Wow, since also Accenture chipped in and is doing away with Performance Management in the traditional way, the discussion got really big. Everywhere you look you see articles, comments, point of views on Performance Management. I am really, really happy about this as I believe that this topic is overdue for a revolution! When you then read these articles and comments as well as when you speak to clients, they say that they are doing away with it because it takes too much time from Line Managers and HR. Sometimes you even read that people involved in the process are starting to question if there is any value in this process at all – businesses are changing, organisations are changing, ways of working are changing, the pace is getting faster – and all of this should be supported by an annual process? Of course that cannot work – and these two reasons are two important reasons why Performance Management need to be rethought.
However, there are more important ones which are not too obvious. When you read on or talk more to clients, they all come to the same issues they see when thinking of doing away with Performance Management:
- But how do I decide who gets what bonus?
- But how do I decide whom to promote?
And these two questions really show me the need for a revolution here.
Let me explain. In most companies where I have seen Performance Management in the traditional way (and there are not yet many out there who are more futuristic), Performance Management actually is a process which serves three purposes:
- Ensure that Line Managers talk to their employees
- Plan and decide on bonus payments
- Plan and decide on promotions
- and sometimes a 4th one on communicating company targets and ensure understanding of it/ ensure that employees understand their importance for the overall company goals
The Performance Management process is perfect for these purposes, isn’t it? And on top, as it is an HR tool with numbers, objectives, target measurement, performance discussions and at the end a ranking of all employees (similar to the school report of your kids), it is 100% objective and ensures that only the best get promoted and that your effort you dedicated to work during the last year is valued monetarily. Fantastic … but wait… Let’s step back and have a look again what I wrote and make a reality check.
First of all: who has seen an objective Performance Management process? – this is nonexistent as at the core of this process humans assess humans, and therefore it is a mix up of many different subjective assessments. That does not make it objective. And how do you compare performance of different employees in different jobs? And how do you make sure that all Line Managers use the rating scale in the “correct” way? Truth is, the Performance Management process is used to mask the fact that it is a very subjective act in which the Line Managers with the most power distribute the money and future power (promotions) in a way that fits to their individual motives. In addition, I would even say that it is not used to motivate employees, but to “shut them up” and ensure that they act in conformity with a Line Managers thinking. Question: Is this what you want or need?
Second: It is called Performance Management – so at its core it is supposed to manage the performance of employees (aka motivate employees to bring their best every day). But when you read through the articles or listen to the discussions, it is all about bonus payments and promotions. And this is where the real revolution is necessary: Re-think how to motivate employees to bring their best every day. It was so easy in recent years to just “believe in” the bonus payment and promotion chances that many HR practitioners have forgotten about the core of Performance Management – and (most important) that a monetary reward does NOT necessarily lead to the performance and behaviour one might want or need.
We are all humans and have more than one (money) motive to go to work and bring your best performance every day. And not so new research shows that the traditional model of “better performance through more money” does only really work for manual work. But where do we really have pure manual work today anymore? Sure, it is still existent, but where we really need to manage performance, where it is really mission (and company) critical, we normally don’t have manual work, but mental work, brains. (interesting video here) And these need to be motivated in a very different manner.
What I am saying here is not new. Research in psychology, sociology, organisational science has proven this for years, but wasn’t listened to. I hope that now is the point to start listening again.
In essence, there are two paths you can go now:
- The easy path if you just need a process to distribute money (bonus), just call your process “Bonus Process” and all is fine:
- Tweak it a little to reduce the workload
- Slice it up into two or four pieces to reward performance closer to the actual behaviour that you want to support
- Give the money into Line Managers hands and let them decide how to allocate it as they can see performance and reward it more direct (which has proven to motivate better) – this also leads to Line Managers needing to speak more often to their employees (although it is sad that this is needed to motivate them to talk to their employees…)
- And be more honest and transparent about this as well as the career process; careers and promotions are not decided during the annual performance management process, but every day in a very subjective way – and this is not bad, it just shows that we are all humans.
- But if you really want to motivate your employees to bring their best everyday, you have to rethink what motivates people and how can you align this with the company strategy and business – and in the end you might do away with your annual bonus? – This is scary though, but necessary.
Let me know your thoughts.
Chief HR Officer 