Five stubborn myths about performance management

Over the last few years, my team and I have worked with many organisations on transformative change programs. A critical review and fine-tuning of our clients’ performance management systems and processes is often a core element of these programs, as the way how organisations set expectations, track progress and encourage (or discourage) certain behaviour has a direct impact on the people’s openness, support and engagement with a new direction. Our objective is always to balance consequences, promoting engagement, constructive feedback and openness to change while addressing distractive patterns of behaviour. In doing so, we have recognised certain stubborn myths and beliefs from the 70-80s of the last century, which are still more common than you might think, making performance management unnecessarily harder. Often these myths create obstacles – not through lack of effort by organisations, but rather lack of experience in this area. This blog outlines some of these myths and debunks them.

Myth #1: Setting objectives is a one-way direction: top to button 

Objectives need to be defined at the top of the organisation and then cascaded down. At least that is how many people experience the objective setting process. Goals start at the top and then cascade through the organisation. Very common. Very logical. And, just plain wrong.

The approach of cascading objectives through an organisation are remains of a command & control mindset in which decisions simply flow downwards from the top. This mindset sees the top management as the generals of the organisation and its employees as the foot soldiers – the muscles, purely implementing the genius ideas from the upper end of the food chain. The brain on the top and the muscles at the bottom. This may work in strongly departmentalised companies with highly standardised products and hierarchical structures, but not if you have teams of highly qualified and specialised experts, which the organisation basically hires at great expense to utilise their professional knowledge and skills to find solutions to opportunities and challenges – not to blindly follow orders from the top. 

In modern agile, self-organised, high-alignment cultures using agile goal setting, objectives are developed in a “bubble-up” process in which teams set their own objectives after receiving clear direction and priorities in the form of high level objectives for the organisation. Setting high level objectives for the organisation should not be done by the top executives in isolation, without input from the teams. The top-down approach often takes too long to achieve alignment. Direct reports are often dependent on the completion of their supervisor’s objectives before they can begin developing their own objective. The alternative is to have a parallel process in which individuals and teams define goals that are linked to the organisation objectives and validated by managers, in a process that is bottom-up and top-down simultaneously. 

“When people are financially invested, they want a return. When people are emotionally invested, they want to contribute.” – Simon Sinek

Our core philosophy is that around 60%-70% of an OKR (Objectives and Key Results) framework should be created by the teams, bottom-up. The objective of the process is to align – not to cascade. The most important point by far regarding the „cascading“ culture is the level of engagement. When teams and individual performers take the overall strategic direction of the company as a foundation and engage, develop, and align their objectives with mindful alignment of priorities and considered management of interfaces with other teams, you experience a new level of engagement and commitment. 

Conclusion: Participation and ownership create engagement. Engagement creates commitment. 

Myth #2: All you need are once a year performance reviews  

Conducting annual performance reviews as your main performance management activity is ineffective. In fact, it most likely will do more harm than good. Various studies show that once a year evaluations tend to be biased and don’t achieve reliable and sustainable results. In times of dynamic markets, annual performance reviews don’t leave your company any time to course-correct and improve throughout the rest of the year. It doesn’t need a COVID-19 pandemic to see that over the course of a year major business factors may change significantly. One of the root causes of this myth is the mindset of performance management being an administrative burden, invented by Human Resources to force all line managers, matrix managers and their employees to fill in complex, strangely worded and useless templates under enormous high time pressure.   

Neglecting to touch base with a high performing employee, maintaining the relationship, reviewing and acknowledging achievements and seeking a challenge of next level could easily make her/him slowly become a flight risk as they look elsewhere for another challenge. 

You may have entire teams that have lost their enthusiasm for your organisations purpose, strategy and culture or individuals who are stuck and need additional coaching to achieve the desired results. Ignoring these factors creates unseen risks and impedes growth.

Lastly, infrequent touch points and reviews promote bias — the way a person performed on their most recent tasks may affect the perception of their effectiveness. This may be a false indicator of their ability – good or bad.  

The role of line managers in the performance management process has changed significantly over the last years. They know the most about individual employees, their capabilities, and their development needs. Much of the fairness and fidelity of performance-management procedures therefore rests on the ability of line managers to become effective coaches. According to a study McKinsey conducted in 2018, less than 30 percent of survey respondents stated that their line managers are good coaches. One of the consequences was that only 15% of respondents described their actual performance management system as effective. 

Managers often wait for performance appraisals (which is the end of the year in most cases) to give performance feedback. A huge mistake. In order for feedback to add value, it needs to be timely and current. Holding back this information helps no one. 

Conclusion: The line manager’s role is to coach team members and support them in their development. 

Myth #3 – Individuals should be judged solely on their own performance

One of most frequent mistakes I have seen in Performance Management is to gradually make the organisation’s processes too complex. This change of process is often accompanied by the introduction of new templates or software. At one company, I observed that HR requested managers to evaluate their staff on a competency model of 15 different competencies. What may sound reasonable at first glance, played out to become a very complex exercise. The process required managers to rate up to 5 behaviours associated with each competency. In all, this meant each employee had to be evaluated on 75 behaviours plus additional aspects of the performance process including objectives and a development plan.

Of course, the line managers did not fully understand the complex competency framework, said the review took far too long and refused to participate in the process. The lessons learnt here is “keep it simple”. Simplicity before comprehensiveness. It takes extra effort to create simple solutions – but it’s worth it. Performance management is an ongoing journey and as such, organisational maturity and manager skills need to be considered when implementing the system. Continuous improvement should always be considered to make the process easy to understand and to use. 

Conclusion: Keep it simple, stupid! 

Myth #4 – Individuals should be judged solely on their own performance

Who needs systems supporting performance management? Isn’t it enough to capture everything on paper? Well, in large organisations, manual Performance Management systems typically fail 18 months after deployment, with completion rates of less than 30%. This is because manual systems do not facilitate effective and timely reviews. Line managers learn that they can avoid the process by simply not doing it. Often it is easy to blame HR for lost forms. Because it is so easy, line managers don’t complete the process and the process becomes fragmented. 

The recovery from this position is to install an online automated system that provides line managers with a simple way to implement Performance Management. An online automated system provides both HR and line managers with a way to keep on top of the process through meaningful reporting. In interviews, many line managers shared with us that one of their greatest frustrations with manual systems is keeping track of where they are within the process. Managers lose track as to who they have set objectives for, who has been reviewed and what actions they need to take in relation to an employee’s development plan. Invariably, nothing happens as the line managers forget what actions they need to take (forms are sent back to HR and then nothing happens). The fact that line managers do not act, means that staff don’t see action and in turn see little value in the process.

Conclusion: Systems help to self-organise and promote accountability!

Myth #5 – Individuals should be judged solely on their own performance

No man is an Island. The idea that we perform as an island may apply to an isolated few, but it doesn’t fit the majority of functions across your organisation. The effort made in working out how to evaluate individuals may be better spent evaluating the quality of their team or business unit’s output. What targets have been hit? What  goals have been reached? Of course this aspect is particularly important and needs to be considered in the performance of agile teams, where the team is self-organised, but the same principle can also be applied to classical mode of collaboration. My recommendation is to evaluate individuals not only on their performance, but on their level of engagement and on their ability to thrive in team-based environment. 

Highly engaged staff is more likely to go the extra mile, make an additional effort and have a tangible effect on a company’s bottom line. It won’t surprise you that various studies show a direct correlation between employee engagement and productivity. In a study conducted in 2016, Aon Hewitt has reported that for every incremental one-point increase in employee engagement organisations, it has achieved a 0.6% increase in sales. With annual total sales of 100 million US$, this results in added value of $6 million. The same study reports that companies with engaged employees, revenue growth was 2.5 times greater than competitors with lower levels of engagement.

Conclusion: Performance management is team sport!

These are five myths about performance management – all rooted in the last century – which impact the limited  ability of organisations to manage change at large scale. Interesting enough, we see a significant number of companies investing heavily in their production lines, in their infrastructure or even in recruitment activities -attracting new staff- while leaving the development and growth of their teams -their most valuable asset- to outdated principles, mindset, systems and processes. 

We help organisations to assess the maturity of their performance management system, to build on their organisational strengths to further align their performance system with their strategic direction and the organisational culture they seek. What exactly do they want to achieve? How can they manage the change so that their people are committed? What are the implications on the requirements for workflows, processes and systems? What tools are required to empower their teams? Does the organisational culture need to be adjusted? How? Do the organisation’s systems foster and enable the new mindset?

Together with our clients, we look at their organisation as an interdependent system and not as individual components. This way we avoid a tunnel view on individual components, leading to blind spots in the change program. Instead, we analyse the interdependencies across the entire system and bring PEOPLE, PROCESS, CULTURE and SYSTEMS in sync.

What do you think? Do you agree? What is missing? What is your experience? I look forward to the exchange.