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New Talent Management – Performance Management

How HR can get ready for future performance management

New Talent Management – Performance Management

The Management by Objectives (MbO) management tool developed in the 1950s will soon celebrate its 70th birthday. In many companies the way in which they assess their employees' performance has changed surprisingly little over the last 70 years, through various economic cycles, massive technological developments and significant social changes. In our previous blog post, we discussed the challenges and opportunities associated with pay transparency and how these aspects can influence talent management. In the context of this discussion, we will now look more closely at the established MbO model and examine how modern approaches to performance management can help to attract, retain and develop talent.

Classic performance management and its challenges 

The aim of classic performance management is to measure the organisation's performance over a past timeframe and derive actions from it. This approach dates from a time when the demands on businesses made by current topics, such as the shortage of skilled labour and the employment market, were not as great as they are now. What are the challenges facing this classic performance management approach today? 

  • Review meeting frequency: In today's age marked by BANI, it is increasingly difficult to plan accurately on an annual basis. The BANI model, which describes current challenges in the business setting, stands for a brittle, anxious, non-linear and incomprehensible world. Is an annual target performance review still enough?
  • Subjectivity in the assessment: A manager assesses the performance subjectively, and this could be greatly influenced by recent events. This entails the risk of objective assessments fading into the background.
  • Ratings and extrinsic motivators: Performance ratings can lead to employees focusing too strongly on the "grade" and tuning out constructive feedback. This can harm intrinsic motivation and employees' engagement.
  • Focus on the past and the individual's restricted influence: An assessment of targets over a period is always backward-looking, and factors that cannot be influenced can also play a role in their achievement. In the case of employees, this can cause frustration, however, if insufficient consideration is given to personal development and current influences. 

The future of performance management 

How can we, as HR, face up to these challenges and establish performance management in the company that on the one hand meets employees' current needs and, on the other, also offers added value from a corporate perspective? 

  • Flexible, target group-orientated processes: An annual target and review are no longer enough. Management must be able to hold regular check-in meetings. It should be possible to discuss topics such as current workload, wellbeing and progress towards achieving goals or any adjustments to targets at this time.
  • Case-by-case, immediate feedback: The best way to understand and act on feedback is as soon as possible. A company should therefore promote an open feedback culture and encourage employees to give each other constructive feedback at any time. We recommend also obtaining feedback from third parties in order to gain an even more nuanced picture.
  • Sensible use of targets and assessments, with the focus on milestones: Individual targets make sense only if the employees can directly influence their achievement. Employees should be involved in the process of setting their own goals in order to promote greater engagement. Shorter-term activities or milestones can help to make targets more achievable for employees. If a numeric rating system is used, it is important for the ratings not to be given out of context and without justification.


Picture: Obtain feedback from third parties in order to be able to make an objective and differentiated assessment.


Specific recommendations

  1. When establishing (new) performance management, consideration should always be given to the corporate culture as a major component. It is possible to define the correct performance management for the company using six decision-making criteria.  
  2. Define a clear vision and goal for performance management: Formulate specific targets and a clear vision for your performance management. This will make it easier to structure and direct the process.
  3. Define target groups and be aware of their needs: Carefully analyse your employees' needs in order to define the right tools for a successful process. A targeted discussion of expectations is decisive.
  4. Empower management: Management plays a central role. Offer training and support so they are given the right tools in order to implement target- and target group-orientated performance management of your employees.
  5. Involve employees and create loyalty: Provide employees with tools that facilitate effective cooperation. Employee inclusion helps to increase their buy-in to the performance management process.
  6. Assistance from digitalisation: Implement digital solutions in order to manage the process more easily, track it more efficiently, save time and analyse data at the press of a button.
  7. Monitoring, review and continuous improvement: Establish a regular monitoring and feedback mechanism. The process introduced should not remain static; rather, it should be improved continuously on the basis of feedback and monitoring.

Summary and key messages 

The traditional performance management approach no longer meets current requirements. The contemporary approach is to focus more closely on employees and their needs. Reviews at shorter intervals, case-by-case and with immediate feedback from different sources, active inclusion of employees in the whole process and focus on daily activities are of decisive importance. The change to a more agile performance management strategy with employees at its heart is indispensable in order to attract new talent, retain them long-term and develop them successfully.

Look forward to the next blog 

The need for effective succession planning is increasingly obvious in the context of blog posts so far on the subject of new talent management. The debate surrounding long-term corporate success proves to be a complex network of processes that go beyond simply recruiting talent. At a time of intensive competition for qualified workers, long-term employee loyalty and development are crucially important. The next blog highlights the question of how companies can develop sensible and forward-looking succession planning in order to meet the complex challenges of the modern world of work. 

To the blog:




  • HR Futures 2030, a Design for Future-Ready Human Resources  




Rebekka Bitschnau

Rebekka has worked in HR for almost eight years. In her role as SAP SuccessFactors Consultant, she helps HR departments to digitalise their talent management processes and thereby to use the tools such that these contribute targeted and quantifiable added value. With her packed, diversified HR rucksack, she is very concerned with implementing creative, efficient solutions geared to the companies. 

Published: 26. March 2024

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