By Susanna Mlot and Aaron Sorensen

Performance management has been getting a bad rap recently as GE, Microsoft, Accenture and others scrap their traditional annual performance review processes. Here are some important questions (and ideas) to consider before fad becomes fact and the performance management pendulum swings too far at your organization.

The core argument for eliminating the traditional annual performance review is “too little, too late, too stale,” particularly for feedback-hungry employees such as high performers and Millennials. GE, for example, is moving to a model that emphasizes coaching rather than ratings, labels or ranking. Several companies, according to an August 17 New York Times article, see an opportunity to save millions by eliminating the distraction of documenting bottled up appraisals once or twice a year.

In the midst of all the hype, it is important to remember why performance management is, and always will be, a critical business process. Human capital, or the collective knowledge, skills and experiences, are what make great companies in today’s knowledge economy. An organization’s ability to align the behaviors of the workforce toward a common goal, improve key skills and make smart business decisions is the source of competitive advantage. This requires frequent feedback, course correction, and making tough workforce decisions.

Performance management is integral to the process of making those decisions and also provides essential data on the return on investment in talent. It measures the value that individuals and teams contribute to the enterprise. Lastly, it reinforces the consequences and rewards that motivate most employees, and therefore is an important part of the communication loop.

Sure, performance management is a process that people love to hate, but before the performance management pendulum swings too far in your organization consider these questions:

  • Do managers know how to provide constructive feedback?Many reviewers don’t. Telling someone they did a good job delivering a speech is a gracious observation. More valuable, however, is a specific assessment of what the speaker did well so that he or she can repeat the good behavior. Consider: Shift the focus of performance evaluations from an annual accounting exercise to helping managers have constructive, ongoing dialogue with their people about their development opportunities. Build new skills to deliver productive assessments that drive the kinds of behaviors necessary to execute the organization’s strategy. A lexicon or framework for describing behavior at work can be incredibly helpful for those who lack the fluency to put into words what they observe in others.
  • Is your talent management strategy following fads or your strategy?Changing performance management practices will alter the employer/employee relationship for better…or worse. Don’t put the capability to execute your strategy at risk before looking at any recommendations through a strategy lens. Consider: Make the line of sight between what employees do and how it contributes to the organization’s success crystal clear. Everyone wants to feel that the work they do makes a positive difference.
  • Has technology boxed you in?Technology has become a crutch for performance management. Enamored with technology-enabled systems and dashboards, organizations lose sight of the purpose for performance management—to improve the performance of the workforce, not just document it. Consider: Get back to the basics…self-reflection about performance strengths and weaknesses, conversations with a boss or superior about development opportunities, and simple plans about what behaviors to start doing more, stop doing and continue can help immensely and don’t require technology.
  • Have you differentiated the administrative and developmental aspects of your performance management process?According to a number of peer review studies, organizations that combine the annual performance appraisal process that determines incentive pay or pay increases with development messages can diminish the value of performance management. Consider:  Separate development conversations from the administrative process that is linked to pay.  Focus conversations on performance strengths, weaknesses, trajectory and pace of growth against goals and previous performance periods.  Connect the dots between pay and performance by setting clear goals and evaluating achievement against those goals, incorporating conversations about how the goals were achieved (both the “what” and “how”).

In short, avoid the temptation to grab the swinging performance management pendulum. Ways of evaluating, calibrating, and rewarding employee performance and development with meaningful messages and motivating consequences can always be improved. It would be a shame if the value of effective performance management is lost in the haste to play “follow the leader.”

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