Performance management is a process that hasn’t seen much innovation over the decades. Despite the obvious flaws in many established practices, companies are reluctant to change—”the way it’s always been done” seems less disruptive and probably feels safer to those leaders who like or benefit from the status quo.
But the pandemic has ushered in a wave of disruption, with employees and company leaders re-evaluating everything from the purpose of work to the definition of the workplace itself.
This new era of work means major changes for the enterprise. The rapid transition to remote work, along with new expectations from employees, means the power dynamics continue to shift. The “old ways” are simply not acceptable, scalable, or even feasible anymore.
“Performance management” is arguably one of your most critical people programs, given that it’s the process that employees associate with their growth, development, learning, income, and progression within your organization. But employees don’t join your organization to have their performance “managed”—they join to progress their career. Here’s where the paradigm needs to shift in order to support employees today and in the future.
Performance management today: a flawed system
As it is today, we can’t talk about performance without talking about performance reviews. These dreaded evaluations are how most companies measure and evaluate employee performance—and where the main issues with performance management start.
Being that our paradigm for measuring employee performance is top-down, it’s no surprise performance reviews follow the waterfall methodology and are, by design, linear and sequential. Since they lack clear performance benchmarks or criteria, reviews are highly subjective.
Plus, the review infrequency—once or twice a year—doesn’t offer a continual feedback loop to help guide employee growth and results in a number of unconscious biases creeping into the process. This thwarts much of the great work companies do to progress diversity, equity, and inclusion efforts in their organizations.
It’s easy to brush off the notion that employees widely dislike performance reviews and see them as a regrettable necessity, but it's not only employees who suffer from this process. The business suffers as well. While all other areas of our businesses have benefited from innovation and technology to make us more agile, nimble, and high-performing, we stick to our paradigm of performance “managing” people.
If you’ve gone through the process, you understand how behavior changes during performance review season. Suddenly, elbows start rubbing, and a heavy wave of politics stifles authenticity.
The mechanics of the system are broken: Reviews don’t offer employees a consistent understanding of their career growth process, nor do they supply context around expectations. So what positive business outcome are we getting from doing it this way?
The results of traditional performance management
Consider the high-level impact of performance reviews. On a company level, these performance management issues limit organizations from being agile. Making adjustments, adapting, and evolving is often a slow, difficult process. And because these reviews are subjective, they’re inherently biased. They don’t progress organizational diversity efforts and can even hinder them. Meanwhile, employees aren’t empowered to understand how they’re progressing throughout the year and make the appropriate shifts.
Many managers end up using one of two methods to rank employees. The first is the bell curve, where managers categorize low-, mid-, and high-performing employees. With this method, employees are judged based on no set criteria, paving the way for biased and subjective performance measurements.
Then there’s the 9-box grid, where managers categorize employee performance and potential, ranging from low potential-low performance to high potential-high performance. Despite its best efforts, this method has the same level of bias and subjectivity as the bell curve. Employees are, once again, judged without any set criteria.
A better way to do performance
Performance management issues can’t be solved by making small tweaks to the performance review process. The solution requires a full pivot to a modern methodology that’s integrated, iterative, and focused on agile, continuous employee career progression.
What does this look like in practice? Continuous progression requires a structured process that supports the ongoing measure of employee performance over time. Some key elements of this method:
Transparent and strategic levels are used to help managers and employees identify where they are currently within the organization and which enable smaller, more iterative steps in career mobility (through a greater number of levels).
Contextualized, role-based competencies are needed to track ongoing career growth and anchor employees’ progression at their level. Ranking competencies by level can help employees see where they’re at and continuously develop themselves in between-level progressions.
Calibration conversations occur consistently between managers and employees to create common ground in a growth-minded environment—here, an employee and manager would review the results of competency assessments together to calibrate expectations for each skill dimension.
Real-time, structured feedback is initiated by employees, peers, and managers to anyone, from anyone, at any time within a personalized context (specific skills by level) for employees to support a constructive feedback culture and iterative progress.
A better way to measure performance
Continuous progression allows a crucial paradigm shift to occur in performance management. It helps organizations shift from “let’s identify the top performers” to “how do we get the most people performing at their best.”
To create and monitor this shift, organizations can lean on two key measurement systems: the employee growth rate and employee lifetime value.
The employee growth rate or score tells a holistic story of continuous measurement. It’s a real-time metric that contextualizes growth in a way that can be monitored over time in a transparent and equitable way. This metric helps you understand how quickly employees are growing, in which areas they may be struggling, or perhaps areas in the org that are consistently succeeding. Because the employee growth score is a measure of growth over time, it’s a more equitable way to look at employee performance as well as a key way to clearly identify inequities that may be cropping up within your organization.
Employee lifetime value (ELTV) is the total value created by each employee over their tenure, and it can be optimized with continuous, iterative growth. Optimized ELTV means shorter ramp times, increased retention, and much higher employee growth. Looking at employee growth as a continuum and using employee growth score as your metric, you can iteratively optimize how employees grow and perform, therefore increasing bottom-line impacts for your business in real time.
When you focus on how to get the most people to perform at their best, performance management becomes a more impactful organizational tool. Companies become more agile. Bias is reduced, and supportive, transparent structures are created.
Make continuous progression your new performance paradigm
It’s exciting to consider the impact that continuous progression can have on companies, employees, and the future of work. As well intended as performance reviews are, the new era of work requires a new way of managing performance—one that is iterative, transparent, and ongoing.