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Concepts for Performance Management

The degree of agility in companies dictates the performance management concept

Concepts for Performance Management

Businesses are increasingly confronted with different performance management concepts. How should these be handled and what approaches will best suit my organisation? We’ve taken a closer look at various performance management concepts and subjected these to critical questioning.

by michael walther

Performance Management Concepts

The aim of the performance process is to increase employee motivation and direct their activities towards overarching company goals. The overall aim here is to increase productivity throughout the whole company. In the traditional performance process, individual targets based on company goals are used to work towards achieving this. The individual targets are assessed by superiors and monetary rewards are often used as an incentive for good performance. As outlined in the  Outperformed performance management blog post, traditional performance management has become obsolete for many businesses. For agile teams, a rigid annual cycle and quantitative assessments by way of a formal annual appraisal simply don’t cut it. Approaches such as informal check-ins during the year, new target methods such as OKR (objective key results) and continuous exchange among employees through differentiated feedback methods are encouraged. Between traditional performance processes and agile concepts, there is a lot of room for nuance to achieve the ‘best fit’ between performance process and organisation culture.

Cultures and Structures within the Company

External drivers such as digitisation, rapidly changing customer behaviour and increasingly intense competition put more pressure on a company’s need to be able to react to environmental influences more quickly and flexibly. The rigid hierarchical structure is fading from the spotlight and a network structure with agile teams is the new aim. In any case, this must mean that all organisational units should become agile. In highly regulated and standardised departments (e.g. less complex production departments), solid and rigid structures are just as important as high levels of flexibility and adaptability are in highly innovative departments. In reality, there are often various subcultures within a company, different groups with different needs and manifestations of agility that should be taken into consideration in designing the performance process.

When Should Which Concept Be Used?

 

 

Traditional

In departments with keenly hierarchical structures where employees carry out similar work within a team, it is possible for a manager to get an accurate estimation of an employee’s performance as they understand the employee’s activities and can compare these with those of others. A traditional approach seems to make sense in this case.

Expanding Perspectives

However, as soon as employee activities differ drastically, an objective performance estimation becomes more difficult. This means that businesses run the risk of managers making errors in judgement. This risk can be counteracted by increasing transparency. This is achieved by an employee’s performance not just being considered in isolation from their own team, rather comparing cross-team performance.

Flexibility

In teams that have a high level of agility and a manager that primarily acts as a coordinator and coach, individual employee evaluation by a manager seems less and less apt. It’s more important to constantly and efficiently exchange information so that everyone is aware of their role in the overall construct and can act as a team. In agile departments, it seems to make sense that employees enter into informal exchanges with their superiors more often, e.g. within the framework of ongoing check-in meetings. There should also be a feedback culture that encourages continuous direct feedback so that people can better estimate, reflect on and improve their own performance.

Know the needs of the organizational units

The performance process forms the basis for further aspects of talent management such as salary, bonus and succession planning as well as promotion. Alongside these aspects, interdependencies with other elements of talent management should be taken into consideration in the decision-making process. Software solutions are, of course, another issue that should not be overlooked in this context, as these facilitate process administration and can make a significant contribution to a successful cultural change. Platforms (such as  SAP SuccessFactors ) that support various approaches, and that therefore could serve various need groups in one system, seem particularly helpful.

To summarise, today’s HR department must ask itself how agile its company’s departments are and which performance management concept would best support its various groups’ needs. Of course, the best solution may be a compromise so that a concept can be implemented all across the company.

Published: 19. May 2020

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