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Effective performance management has fallen off-track. According to recent performance trends, 59% of today’s employees say they are receiving adequate feedback on how they are performing. Quarterly and annual review cycles are not fit for purpose. Formal models and processes are failing to move the dial.
The time has come for organizations to take a bold, new approach.
Through conversations with 67 top-flight performers from outside industry, we have developed a new blueprint for performance management that rejects most conventional corporate wisdom. It involves a radical simplification of traditional practices and processes. It replaces backwards-looking reviews with cycles linked more closely to the rhythm of work and makes feedback conversations a normal and daily feature of the workplace.
At the same time, organizations must develop, embed and sustain the right conditions to enable free-flowing feedback to thrive. These include a shared performance purpose, a strong cultural and values framework, and an inclusive climate of psychological safety, where any perception of threat or fear relating to feedback has been removed.
In previous articles, we have looked at some of the key elements that make up this new approach, including getting the environment right, helping leaders see the person, and growing feedback-hungry individuals.
In this article, we go one step further to consider the specific actions organizations need to take to start building the performance management of the future.
At the heart of our proposed approach is the personal impact contract (PIC). This differs from traditional performance management processes in several key ways.
First, the PIC does not involve a cascade of goals. Instead, the individual employee takes a view of their current capacity (a combination of the capabilities and energy they bring to the organization). This then leads to a wider discussion with their leader about what the organization is trying to achieve and what impact the individual believes they could have.
Second, the PIC does not have a fixed timeline but is linked to the rhythm or cycle of the individual’s work. For project-based workers, the PIC would link to the next project cycle. Those whose rhythm of work is more consistent could choose their own schedule, whether it’s annual or longer or shorter.
Third, the individual sets their own targets with measures linked to impact. This, critically, is not about objectives and key results. It’s about the contribution the individual will make (and if the team is important to the individual’s ability to perform, then the PIC could also contain commitments around impact on team performance). The PIC could even be used to capture their self-determined, experimental work.
Fourth, there is no box-ticking to do or prepared templates to complete. All that matters is that the individual and leader are happy, they have had an impact conversation to agree what will happen during the work cycle, and they can both access a saved copy of the PIC, which can be referenced for future performance conversations, if needed.
Effective performance management does not begin and end with the PIC. Far from it. Organizations should aim to bake feedback into daily work by encouraging leaders to share observations on individual or team performance at the beginning or end of meetings or other regular interactions. Think: continuous performance management.
For this to work, our performance trends show leaders need to become experts in human behavior, and develop the characteristics that define expert feedback givers, which include courage, empathy, humility, credibility and empathy. At the same time, employees should be encouraged to build their self-awareness and resilience — traits that enable people to assimilate and act on feedback with much greater effectiveness.
Throughout each work cycle, the individual uses the PIC as a reference point for the contribution they are making. If their capacity shifts during the work cycle, say through the acquisition of new skills or a change in energy levels, then the PIC can be revisited at any time. When the work cycle comes to an end, they rate themselves on their achievements against the PIC. They can gather as much input as they like for this evaluation, from people inside and outside the organization.
When individuals are ready, they trigger a “stand-back” meeting with their leader (or an expert in their personal subject matter). This places the individual in the driving seat, giving them autonomy and agency in the feedback process.
By following this cadence, feedback would not be limited to once a year. It would be happening all the time to different rhythms for different individuals — which, more crucially, means the feedback would be linked to the actual delivery of work rather than to the rigid cycles of the calendar.
Are you ready to transform your organization’s approach to effective performance management? Download our full performance management whitepaper to learn more about our bold, new blueprint for creating an environment where teams and individuals excel.