The Evolving Landscape of Performance Management

In the old days, employees and their immediate supervisors would have a formal meeting once a year to talk about their past performance and set goals for the future. In today’s fast-paced, rapidly changing environment, spurred by technology advancements, global competition, and changing consumer demands, that annual process seems woefully inadequate to ensure high performance.

New demands mean new opportunities. Today, talent managers and human resources professionals are looking at new ways of more meaningfully providing performance feedback to employees—as well as creating mechanisms for them to evaluate their own performance.
Indeed, some organizations are dropping formal reviews altogether. Kelly Services was among the first, according to Peter Cappelli and Anna Tavis, writing for Harvard Business Review. They dropped their formal appraisal process in 2011 and were quickly followed by others.
In “The Performance Management Revolution,” Cappelli and Tavis point to three business reasons prompting organizations to change the way they view the performance management process:

  1. The return of people development and competitive pressures for organizations to focus on talent management in a tight labor market
  2. The need for agility being driven by rapid innovation and technological disruption
  3. An increased focus on teamwork versus individual contribution

Short-term goals are becoming more the norm, with automation and “big data” providing the means for teams to monitor their own performance against established goals.
It’s not that companies don’t understand the need to provide feedback and the value of doing so. They’re simply recognizing that a more forward-oriented and frequent approach, particularly in a rapidly changing business landscape, holds more potential value.
Instead of formal, annual conversations, companies are focusing on cultures that demand more constant and real-time interactions and feedback, catching employees “in the moment,” instead of documenting thoughts and sharing them during an annual process.
These new approaches, though, aren’t without their own drawbacks. Cappelli and Tavis point to four:

  1. Aligning individual and company goals. With a more project-based focus in most organizations to ensure agility and the ability to flex to meet changing market needs, the top/down alignment between corporate and individual goals can get murky.
  2. Rewarding performance. A move away from numerical to more qualitative judgments doesn’t remove the consternation around the reliability and validity of management assessments. At this point, companies are still trying to find an alternative to pay-for-performance.
  3. Identifying poor performers. Some managers have always been hesitant to “call out” poor performers; a less formal, more qualitative approach to performance management is not likely to change this.
  4. Avoiding legal troubles. Some express concern that without formal, quantitative assessments as the basis for pay and promotion decisions, there may be an increase in discrimination charges.

Still, despite value concerns, a movement toward more frequent, less quantitative approaches to performance management is apparent with many large companies already moving in that direction.

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