- Most performance management systems are too rigid for uncertain times
- Leaders need a new way to track and encourage high performance
- Agile goals, ongoing feedback, and flexible metrics and incentives are key
The COVID-19 pandemic has thrown performance management systems into chaos -- and the reactions have been telling.
In March, 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 are scrambling to explain last-minute changes to their performance measures and reward allocations.
Perhaps the most unique situation involves those companies stuck in an unexpected, lopsided business environment: They have some departments that are crushing it like never before, while others are (a) busy but running at a loss or (b) stuck without work.
How do you make performance goals fair and meaningful in this topsy-turvy, ever-changing, uncertain-future environment? How should you think about bonus pay and incentives? The old metrics often don't make sense, and adding pay into the mix is likely going to upset people.
The initial reaction of many organizations seems to be a recognition that their performance management systems are ineffective, frustrating and too rigid for a dynamic, high-risk marketplace.
Before the pandemic, many organizations believed they had modernized their performance management system. But now, the boardroom buzzword "agility" has finally become an urgent need. Whatever happens, you can be certain that the marketplace will be shifting for many months, if not years.
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.
A table highlighting the differences between traditional performance management (annual goals set by manager, infrequent and irregular feedback and an annual performance review) with a re-engineered approach (agile, collaborative goals; ongoing conversations; timely recognition and quarterly progress reviews with accountability and incentive adjustments).
1. Agile Goals
Setting and forgetting goals is no longer an option. The current disruption and future uncertainty of our business landscape require 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.
The truth is that everyone is experiencing something different right now. Some people are working from home, some are on-site, others are blended. And life outside of work has a much greater impact on work itself. In addition, people's emotions and moods change from day to day, from hope to fear.
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.
Managers should keep the focus on the future -- identifying opportunities, quickly communicating changes and preparing for potential pivots. Even in times of crisis, 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 a fully remote workforce has not made things any easier during the pandemic. Working from home 100% of the time 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.
A line chart showing that the more frequent feedback an employee gets, the more engaged they are. This is especially true of those who work remotely. 63 percent of those who work remotely 10 percent to 80 percent of the time and who receive feedback once a week or less are engaged.
Ongoing coaching conversations will be that much more crucial to master with a widespread shift to remote work.
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.
Managers should be given the expectation, authority and flexibility to tailor goal setting to the team and the individual as their work changes.
The worst possible strategy is to avoid having progress review and pay conversations altogether. Gallup has found that when people have conversations with their manager about progress and pay, they are more engaged and feel better about the pay they receive -- even if they don't get a pay increase. Now is the time to honor everyone's contributions and challenges, and talk about how we're going to move forward together.
It's Time to Burn the Boats
If there's one important piece of advice for leaders, it's this: Don't stop tracking performance and having meaningful conversations about the task at hand. Even if you cancel bonuses, merit increases, awards ceremonies, etc., it's important to communicate: We are still tracking progress and need high performance. We see what you're doing. We appreciate you.
That said, 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. When the dust settles, you need to know who your stars were -- and you need to keep those people engaged.
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.