The conventional command-control model of performance management is losing traction due to a growing emphasis on teamwork, shared leadership, and the ongoing struggle to attract and retain skilled employees.
Performance management was often perceived as a cookie-cutter, top-down approach, prioritizing negatives over positives and hindering constructive career discussions. This approach has historically failed to inspire motivation, typically leading employees to merely avoid it without alternatives.
The imperative is clear: to break away from familiar yet antiquated methods and embrace a changed reality shaped by interconnectedness, customization, and the influence of millennials in the business world.
Nairametrics recently interviewed a human resource expert, personnel psychologist and learning & development expert, Mr. Folasele Vincent Akinloose,where he shares some insights about how companies can adopt, build and sustain high performance culture, shifting away from the traditional approach and transcend outdated practices.
How can you define performance management for a layman?
Performance management is how we assess employees’ contributions to organizational objectives. So, when we hire you, we provide you with a job description and key performance indicators (KPIs), and we want to evaluate whether you’ve been able to deliver based on what we’ve asked of you.
Performance management typically adopts what we refer to as a balanced scorecard. This balanced scorecard usually consists of four components, but personally, I expand it to five: Finance, people, customer, processes/tools, and core values
When we talk about finance, we are talking about assessing your financial contributions. The people aspect involves how you’ve been improving yourself and creating value through your development. For the organization as a whole, we assess factors like talent retention, talent development, and overall career growth. When it comes to customers or stakeholders, we consider the impact we’re making on their lives and their satisfaction with our work. When we look at our core values, we are considering how our actions align with values and we are able to create a culture that promotes sustainability and psychological safety.
Moreover, performance management includes rewards and recognition, which are essential components. So, when assessing an employee’s contributions, let’s use the terms “staff” or “employees” instead of “staff” alone, as it’s outdated.
We need to identify these contributions and determine how to reward, recognize, and support employees so they can continue making valuable contributions to the organization. That covers the full scope of performance management.
There has been a shift in the world of work with new trends as a result of new ways of thinking. How has this affected the way HR leaders see the practice of performance management?
It’s becoming intriguing because there’s a significant transformation in the world of work. This shift is driven by what we refer to as the VUCA environment—Volatility, Uncertainty, Complexity, and Ambiguity.
Globalization, technological advancements, and the diversity of workforce multigeneration have led us into this VUCA environment. Different generations in the workforce have unique needs and skills. For instance, Baby Boomers may be less inclined to embrace technology compared to Gen Z. This diversity necessitates a reevaluation of our approach to performance management.
Traditionally, performance management focused on annual or semi-annual reviews, primarily involving appraisals and ratings. Often, after HR completes the appraisal, employees are left out of the feedback loop. This approach has had a limited impact on employees, possibly less than 25%.
In the modern approach to performance management, we prioritize the relationship between line managers or supervisors and their direct reports. Instead of waiting for annual reviews, we adopt ongoing performance management, which can occur weekly, monthly, or quarterly.
In this new approach, we emphasize several critical aspects:
One is promoting a culture of continuous growth: We assess staff growth regularly, rather than waiting until the end of the year.
Two is creating a feedback culture: Employees receive feedback regularly, empowering them and fostering a culture of continuous improvement.
Three is motivation and recognition: We don’t wait until the end of the year to recognize and reward staff for their contributions.
Four is getting clear expectations: Employees receive clear expectations aligned with their roles on a regular basis.
This new approach is driven by the quality and trust in the relationship between managers and employees. Line managers are responsible for providing necessary support and tools for employees’ performance, rather than relying solely on HR. Additionally, reinforcement of successful performance behavior through rewards and recognition is emphasized, not just annually, but regularly—weekly, daily, or monthly.
To summarize, the new approach to performance management prioritizes relationship building, clarity of purpose and smart goals, provisions of necessary support and tools, and emphasizes regular rewards and recognition. This marks a significant departure from the traditional approach and underscores the evolving nature of performance management strategies.
How can business and HR leaders build and sustain a high-performance culture?
The most crucial aspect to understand about this endeavor is that it’s deeply rooted in organizational culture. All performance stems from culture, and when we talk about culture, we’re referring to the organization’s philosophy.
This philosophy encompasses the organization’s vision, mission, values, and strategy. As an expert, your first task for any organization is to clarify its goals. Clear direction and purpose are essential because unclear goals can lead to confusion and hinder progress. Employees need SMART goals—ones that are Specific, Measurable, Achievable, Relevant, and Time-bound—from the top down to the individual level.
Next, organizations must focus on building capabilities. Employees need the right skills, knowledge, and resources to achieve their goals. Continuous development and training are vital in this regard. Additionally, providing feedback, coaching, and development opportunities is crucial. These elements should be embedded in the organization’s training and development programs.
Recognition and reward of performance are essential for reinforcing desired behaviors and outcomes. Creating a supportive work environment that values diversity, collaboration, and innovation is also key. Psychological safety in the workplace is paramount.
Furthermore, all managers and leaders should lead by example, promoting a culture of accountability, trust, and transparency. Performance management is built on trust and transparency. Lack of transparency breeds distrust, which can undermine the effectiveness of the performance management system.
Leaders must align their actions with their values to instill trust in the performance management system. Transparency is crucial in ensuring that employees understand the purpose and outcomes of performance management processes.
Finally, accountability for the effectiveness of the performance management system ultimately rests with leaders. While managers and supervisors implement performance management strategies, leaders must set the tone by leading with accountability, trust, and transparency.
What new metrics are used to measure the performance of employees in an organizations?
Let’s revisit the last question we discussed to conclude our exploration of modern performance management.
It’s centered on relationships, ongoing feedback, and creating an environment of reward and recognition. The essence of performance management lies in becoming a supportive organization that aligns employee expectations with organizational goals, ensuring mutual achievement and value creation for customers.
Traditionally, new metrics for performance management are based on the four areas mentioned initially, which form the balanced scorecard. These include finance, people, customer, and process targets for employees. Traditional metrics in performance management often overlooked the human aspect in human resources, viewing employees merely as resources rather than individuals.
The new metrics aim to balance expectations, rooted in both organizational and employee success metrics. The Balanced Scorecard (BSC) framework, comprising financial, people, customer, and process/tools perspectives, has been widely adopted to comprehensively assess employee performance. Under the financial perspective, traditional metrics primarily focused on profit-driven targets such as sales volume or revenue generation.
However, contemporary metrics recognize the significance of financial performance while also considering factors like employee engagement, satisfaction, organizational support, and rewards and recognition. Regarding the customer perspective, old metrics prioritized customer acquisition and retention but often overlooked customer satisfaction and loyalty.
New metrics, however, prioritize customer satisfaction and loyalty, often measured through external metrics like the Net Promoter Score. They also emphasize the importance of customer experience from acquisition to offboarding, assessing how employees and organizations build stronger relationships with clients and enhance overall customer satisfaction.
In terms of the people perspective, traditional metrics evaluated employees solely based on productivity, neglecting individual skills and aspirations. In contrast, modern metrics adopt a more human-centric approach, recognizing employees as unique contributors with diverse talents and needs. Metrics such as employee feedback, internal net promoter scores, engagement levels, and job satisfaction offer insights into overall well-being and alignment with organizational objectives.
Turning to the process/tools perspective, old metrics focused primarily on output quantity and efficiency, often overlooking the processes or tools utilized by employees. However, contemporary metrics emphasize process improvement, automation, turnaround time (TAT), and employee development as key drivers of productivity and efficiency. Metrics related to learning and development participation rates, completion rates, and skill acquisition levels provide valuable insights into the effectiveness of internal processes and tools.
Furthermore, modern performance management underscores the importance of behavioral changes and alignment with organizational values. Metrics related to leadership capabilities, cultural integration, and adherence to organizational values ensure that performance goals are aligned with the culture and values of the organization.
In conclusion, modern performance management metrics prioritize a balanced approach that considers both organizational and employee-centric metrics. By fostering a supportive and inclusive environment, organizations can drive mutual success and deliver value to both employees and customers alike.
HR leaders believe that a positive, engaged and high-performance culture supports higher business revenues. What are some of the effective ways to use performance management to increase profitability
Effective performance management is instrumental in driving business productivity through various mechanisms that enhance employee performance, engagement, and alignment with organizational goals.
And when you look at the KPMG research, they said that organizations who effectively establish performance management, have a chance of increasing their profitability by 25%, And not just about increasing by 25%, they also increase employees’ retention, engagement, and overall organizational productivity, which is massive.
So, how does effective performance management contribute to profitability? The answer lies in its influence on various aspects of organizational success, including profitability, financial stability, employee engagement, customer satisfaction and loyalty, and reputation. Clear goal-setting within performance management frameworks ensures that employees understand their roles and contributions to organizational objectives, thereby enhancing productivity and efficiency.
This directly affects profitability by optimizing resource utilization and minimizing wastage, while also reducing the likelihood of errors and inefficiencies that could lead to high turnover, poor customer experience, and financial losses.
Furthermore, regular feedback mechanisms and open communication channels foster continuous improvement among employees, leading to higher productivity and performance. Timely interventions based on feedback help address performance issues before they escalate, preventing financial losses and reducing turnover rates.
Investing in employee development initiatives is also crucial, as it enhances employees’ skills and capabilities, positively impacting profitability. Engaged and motivated employees are more productive and committed to achieving organizational goals, directly influencing profitability and customer satisfaction.
Additionally, fostering a culture of accountability and transparency within performance management systems is essential for maintaining organizational integrity and trust, ultimately driving sustainable growth and success while mitigating potential risks and challenges.
Finally, prioritizing work-life balance and stress management further contributes to employee well-being, enhancing productivity and reducing absenteeism, turnover, and associated financial losses.
Are there challenges to conducting an effective performance management?
Employees lack trust in the organization’s performance management system due to perceived ineffectiveness in promoting and rewarding deserving staff. Transparency issues arise when promised promotions or salary increases fail to materialize, leaving employees uncertain about their future within the organization.
Fear, bias, and inconsistency further erode trust, as shifting goals and lack of fairness in measurement criteria create disillusionment among employees. Leadership plays a crucial role, yet leaders often fail to lead by example or be held accountable for toxic work environments. Toxicity, characterized by a lack of psychological safety and growth opportunities, hampers employee performance.
Technology, while crucial for automating performance management processes, presents challenges in finding the right tools that ensure fairness, transparency, and consistency.
