Performance Management Must Evolve

The early months of the COVID-19 pandemic threw performance management systems into chaos -- and the reactions were telling.

In March 2020, Facebook announced that it would be giving all 45,000 employees the same "exceeds expectations" performance review rating for the first two quarters. Some companies canceled their next review cycle altogether. Others scrambled to explain last-minute changes to their performance measures and reward allocations.

Before the pandemic, many organizations believed they had modernized their performance management systems. But when true disruption occurred, "agility" in the workplace was nonexistent.

In a time of crisis, the performance management systems of many major corporations were ineffective, frustrating and too rigid for a dynamic, high-risk business environment. And rather than returning to normal, the marketplace and the workplace are radically transforming -- a generational sea change with profound implications for how we measure and lead performance in organizations. It's time for leaders to make a leap to a new way of managing people.

The Three Essential Characteristics of Modernized Performance Management

The new approach to performance management will have to be more collaborative, adaptive and individualized based on conditions on the ground.

1. Agile Goals

Setting and forgetting goals is no longer an option. Future uncertainty requires an agile approach to goal setting. Goals need to be immediately adjusted to focus an aligned effort on business needs and how employees can best deliver value to the organization.

This requires an "agile mindset" that encourages employees to own their goals and expect change. Even anticipate it. Employees and managers should be on the lookout for opportunities to pivot with changes to business needs and be rewarded for identifying new ways to make a positive impact. Managers should be given the expectation, authority and flexibility to tailor goal setting to the team and the individual as their work changes.

Employees should not be surprised by performance reviews. This starts with the expectation that goals will be adapted as needed to keep them highly relevant and precisely targeted at high performance. And it ends with ensuring the goal posts don't move at the last minute, without warning.

2. Ongoing Conversations

Nearly half of employees say they receive feedback from their manager a few times a year or less. But the only viable management style going forward will be ongoing coaching conversations that establish a rhythm of collaboration and create shared accountability for performance and development. These conversations are more than just talk -- they will have different purposes and outcomes at weekly, monthly and quarterly intervals.

Managers need to be ready to manage in a hybrid workplace, with some people working from home, some on-site and others blended.

Managers also need to take the personal lives of team members seriously. As the pandemic showed, life outside of work has a great impact on work itself. In uncertain times, people's emotions and moods change from day to day, from hope to fear.

Managers should keep the focus on the future -- identifying opportunities, quickly communicating changes and preparing for potential pivots. People still want to know that their long-term growth and success haven't been forgotten.

Great ongoing coaching conversations create a two-way street of communication that makes it easy to discuss needs and challenges and deliver highly individualized recognition. But managers aren't always naturally good at initiating frequent conversations -- and employees don't always welcome them. Imagine getting more feedback from the worst boss you've ever had!

Meaningful conversations and collaboration require training and practice -- just like teamwork in any other profession. Imagine professional sports teams, musicians, dancers or the military trying to do their jobs without practice and constant coaching.

Furthermore, this is how trust is built. Managers can't just flip a switch to gain trust; they have to earn it through action and building a strong working relationship. This was true pre-COVID and now has become essential.

Managing remote workers will be a permanent part of work going forward. Gallup has found that working from home can be one of the most engaging or disengaging experiences possible for an employee, depending on how their manager handles it. When managers are able to step up and have frequent, meaningful conversations, employees are able to capitalize on the advantages of working from home. However, when managers fail to communicate, engagement plummets for at-home workers.

3. Dynamic Adjustments to Accountability and Incentives

Incentive structures that made sense before the pandemic can now seem cruel and needlessly painful for employees. They can also warp behavior, as some people may try to game the system for short-term gain. When a metric is no longer fair, employees should not be punished. Don't hold employees to a metric or incentive that doesn't make sense in the current business environment.

Many organizations rely heavily on financial incentives as a driver of employee motivation. In an uncertain marketplace, this will be challenging. Performance incentives are especially tricky because it may make sense for everyone to share the financial burden or opportunities created by COVID-19 and receive uniform adjustments to pay across the organization. At the same time, it's important to recognize and reward your stars if they're shouldering an extra-heavy workload or making exceptionally valuable contributions.

Additionally, taking a performance goal-based approach to performance measurement that focuses on clearly defined expectations and standards (e.g., SMART goals or OKRs) allows for a more flexible or task-based approach where metrics don't exist or can be deceiving. This is especially important for teams new to working from home. It is critical for those teams to focus on clearly defined outcomes and performance indicators (e.g., metrics, goals, deliverables). Don't mistake activity and participation -- such as emails, meetings, hours on a timesheet -- for high-quality, productive performance outcomes.

It's Time to Burn the Boats

Employee needs can't be adequately met in today's business environment using traditional performance management systems. It's time to burn the boats, leave old performance practices behind, and create a performance management strategy that is adaptive, responsive and calibrated to the new workplace.

This means that you need the fundamentals of good management more than ever: agile goals, exceptional coaching and high accountability systems.

Static performance reviews, annual goals and infrequent feedback never really cut it before the crisis, but they certainly won't cut it now. It's time to make a change.