What is performance management, really?

by Anna Helene Skau, Senior Consultant Dossier Solutions

There has been a great deal of debate as to whether performance management “works” as well as how performance or productivity should to be measured. Looking back to when most measurement methods were developed, one finds that not much has changed. Yet, the world has changed significantly, moving from a blue-collar to a white-collar, knowledge based economy. This also means that traditional methods for managing and measuring performance need to take evolutionary leaps to keep up with today’s reality.

Much has been written about traditional performance management, and throughout its theoretical existence the framework has moved from a “scientific management” perspective to a more wholesome approach. Simply put, performance management is an ongoing process of communication between a supervisor and an employee that occurs throughout the year, in order to support the accomplishment of the strategic objectives of the organization. The communication process includes clarifying expectations, identifying objectives, setting goals, reviewing results, and providing feedback; in essence, providing a record of an individual, team or organization’s accomplishments.

But, does it work?
The reason why so many companies struggle with implementing an effective performance management program is that it often ends up being a “numbers game” – where appraisals, ratings, benchmarking and goal assessments are believed to generate higher performance. The problem is that setting goals, in itself, reviewing results and providing feedback does not necessarily trigger the type of behavioral changes and learning that are needed in order to have a positive impact on the bottom line.

The problem with performance management is that setting S.M.A.R.T. goals and conducting performance appraisals is not enough and, when done incorrectly it, can actually be counter-productive. This rings especially true when the way we measure performance is outdated. Imagine a call center environment, where leadership has stated that performance (aka productivity) needs to increase, and sets a goal that all employees in the call center need to handle at least 60 incoming calls/day. As supported by most performance management theories, people typically accomplish what is expected of them, and as a result, employees in the call center make sure to hit their target of 60 calls/day. However, a consequence of this is that they speed through their customer support calls, taking short cuts in their problem-analysis, and “hurry” the customers through the process. Six months down the line, customers have jumped ship and business is down. What happened? Well, employees did what was expected of them, and the goal was S.M.A.R.T. but not “smart”.

Focusing on the goal will not get you there
When companies go about implementing performance management, many believe that it is sufficient to train their managers in the “WHAT”, i.e. KPIs and goal-setting theory. However, this rarely leads to the desired outcome. The familiar case of weight-loss can be used as an example of this, in the following way: if you would like to lose 5 kg by summer, it is not enough to set a goal with a deadline. You may not have the necessary knowledge of nutrition or exercise routines, equipment, coaching, nor the discipline to go to the gym, and you may not even be truly motivated by the goal itself. Setting the goal and stepping onto the scale every day will get you nowhere, unless the HOW and the WHY are defined.

Performance should not be managed – it should be developed
There needs to be a paradigm shift in the way we look at performance management. Firstly, performance should not be managed – it should be developed. High performers are capable of reaching their goals by having the necessary skills, knowledge and competence to perform critical tasks with high quality in a timely manner. By integrating performance goals with personal development goals, managers and organizations can work strategically in developing performance through increasing their employee’s capability to contribute to the success of their organization. 

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The belief that performance development hinges on capability development is strongly supported by the 70:20:10 model. This model proposes that, on average, 70% of a person’s learning happens through experience-based situations, 20% from interacting with employees (social learning), and 10% through formal training.

In general, on-the-job training is an overlooked and undervalued strategy for performance development, and many organizations rely purely on formal training. This supports only one aspect of organizational learning. Not only is learning through actual situations much more transferable to everyday performance, but the act of teaching something to someone else is, in itself, a great way of increasing one’s skills and capabilities. As a result, the organization gains two employees who are more capable of performing at a higher level, and at no great cost!

This way of thinking resonates with the winner of HR Norway’s competence award in 2016, Sopra Steria, whose approach to performance development is based on the 70:20:10 model. They focus on competence and capability development as their main strategy for organic growth and high performance, and as a consequence they are rated as one of the best places to work. By utilizing this model as a foundation for their learning and development work, they have seen an increase in both performance and bottom-line results.

Happy employees = high performers
Additionally, organizational research validates the fact that focusing on motivation and work satisfaction is one of the most effective ways to increase performance. In fact, this is such an important contributor to performance that organizations should consider moving away from measuring performance on an individual level, to rather measuring satisfaction and motivation across the organization. Highly satisfied and motivated individuals will in most circumstances perform very well, something the Harvard Business Journal has picked on, pointing out that happy employees are on average 31% more productive than others, whereas highly engaged employees are 50% more likely to exceed expectations.

This realization is slowly catching on. In fact, one of the highest performing companies in the world, Google, has recognized this, and they have their own CHO, Chief Happiness Officer, who ensures that their employees are highly motivated to perform at the best of their abilities.

Unfortunately, happiness and motivation are aspects that still tend to be overlooked when thinking about performance development. This might be because “happiness” is difficult to define and measure, but maybe more so because it represents a new way of thinking about performance, and challenges traditional performance management theories and beliefs.

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From “managing performance” to “developing performance”
As most athletes will tell you, results do not come about by purely focusing on the end-goal, but instead by focusing on HOW you are going to surpass expectations. Research shows that top athletes, who train in an environment that focuses on capability, perform at a much higher level than athletes who train in environments that focus on competitiveness. This also holds true for other arenas. Shifting from “managing performance” to “developing performance” through working with ability, motivational factors and situational constraints, will enable organizations to really supercharge the performance of their employees.

It is said that, “not everything that counts can be counted, and not everything that can be counted counts”. It is important to think outside the box when it comes to “counting” or measuring performance. Furthermore, performance development will only be truly successful when we focus on the behavior, activities and attitudes that will LEAD to the desired goal, and not on the goal itself.