Digital transformation and pandemic have accelerated a series of evolutions that we had already learned to observe, gradually undermining those “traditional” models and paradigms that have long worked in organizations. Hybrid work, collaborative and diffuse teams, activity-based working and flexible time schedules are just some of the macro-trends that remind us that our daily lives have changed, and are likely to do so again. Underlying this is the paradigm of working “by objectives”-a model of leadership and collaboration based on the principle of shared autonomy.
It seems like an almost natural concept, but this paradigm is moving two basic needs: on the one hand, to equip oneself with a management model and tools that enable monitoring of results, and on the other hand, to tune one’s organizational culture to an approach based on trust and recognition of people and Teams with greater autonomy in the face of accountability for results.
With this in mind, organizations and HR functions have begun to ask themselves how they can make their processes more digital, innovative and up to date to accompany and lead these changes. The data, however, suggest that in order to navigate change, sometimes it is not enough to “modernize” the past, but to transform.
Under the spotlight of this discontinuity is certainly the performance management model, which aims to improve the quality of work, create business impacts, and motivate people to fully express their contributions. Traditional approaches, mostly focused on performance review or performance appraisal processes and not on the broader concept of performance management, have in fact proven, even in the past, to be ineffective in this respect.
How come?
Annual evaluation, the use of metrics and summary indicators, ratings, standardized criteria and so on have diverted attention away from the true purpose of the process-namely, to clarify expectations, promote continuous improvement and inspire employees to perform at their best-instead placing emphasis on the concept of “measurement,” which has ended up giving people the perception that they are essentially being judged, evaluated, measured on a scale and against a set of criteria.
The limitations of traditional systems were thus already evident before the pandemic. It is not surprising at this point that only a small proportion of people (14 percent according to Gallup1) believed in 2018 that the performance reviews they received inspired them to improve and perform at their best, while an almost equally small proportion (2 in 10) said they were convinced of the actual impact of them on motivation.
According to Gartner2, 81 percent of HR managements were considering changing their performance management processes as early as 2019, questioning how to make them more useful, a percentage that the following year already showed an increase (87 percent) according to data from the same consulting firm.
Such perceptions led some organizations to question whether it was even necessary to have proper evaluation systems, ending up, in some cases, abolishing them. The result? A systematic decline in performance and engagement (about 10 percent), as well as a decrease in the quality and duration of informal conversations.
In short, a dilemma known to experts in the field who have struggled to find creative solutions to introduce a performance model that is truly useful to the organization.
What, on the other hand, in traditional models is increasingly criticized?
The elements that suggest the need to rethink performance management processes are many. The elasticity and agility of today’s organizations, in which the key players (manager, person, workgroup) are multiplying, organizational levels are shrinking, and teamwork is becoming a paradigmatic operating mechanism, dictate the use of performance management systems that are not only less rigid, bureaucratic and “one-size-fits-all,” but also, and above all, capable of overcoming the traditional manager-centric logic in favor of greater participation and co-responsibility and “tailored” decisions that fit the natural cycle of work.
What we now see as outdated models, in that they are “past year performance oriented” and often experienced as “report card grades,” were actually responding to the need to set long-range goals in relatively more predictable economic environments than those in which we navigate. To these needs, which have since changed as goals have become more short-term, has been added the need to have processes on more flexible time horizons, to react effectively to unpredictability, and where the focus is on how to prepare for the future.
Rather than “alternative” or “actualized” versions of the better-known performance review mechanisms, the new performance management systems are approaches capable of going beyond the moment of evaluation and including all the “collective” planning, coordination, and monitoring activities that organizations need to achieve their goals. Indeed, we could adopt the label of continuous performance management, to define those models that work, not only because they are based on simplifying the system and reducing bureaucracy and complexity, but also because they introduce collaborative activities that increase their usefulness and make them suitable for contexts of discontinuity, where it is necessary to reverse priorities now with some frequency.
How can we reconnect the performance management process to its purpose? This is the question we will try to answer in the next stages-“Requirements of performance management models” and “Golden rules for designing performance management models“-in which we will make available the practices we have seen work and our lessons learned.
