- A slowing economy is pushing many leaders to be more demanding of employees
- Command-and-control performance management is ineffective and disengaging
- Now is the time to focus on building trust and developing future leaders
Today's business leaders are fighting for control of their workforce and financial future.
As profits shrink and recession fears loom, many leaders are looking to get their companies into fighting shape. Particularly in the tech and financial sectors, CEOs have been publicly communicating to their employees: Cuts are coming. It's time to shape up. We're coming for the slackers.
The context for this approach is a rapidly changing world where executives feel out of control. Employees are refusing to return to the office. Customer expectations are changing, and inflation is putting pressure on spending. Supply chains continue to disrupt normal business processes. And nobody knows what's going to happen with the economy in the next year.
It's no surprise that some leaders are trying to regain control by returning to what they know best -- the old ways of commanding their employee base, monitoring office attendance and driving productivity and accountability. They're making aggressive demands, threatening people to do more and firing the whiners.
But this approach has just one problem: It never really worked.
If traditional command-and-control approaches to performance management worked, leaders would not be so concerned about whether their remote workers are being productive (they would know how they're performing and how to make improvements!).
The Problem With Traditional Command-and-Control Performance Management: It Never Worked
Before the COVID-19 pandemic, it was clear that traditional performance management practices were a failure. According to Gallup research, only about 2 in 10 employees strongly agreed that their performance was managed in a way that motivated them to do outstanding work.
Traditional approaches to annual goal setting and performance reviews -- which largely focus on giving a performance rating for the sake of justifying pay and promotions -- have long been particularly demotivating and ineffective. Worse yet, traditional approaches to performance feedback often fail to improve future performance ratings and objective measures of performance. According to a famous meta-analysis spanning 90 years of research, more than one-third of feedback interventions result in worse performance.
According to a famous meta-analysis spanning 90 years of research, more than one-third of feedback interventions result in worse performance.
When the COVID-19 pandemic hit in 2020, the flaws in traditional performance management systems became even more apparent. Many major corporations delayed or canceled performance reviews. Many scrapped their goal-setting process and performance ratings because the situation was too dynamic -- too uncertain for their antiquated systems to keep up. At the same time, company revenue growth and employee engagement largely soared into early 2021 for U.S. companies, despite many organizations suspending expensive corporate processes and systems designed to improve performance.
In other words, many companies essentially gave a vote of no confidence to their performance management system, and yet, many of the same companies had record revenue growth years while most of their office employees worked remotely.
Fast forward to today: The pandemic recovery has been rough. Geopolitical and global economic uncertainty abounds. Employees and employers are still negotiating the future of the workplace. The popularity of unions is at a 57-year high. And we are still learning to navigate COVID-19 health concerns and the fear of being one mutation away from another surge.
Traditional performance management mindsets and systems are destined to fail going forward. They were demotivating during the best times and nonsensical during the worst times. Why should we think the old command-and-control approach is going to magically fix our problems now?
A Leader's True Threat: Losing the Trust of Your Best People
The ineffectiveness of traditional management is perhaps not even the biggest problem with switching to a "no more Mr. Nice Guy" leadership approach now.
Identifying and removing low performers is perhaps the easiest part. The true challenge for leaders is engaging employees today, inspiring a bright future for the organization and developing potential leaders over the long term. If leaders don't have a development strategy beyond "sink or swim," they will not nurture and keep the talent the organization needs to survive.
Talented workers stick with leaders and organizational cultures they believe in and trust. But executives can destroy that trust the instant they start ruling with fear or making decisions that go against the organization's communicated values. Now is not the time to rule with fear -- disengaging work environments are what led to the Great Resignation in the first place.
If a company told employees during the pandemic it cared about their wellbeing, valued their opinions and rewarded those who went above and beyond, but then the CEO says, "All that ends today," it's not the checked-out quiet quitters who will feel let down. Instead, it will offend those who took pride in their organization during those tough times and did everything they could to help their company prevail.
Flipping the switch from "the organization that cares about your wellbeing" to "no more Mr. Nice Guy" can send a shockwave through your company culture -- a culture that took years to build and will take years to repair. And your most talented people will quit first, taking their friends and followers with them.
A New Approach to Performance Management
If leaders are committed to driving exceptional performance, they need to study what works.
Haphazard goal setting, infrequent feedback and annual performance reviews do not motivate employees, and they are incompatible with the new pace of change in business.
What motivates employees?
- Shared goals
- Agile goals that are adapted to changing conditions
- Two-way dialogue with managers
- Frequent informal conversations about goal progress
- Supportive managers who provide resources and remove roadblocks
- Timely recognition for exceptional performance
- Shared accountability
- Future-oriented conversations that promote learning and development
Motivating employees requires adaptability, honesty and ownership, which means performance coaching must become more frequent and meaningful. Employees need to have a two-way dialogue with managers to understand the purpose and value of their work and what's expected of them.
Exceptional performance is ultimately fueled by employees who are motivated to take ownership of their work. This means they have a say in their goals -- goals that make sense to them -- and know why these goals matter to their development, their organization and the world. They also embrace the ability to adjust their goals to better reflect their most important work.
Ultimately, effective performance management strategies focus on collaborative goal setting, provide ongoing support and allow for adjustments as priorities change. They also set high standards that challenge people while giving them a chance to learn and grow if they fail.
Decision Time for Leaders: Retreat or Advance?
The future of workplace leadership is at a tipping point. Ironically, the "tough guy" approach is the easy way out. It may be tempting for leaders to revert to old patterns that feel comfortable, even if those ways of doing business are ineffective or counterproductive.
Good leaders hold people accountable, but that accountability begins with themselves, and now is the time to elevate their leadership in a way that serves people rather than breaks them down. It's time to outline a new path for how to work together more effectively and create shared accountability for team performance and cross-functional collaboration. It's time to more seriously align employee and employer goals to accelerate productivity in the organization. And it's time to ensure the organization is developing employees in a way that retains them and builds a strong talent pipeline for the future.
If leaders should be tough on anything, it's on their own approach to performance management and how they enable each team to do its best work to advance the business. The best leaders lead by example, demanding more of themselves before asking more of others.
It's time to update your performance management strategies:
- Read our research paper Re-Engineering Performance Management for insights into what works for developing performance and what doesn't.
- Discover why performance management must evolve.
- Learn how Gallup can help you transform your performance management system.