Strategies to Re-engineer Performance Management System


“People in many organization are always attached to the obsolete – the things that should have worked but did not, the things that once were productive and no longer are.” ― Peter F. Drucker

To start with, performance management was created to manage (i.e. control) the work of an industrialised workforce to maximise output. Not much  thought was given to creativity and development of the individual. It’s no surprise that a process created to control the output of a workforce where large part of the work was standardised and repeatable do not work as a tool to develop a knowledge-based workforce. In a nutshell, Performance Management is a process by which organisations align their resources, systems and employees to strategic objectives and priorities in an effective and efficient manner. The frequency of appraisals cycle varies from company to company. Majority of them tend to do Annual appraisal, while some opt for half yearly, or quarterly, or even monthly cycle.

“Many large organisations across industries are grappling with inherent issues of various performance management models to ensure immediate performance development, rather than an annual forced ranking based on the past year’s metrics. They are at different stages of the change cycle. It’s time for us to change our lens from performance management to talent development”

And I believe HR needs to lead the way. It has already started happening at some organisations where they are thinking different and going beyond the obvious. 

Most of these Organisations have stressed upon the need for more frequent performance discussions. Performance assessments based on data points being on one side, developmental dialoguing leading to enrolment in appropriate learning programs on the other side.

There are various applications of appraisals like promotion, compensation, performance improvement, promotion, termination etc. Various performance appraisal methods are followed by organisations to ensure fair appraisals to their employees that includes, Assessment Centre, Rating Scale, Essay Evaluation. Management by Objectives, Paired Comparison,  360 Degree Feedback etc.

At times, I keep wondering if much feted performance management system is serving the purpose they were built to serve across the industry. While I agree there may be pocket of excellence – some organization doing it better than others. 

I have not seen too many Managers who would refer to last year development plan wherein they would have had a stake to enable development of an employee while kick-starting the discussion for the current appraisal. Last appraisal once done tend to become a history.

As we all know, historical objective of performance appraisals is to help employee understand his strengths and development need and accordingly create a training to bridge the gap. Now the questions come to mind – Do employee look forward to performance appraisals to get feedback and development plan? In majority of the cases, Answer is largely – No. What they look forward to is Ratings and basis those ratings what would be their increment / bonus.  

Let us look at following cases —

Case No. 1

Mike is a successful Trainer at Company X. His five-year performance record is exemplary. He is the highest rated trainer. When it came to performance appraisals, Mike enjoyed the complete confidence of his former Manager. Appraisals were informal and pleasant – a yearly housekeeping matter that lasted less than 30 minutes from start to finish. But, all this changed when Mike Manager left the organization.

His face to face discussions with his new Manager were minimal, however, Mike remained un-alarmed given the absence of developmental feedback and complaints. Even when the new performance planning and review system was announced, he was at ease as he had no cause for concern basis his past performance and current delivery and reputation that was impeccable.

Entering into his new Manager’s office on the day of his appraisal, he felt secure at first, knowing he dutifully completed his self-evaluation and performance goals. After a few opening pleasantries, the Manager handed Mike the completed appraisal and began to sell his assessments on each performance dimension without inviting Mike to comment or provide input.

There was no mention of his self-appraisal or development goals. He received an overall satisfactory rating with two documented incidents by disgruntled trainees for poor course organization and delivery.

Mike was extremely pissed off and sat in stunned silence as the remainder of the appraisal was read without mention of his past years of loyal service and successful job performance. He was assigned new performance goals and standards, and recommended a three percent raise – the lowest of his five years with the company.

Case No. 2

It was Monday morning, Daisy was apprehensive when she reached office. Today was the day to decide on her yearly performance rating. She was working as senior executive at XYZ corp for the last few years. Last year she was the top performer in her group of 12 executives, however, she moved to new role 6 months back. She has worked sincerely putting her time and energy on the deliverable which she was supposed to complete. The day will either bring confidence, trust & motivation for her or will make her feel demotivated, exhausted and disinterested.

There were few thoughts flashing across her mind which kept her occupied while waiting for the Manager : – 

  • What rating I will get after year of hard and sincere work?
  • Will my manager be biased to my peers?
  • How much increment will I get?
  • Should I look out in case I get poor rating?
  • Should I agree or disagree with the rating and face consequences?
  • Is this Performance system fair and transparent?
  • Will my role change impact my performance rating?

Well, this is not the case of only Mike or Daisy. This is quite common in corporate world.

This brings us to the questions as to why performance appraisal which should have help employee develop and get better and hence contributing in increasing organisational vitality has become a tool which creates fear and anxiety amongst large section of employees.

Approach to Talent review has witnessed a dramatic shift. Traditional performance appraisal as practiced in majority of organization are loosing its steam. Earlier we generally had one right way but now multiple right ways, best approach keep changing with the situation, earlier the focus was on Maximising production out-put which has shifted to creating competitive advantage through best use of talent. Earlier it was felt that Creativity detracts from results, now it is a established fact that creativity is essential for results. We have shifted from command and control to collaboration and self-motivation. 

Employees no longer drive meaning only from company performance, they drive meaning from various other sources i.e. Mastery, Autonomy, Sense of belonging, Career growth, Higher Purpose i.e. building a better society, community or contributing in building the nation. Hence, it becomes imperative for Managers / Leaders to sharpen their skills to deliver performance feedback and coaching to their folks.  The critical question in front of Business Leaders is how to unleash potential in their organization. 

Below are few points to ponder to help build an engaging and sticky workforce.

1-Reevaluate Reward Mechanism

Very likely you will need to re-think your compensation system, especially if your system has an annual “incentive” bonus tied to an individual performance rating. Consider eliminating the annual bonus entirely (in my experience, such bonuses become an expectation versus actually inspiring performance) and empower your Managers to reward exceptional performance as soon as it happens. Whenever thoughts of de-linking performance management from compensation confront us, we in HR looks in bewilderment as this is how it has worked since we took our baby steps in HR arena. There is bound to be a resistance. However, what got us up to here will keep us here only. 

2-Focus on Outcomes

By being flexible about how, where and when work gets done. If you focus on the various tasks to get there – like narrow job descriptions and strict requirements related to work hours and work location – you will only constrain individual creativity. These things deliver compliance, not engagement. If you’ve done the work in establishing your vision, strategies, etc., then leave the rest in the hands of your employees. Teams and individuals do amazing things when given the right conditions. I have not come across an employee who comes to office pre-decided that he will deliver his worst on the given day. Everybody wants to deliver their best. It is up to us how do we create fire in their gut and guide and facilitate achievement of the desired objective. 

A highly sophisticated review process with extensive tools and metrics done annually by Managers with low to no skills can do just the opposite. We can’t change what we refuse to confront. It’s time to re-think strategies on how to re-engineer performance evaluation and reward system in the organisations.

(The views expressed are personal)


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