Posted on 11 May 2018

Depending who you ask, performance management is dead, or essential, or a necessary evil. It’s good for employees, or detrimental to employee engagement, and depending on the day it seems essential or completely ineffective as a tool for making compensation decisions. Meanwhile, ‘feedback’ enjoys unprecedented popularity – so is the problem with performance management just a branding issue?

Daniel Randello, Group Manager, Business Planning and Transformation at Transdev and Sylvia Vorhauser-Smith, SVP Global Research at PageUp explored what the ideal state for performance management looks like in 2018 in a recent PageUp webinar. Here are the key takeaways.

Traditional approach

The traditional approach doesn’t work, not only because it operates on assumptions which are outdated (in the past employers were prone to believe people wouldn’t work hard left to their own devices, whereas modern organizational psychology suggests the opposite) but because the nature of what many humans do at work has completely changed. They’re not building widgets, but solving complicated problems.

Traditional performance management:

  • Fails to tap intrinsic motivation
  • Is limited to individual performance measures and incentives (so doesn’t work for team objectives and rewards)
  • Is rigid, infrequent, time-consuming and retrospective
  • Is disconnected from engagement and high performance

Traditional performance management was also cumbersome, so cumbersome it was near-impossible to incorporate regular feedback into day-to-day or week-to-week management. “When I first joined the business four years ago we, like a number of other businesses, had a very manual process. Goals were completed on a piece of paper at the start of the year, put back into a filing cabinet, pulled out for the middle of the year and then resurfaced at the end of the year. There were really no touch points in between. Employees saw the process as incredibly subjective,” explains Randello.

A(nother) performance management revolution

According to Deloitte, 79% of executives rate the redesign of their performance management system as a high priority. Randello found that redesigning the performance process at Transdev had many benefits.

“When we started the task of redesigning our performance processes, we really needed to put the employee first. We had a number of conversations with people in our business. There were some frustrations. From an employee perspective the process didn’t mean anything to them, it was just an extra step that they had to do. From a manager’s perspective it wasn’t doing anything to support our organizational performance as a whole.”

Getting everyone on the same page was key to creating a performance management approach that worked for everyone. “Education was probably a key point in our implementation – educating people on the process, what it sought to achieve and also educating our managers. There was a misconception that performance management is underperformance management and so we really needed to break that stigma,” says Randello.

An unexpected benefit of getting the process right was that the business became more attuned to overall organizational objectives. “Performance management will evolve when your business evolves. It needs to change with the changing shape of your business,” says Randello. “For us that meant it changed each year for four years. That was very powerful because people couldn’t just copy over the same objectives as last year. We as a business were changing and that needed to reflect in the way that we operated internally and the way that we measured performance internally as well.”

Giving people the right data to understand their performance

“By and large I believe that everyone wants to do a good job. Everyone comes into work wanting to perform,” says Randello. “Very few people set out not to perform well in their role. So taking away the judgement that comes with a performance process – just showing them how they performed relative to their peers and relative to the targets in our business – is incredibly powerful. That’s where we’re focusing a lot of our time and energy.”

Giving people real-time data to understand their day-to-day performance is also a priority, explains Randello. “For example, one of the things we measure is on-time running. It’s one of the things we’re penalized for if our services don’t run on time. Firstly people need to understand whether they are running on time or not, in relatively real-time. Secondly, we need to give them the opportunity if they’re not to develop in that space – so for us there’s a very tangible link between performance and development. Thirdly, if it goes beyond that and performance is still a problem, we need to listen to our people and to understand why that’s still a problem. That dialogue and giving our people that information is really important.”

What about salary?

For all the ongoing discussion about decoupling performance and development feedback from compensation discussions, there isn’t (yet) an elegant solution to achieve it. Randello has found that having a clear process which employees understand is working well. “For our salaried workers, performance ratings are a language that they’ve really started to embrace and they understand the implications that has on their compensation. They like that overperformance means that their monetary compensation is going to increase as a result,” he shares.

Find what works for you

Finally, Randelo reiterates the point that when it comes to performance management, finding the right approach requires considering what your business needs. “When you’re looking at what’s right for your business, really focus on your business – not fads or what others are doing. Any aspect of performance really needs to be considered in line with the business you’re in.”

Join us at our free Redesigning Learning bootcamp webinar

At our next bootcamp webinar on 7 June 2018, Sylvia will chat with Linfox Armaguard Group’s David Jordan, General Manager People and Capability and Jonathan McConachie, Manager Organizational Development about Redesigning Learning. Reserve your place today.