A key element that differentiates the best organizations from the rest, is an effective performance management system. Organizations worldwide invest significant resources in developing robust performance management systems (PMS).
The primary goals of a PMS are to align individual and organizational objectives, provide employees with valuable feedback, and cultivate a sense of satisfaction and engagement. However, many organizations still struggle to achieve these fundamental objectives.
The reason that this is so hard, is not because it requires sophisticated technology and well-oiled processes (though it doesn’t hurt to have both!), but because at its very heart, PMS involves human beings making decisions that tend to often have inherent ethical dilemmas with no clear right vs wrong answers. Some examples of these are:
- Should individual or team performance matter more?
- Should effort or outcome be recognized?
- Should Short-term or Long-Term results be prioritized?
- Should financials/numbers or demonstrated values and behaviors be rewarded?
Each of the above has tradeoffs, that need to be balanced. However, the job becomes easier by incorporating foundational pillars in establishing trust in the process, fairness and transparency.
Fairness here refers to procedural fairness. Practically, it implies that employees believe that the elements of PMS are designed and implemented to drive objectivity.
The other pillar, transparency, ensures that employees are aware of the expectations, goals, and criteria for evaluation of their performance.
Fairness & Transparency: The Key to Establishing Trust and Driving Performance
Several factors contribute to creating a fair and transparent performance management cycle:
1- Clear Performance Criteria
A clear understanding of how individual goals contribute to organizational success and how will it be measured is imperative for individuals to be able to understand how what they do, will translate into performance for the firm.
It’s not just about communicating the right messages but also setting the right examples and precedents in terms of who are recognized and celebrated. For instance, if in an organization only new sales deals are celebrated, then will delivery be seen as important to succeed?Â
2- Continuous Multisource feedback
Feedback is at the heart of helping drive performance. However, if not done rightly it can derail the entire process; for example, waiting till the year-end to provide feedback, or not having a regular dialogue with coaching and support for improvement are definite derailers.
Leading organizations have incorporated continuous feedback via multiple sources to enable employees to provide feedback to peers and supervisors on a real-time basis Feedback is also much more valuable when it is from multiple sources rather than only the immediate manager.
3- Objective Evaluation & Reward
Employees should have a clear understanding of how their performance will be evaluated and how it compares to their peers. Transparent communication about evaluation criteria, rating scales, and performance expectations builds trust and reduces ambiguity.
These practices have fostered transparency and ensured that performance evaluations are based on a broad range of perspectives. Organizations that want to drive differentiated rewards between high and mediocre performers have a normalization process to fit ratings to a bell curve through forced distribution while others have adopted alternative models such as guided distribution without force fitting.
However, this is at times also seen as generating unhealthy competition. In recent years some organizations have tried the no-ratings model to move focus away from the rating scale to actions to be taken for performance & development where there is a likelihood of a perception that linkage of performance to rewards is subjective.
With the advent of technology, performance management has evolved significantly in recent years. However, at its core, it’s the human touch that matters. Â
Empathy, and Intent: The Human Touch
While technology has undoubtedly enhanced the performance management process by facilitating increased check-ins and redefined rating models, it is imperative for managers to incorporate empathy and emotional intelligence into their approach.
Employees are not numbers or metrics; they are unique individuals with their own set of circumstances and challenges. It is important to humanize this process. Managers must recognize and consider these factors when evaluating performance, providing feedback, and making decisions.
Additionally, organizations need to listen closely to what their employees say, to know if the incorporated process seems fair and transparent to them or not. Leaders need to approach performance management keeping their people at the center and with an intent to develop & enable high-performing teams.
