When Performance Management Kills Performance
Why your performance management system could be doing more harm than good

This post has been modified from an article on the Euromoney Learning Solutions website. View the original piece here.
Performance management may work in theory, but in the real world it’s a complex and oftentimes culturally-dependent phenomenon. Doing it wrong can actually kill performance.
Here’s why. We all know that performance management isn’t one single mechanism; true performance management is a holistic set of processes at every level and an organisational mind-set that encourages staff to contribute to business goals. It includes learning and development, organisational development, evaluation, measurement and communications. It’s because of this complexity that incorrect application can not only stall but destroy performance.

Performance management processes usually comprise of these three main steps:

But as straightforward as the process may seem, a number of problems arise with performance management systems for organisations of all shapes and sizes.
Some of the more common problems include:
One size does not fit all
Assessing all staff against the same performance indicators or factors can make appraisal irrelevant, because roles — especially across large organisations - are very different. An HR manager will have very different competencies than, say, an IT specialist. Performance factors must fit the role.
Performance appraisal = criticism
Annual appraisals are frequently a key part of performance management and very often tied to reward. But mention the word appraisal and many people shudder. We’ve all been there. When thinly veiled as criticism, the annual “appraisal” can be emotive and antagonistic, or it can even lead to indifference and disengagement. If appraisals are seen purely as judgment and not as an opportunity to have a two-way conversation about objectives and development, staff can and will disengage from the process.
Inconsistent appraisal
Good management is vital for a performance management system to work. If managers are inconsistent in how they approach objective setting and appraisals, then performance will be patchy throughout the business. And if there is no opportunity for staff to have their own thoughts and contributions, then the system is one-sided, top-down and disengaging.
Speed of change
Some industry sectors are changing so much that their performance management systems are outdated and ineffective. Strategies are short term, technology advances, and organisations are becoming more agile and responsive to external influences. Performance management that doesn’t take this into account is always playing catch-up.

So how can you make your performance management system as effective as possible?
The key lies in maximising employee engagement. The focus is changing from measurement to ownership, from a top-down approach to a coaching model and from static, rare communications with staff (such as appraisals) to flexible, regular two-way conversations.
1. Motivation matters
Employee engagement happens when staff feel motivated to meet organisational goals. In his recent work Drive, Daniel Pink introduced the concept of motivation as involving three aspects: mastery, autonomy and purpose. Does your organisational culture allow staff to feel expert at their roles, able to make decisions, and that their work matters? Your performance management system can go some way to encourage this, through being flexible enough for managers to choose “the what” with staff having some say in “ the how” of what needs to be done.
2. Managers as coaches
Coaching is a collaborative process that allows managers and staff to work together to set short and long term goals, to discuss performance and to negotiate solutions to problems. Coaching is characterised not by micromanagement but through frequent conversations and check-ins. Coaching is agile management in action, a fluid process through which performance management is dynamic and focused on what’s important now rather than what was important a year ago.
3. From measurement to ownership
This two-way process created by a motivation mind-set and a coaching culture can lead to increased employee engagement with the performance management system — a feeling of ownership of it rather than a feeling of being a “victim” of it.
The bottom line is: if your workforce is engaged with your performance management system then performance will improve. Having a more personal, agile system that responds to motivational factors as well as organisational objectives is the only way forward for top performance in a world that won’t stand still.
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