It's Time to Redefine the 'Why' of Performance Management

Everyone is talking about it. Most people hate it. Almost everyone thinks it needs at least a few major revisions. The words "bureaucratic," "time-consuming" and "waste of time" are often used when describing it. In recent years, it has gotten a lot of press as HR leaders rush to read about companies like Accenture, Adobe, GE, Deloitte and others who have "fixed" it.

What is it?

I'm talking about performance management.

Do you remember how performance management found its way into the workforce? In the 1980s and early 1990s, compensation ruled the HR world; compensation folks were responsible for doling out pay increases. Right about that time, equal pay and issues of fairness were increasingly prominent, and performance management became the tool for determining pay in a defensible and fair manner.

Here's how it worked: Performance reviews were written, scored and delivered once a year, along with communication about the annual pay increase (merit). In 1990, the typical merit budget went up to 14 percent, which created a discernible gap between high and low performers. But over the years, as merit budgets shrank, the concept of "pay for performance" stuck around stubbornly—even when the difference between a top performer and a poor performer was barely two percent of the budget.

HR put the proverbial lipstick on performance appraisal programs by calling it "performance management," but over the years, the process that birthed the baby hasn't changed—even though merit budgets have dwindled to insignificance.

Thus, we have today's scramble to change a program that leads to disgruntled leadership and employees, and doesn't do what it should do: manage performance. (Or better said, improve performance.)

Perhaps it is time to go back to the "why." What is the business goal of performance management?

Let's start here. If we buy the idea that organizational performance is the work of the leaders and employees, it stands to reason that leaders and employees need to know what is expected of them, as well as have the knowledge, skills and tools to meet these expectations. This includes receiving regular feedback. This becomes your "why."

It isn't enough for HR to design and implement a program, even if the CEO says "Do it." First of all, there is too much baggage associated with the concept for even a perfect program to get a fair shake. As a second point, this is hard work; it take strength, confidence, skill and commitment for leaders to spend time defining expectations and providing helpful, developmental feedback to their employees. There are some who, unless they are held accountable, will do a half-hearted job. That won't move the needle on individual or organizational performance.

So, what is the answer?

Get leaders to agree to the purpose of performance management and give them a compelling business reason to make the investment. A business reason with hard, bottom-line results. Do they want to increase revenue, reduce expenses, decrease turnover, etc.?

If so, you have a compelling business case. You must start with the "why." Only then can you address the how. In my next post, I'll share some thoughts about that.

Photo: Twenty20