So much talk about performance management and doing away with ratings. When cars were invented, they were called “horseless carriages” because the absence of horses was so shocking at the time. Wifi was first called “wireless LAN” since LAN cables were no longer needed. Telephones were called telephones until wireless phones appeared, which were called cordless or wireless at first, then they were cell phones, then smart phones. Today, we just call them phones, because smartphones are the norm.
Today, we talk about driverless cars. What will they be called in 10 years if driverless becomes the new norm? We will probably call them cars, no longer referring to what is missing (drivers and horses.)
So in 5 years, what will we call performance management without ratings?
Will it become simply “performance management” again, with no reference to what is missing?
Maybe. It would be useful to find a new label, to break the associations hired-wired in our brains from 3 decades of practice. Come on now, admit it: when we think of “performance management,” our brains immediately associate it with goal setting (which 30% of our managers suck at), ongoing coaching (which at least 70% of managers suck at), and “pay for performance” which triggers thoughts of SMART goals and KPI achievement the last 12 months, self-ratings, manager ratings, calibration sessions and a forced distribution curve, resulting in a merit matrix and bonus formulas that work because ratings can be used in Excel formulas.
Neuroscience research* shows we cannot unwire our brains…we cannot unlearn what we have done for 10 or 20 years or more, like some kung fu movie where the student is asked by his new master to unlearn his bad karate. It is hard-wired. So how do we change our performance management mindset and still call it by the same name?
My suggestion: let’s talk less about performance management, and instead break it down into its components, which do not require HR to “manage performance.” Here are the four components I feel need to be unbundled and re-positioned as separate disciplines:
- Accountability – employees are accountable to their managers to perform their jobs to get results. Managers should not depend on HR to help them with this. Long before we had expensive software, managers were accountable for team performance and ensuring everyone knows their part. Let’s “make managers great again” and get out of their way. I truly believe managers will figure this out on their own, if we in HR stop telling them what forms they must fill out by the deadline.
- Development – managers, with help from HR, must learn to develop talent to maximize team performance. Here is where the L&D folks can shine. Let’s make learning happen for the sake of building organisational capability and capacity.
- Retention – managers, with help from HR, must know whom to retain, and how. Rewards help a lot, but we need to build manager skills and leadership ability to keep the best people.
- Rewards – We have been wasting a lot of money on merit pay thinking it is good behavioural psychology. We permanently reward people into the future for their KPI achievement the past 12 months. Merit pay is better than not differentiating, but let’s be clear that our merit matrices are rewarding past performance into the future. No one “earns” a raise anymore like it’s their right. Pay is (or should be) about individual retention and internal equity. Incentives are about alignment with overall objectives, not achievement of prior year KPIs.
Our merit matrices are rewarding past performance into the future.
Let’s end “Pay for Performance”
The merit matrix has served its purpose, nudging the numbers in the right direction. Unfortunately, the numbers are not getting where they’re supposed to be fast enough. Well paid average performers should get no increase if there are top performers paid low v market. Taking 1% from the former and giving it to the latter is better than giving both the same %, but it is far short of what is needed to retain key talent. Instead, managers must be trained how to allocate scarce salary budgets with the objective of retaining key talent and maintaining internal equity.
So, here’s my verdict on the term “performance management”. The concept is not the problem, the term itself is not the problem. Even ratings are not the problem. It’s ok to keep using the term performance management as long as we see accountability, development, retention and rewards as separate disciplines which depend on managers, not HR, for their alignment.
I believe the term for this already exists. It’s called “management.”
What if you allowed the term “performance management” to fall out of use? In my opinion, if you equip managers well enough to hold people accountable, develop talent to perform better, be a good boss and then leverage rewards to help you retain the best talent, no one will miss the term performance management.
And what about ratings and SMART goals and KPIs and calibration and curves? In my opinion, if you focus on management capability, and managers can coach and have crucial conversations, and can allocate rewards wisely and fairly… you can make the above practices optional, up to each business or function head to keep or stop doing. Let it go, folks. See what happens. As long as you are equipping your managers well, you can make all those rituals optional. Let each business decide.
If your managers are not ready to do their job without hand-holding from HR, then I believe you are stuck with those practices for a while. And if your culture is one of mistrust toward your managers—a belief that only those at the very top can make people decisions fairly, you are doomed to the first quarter fire drill for years to come. For some industries, achieving sufficient managerial talent may be more challenging, perhaps unattainable, given the practice of promoting from within and giving promotions to your best technical experts. In such cases, my advice is to retain ownership for performance management within HR and stick with the current practices.
Agree? I’d love to get your view!
*Read David Rock’s books on neuroleadership and how to help employees think and perform better.