better understanding of staffing decisions.
  3. Personalize performance management across the workforce. Many organizations are customizing the coaching and feedback they provide their workers. They’re tailoring goal-setting, as well as rewards and compensation, to suit the needs of individual workers or segments of the workforce. This helps workers develop their careers and allows employers to galvanize highly motivated and skilled personnel.
  4. Move people decisions closer to the people. Removing or reducing employee performance ratings can increase the influence of business leaders and co-workers in worker assessments. Rewards can be determined by using business performance data, or survey information, to calculate a worker’s impact on the organization.
  5. Clearly define high performance. Traditional performance management approaches don’t adequately identify high-performing workers in a digital environment. Important qualities such as collaboration skills, the ability to learn new competencies and creativity are often overlooked. Organizations need to identify the skills and qualities that support their business objectives. They must then devise processes and practices that recognize, encourage and develop these attributes. High performers, who exhibit key skills and qualities, should be nurtured and appropriately rewarded to enhance their contribution to the organization.

In the digital economy, effective performance management practices can substantially improve the effectiveness of workforces and provide organizations with the agility and flexibility vital to successful business strategies.

For further information about the changing requirements of performance management please follow this think. The report should help you plan a performance management system that’s better suited to the digital age.

Is Performance Management Performing? Revitalize performance management to better support business objectives and the workforce of the future.

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