Performance Management Transformation: Changing Mindsets Versus Changing Processes

Rethinking process design is critical to improving performance management methods. However, having observed hundreds of companies using cloud-based, mobile technology to rethink the design of their performance management processes, I am convinced that process design is the easy part.

The real challenge is changing the mindsets of employees, managers, and leaders toward different aspects of performance management. The best process will fail if people approach it with the wrong frame of mind. Conversely, people with the right mindset can often creatively overcome process limitations.

The following are some shifts in mindset that are associated with highly successful performance management transformations.

Evaluation and Development Are Complementary

Some people have suggested that to increase ongoing development conversations companies need to eliminate the use of formal methods to evaluate employee contributions. These arguments stress that development and evaluation are two very different processes, and many traditional performance management methods over-emphasize evaluation. But there is difference between changing how people are evaluated, and pretending people are not evaluated at all. Employees know they are going to be evaluated in some manner. And acting as though employees are never rated in some manner is disingenuous and unsettling. As one person told me, 'knowing you will be rated is stressful, but knowing you will be rated and not knowing how it is done or how you can influence it is even more stressful.' If you want people to engage in ongoing development conversations with their manager then tell them when their performance will be evaluated, the purpose of the evaluation, and how it will be carried out. Employees are more comfortable talking with managers about development when they know how these conversations will influence decisions related to pay and staffing that impact their careers.

How People Are Evaluated Influences How They Develop

The development strategies employees use often reflect the evaluation processes their companies use to judge their performance. Companies that have poorly structured evaluation processes are likely to have employees who use poorly structured development methods. Similarly, companies that use confrontational performance evaluations such as forced ranking that pit employees against one another are likely to have employees who focus more on competition, impression management and risk avoidance than open discussion of developmental needs. On the other hand, companies that have transparent evaluation processes that stress clearly defined criteria and constructive discussions of employee contributions are likely to have employees who engage in open and constructive discussions around self-development.

Goals Are Primarily a Tool for Ongoing Communication and Role Clarification

Many companies have historically used goals as though they were a form of 'employment contract.' Employees agree to accept goals at the beginning of the year with the understanding that these goals will be used to evaluate their performance 12 months later. The assumption is goals will not change over the year. However, this is the wrong way to think about goals. Goals should be viewed as a tool to communicate, update, and clarify priorities throughout the year. They should also be expected to change as the nature of the business changes. While goal accomplishment does influence how people's performance will be evaluated in the future, that is not their primary purpose. Their primary purpose is to align employees and managers around the things that are important right now.

Managers Must Manage, or They Shouldn't Be Managers

Most managers are not promoted to manager because they are good at managing people. They are promoted because of their technical skills, career ambitions, and past performance as individual contributors. Managers often struggle when it comes to core managerial activities such as clarifying role expectations, providing ongoing coaching, and having honest and effective conversations about employee performance and potential. Many managers actively avoid these activities, viewing them as unimportant and difficult. If companies want to create effective performance management methods, managerial tasks must be treated as a core part of the role of managers. Managers need to be trained on how to perform these tasks, rewarded for doing them well, and held accountable if they do them poorly.

Rating Methods Are a Tool for Understanding Employees

The most effective performance rating methods do not focus on the ratings themselves. They focus on discussing the accomplishments, behaviors, development needs, and future goals of the employees being rated. Ratings are merely an outcome of much richer exploration of employee contributions and capabilities. As one customer told me, 'even if managers agree on ratings assigned to employees, we spend time talking about the employees to ensure we agree on the reasons why those ratings were assigned.' This last mind-shift is probably the most challenging to achieve. Sadly, we live in a society where 'different' is frequently interpreted as 'better' or 'worse.' Getting leaders, managers and employees to a point where they can discuss differences in performance without implicitly labeling people as winners and losers is a truly transformational change in organizational culture.

Changing these mindsets can be difficult. Many managers and employees do not come from backgrounds where performance and goals are openly discussed in a supportive, collaborative, and forward focused manner. Their default reaction toward performance management topics tends to be 'how is this going to hurt me?' A key part of transforming performance management is transforming people's view of performance management from a method primarily used to point out people's shortcomings, to a method that ensures employees are fairly treated and provided with information needed to control and chart their own careers.

To learn more, check out Transforming Performance Management: 15 lessons from 10 years of customer engagements, or listen to an on-demand webcast I did with Rob Arbogast at The Timken Company: 'Performance Evolution: A Blueprint for Success.'

Steve Hunt is senior vice president of Human Capital Management Research for SAP SuccessFactors.