Performance Management

Agile, more agile, most agile. Performance management is changing.

Organisations need to be agile, or at least try to be. If the organisation is sluggish and hierarchical, even the most modern software cannot bring about the desired quantum leap.

So far, so good. It is therefore logical that HR must also jump on the bandwagon and ask itself which levers can be used to achieve the maximum effect. The classic MbO process, with which we all share a deep love-hate relationship, comes to mind.

Do annualised targets still make sense today? More than 15 years ago, controllers began to explore concepts such as Beyond Budgeting. The aim was to replace annual frozen budgets with more flexible, i.e. more agile models. Why? So that managers stop chasing a pointless annual budget and ignoring the essential business challenges. Because the calculation is often: budget adherence = target fulfilment = bonus = new car = prestige. Sounds logical, doesn't it?

Let's be honest: many employee and team targets are still budget targets today. Partly because they are so easy to measure. An account manager is happy to work their feet to the bone to bring in the missing thousands through new customers. It doesn't matter that a long-standing major customer cancels the contract, which could have been avoided, if the target agreement is designed to win new customers. Common sense is subject to the power of the MbO process.

A rethink is finally in sight: away from rigid targets, an end to long-term annual thinking and towards agile targets, ongoing coaching, short feedback loops and enthusiastic employees. It sounds too good to be true. Even software manufacturers are coming out with new solutions that support this agility in management.

But does everyone want it? And can we all do it? Are line managers and employees alike possibly overwhelmed by this coaching approach? Anyone who leads a large team knows the problem: regular, albeit brief, bilateral consultations with each individual team member quickly lead to an exploding calendar. Does this even make sense for all employees?

Situational performance management would be perfect. For some employees, a little more coaching and greater dynamism, for others a classic annual approach is sufficient. How dynamic is the individual's working environment? What level of maturity does the employee have - in other words, how much leadership does the person actually need?

This, in turn, is a difficult question for HR. After all, how is HR supposed to ensure transparency and quality if every manager-employee team interprets performance management differently? And is a lack of leadership possibly concealed behind the elastic concept of situational leadership?

So before HR simply turns the existing processes upside down, we recommend a thorough culture check: What is the management culture in your company? How important is the MbO process, and is it really practised or just tolerated? Experience shows that HR IT tools to support the performance process only bring added value if the process is lived from within and is widely accepted. If line managers only see the additional time required when thinking about "Continuous Performance Management" and employees have the feeling that they are being subjected to even more control, then caution is advised.

A first step in the right direction could be to systematically separate the topics of performance appraisal and bonuses. Rigidly linking performance appraisals and bonuses prevents a real debate about performance, as it is often just a matter of "defending" the bonus in the background. Companies would do well not to link bonus distribution to individual targets, but to overarching, company-wide targets. This way, employees and managers no longer work with tunnel vision on "their" goals, but recognise the "big picture". It also strengthens team spirit and cooperation.

When employees understand their contribution and that of their colleagues to the success of the company, an important first step towards agile performance management has been taken. Regular bilateral feedback meetings then make sense and are not perceived as a form of control. Rather, they are a valuable tool for the ongoing adjustment of goals to changing circumstances and serve the continuous improvement on the way to achieving common goals.

Would you like to take the first step towards agile performance management? As strategy consultants, we will help you determine the path and support you in realising your vision. Find out more about the HR Campus HR strategy programme at here .