Reinventing Performance Management
You know that quarterly/ annual meeting you have with your boss to discuss your performance? It does not work! All I'll say on that is "garbage in, garbage out. But the good news is there is a far better alternative approach to use...
In a survey conducted by Deloitte, 58% of executives believed that their current performance management approach does not drive employee engagement nor high performance. A study published in the Journal of Applied Psychology in 2000 based on a survey of over 4,400 managers indicated that 62% of the observed performance variation in a traditional 360-degree assessment comes from the individual evaluator’s perceptions – the actual performance accounted for only 21% of the variation! With these studies in mind, it seems that evaluators also suffer from recency, personality-skew, interpretive scales and numerous diversity issues.
The bottom line is that the current performance management approach does not work – and is not even seen to work by the managers.
A Harvard Business Review article says, “We are in need of something that is nimbler, more real-time and more individualized, squarely focused on improving performance rather than assessing the past.” The authors go on to suggest that a good performance management system should achieve three goals: visualize performance, improve performance and reward performance.
The employee and manager need to be able to see what performance has occurred. Based on that, they need to be able to see what aspects need improvement and see if improvement efforts are working. Finally, the individual needs to receive some form of recognition or reward for their contribution to success.
In addition, the most important features are transparency and frequency. Transparency is about ensuring that the appropriate stakeholders have clear visibility to performance related to themselves and their teams. Transparency is important because it allows everyone to interpret their performance in the broader context and understand how their performance impacts the rest of the organization.
Frequency is the need to have one-on-one and team meetings focused on the observed performance on a weekly and monthly basis. Although the frequency is, to some extent, driven by the “drum-beat” of the organization, the need for very frequent performance conversations is required to build performance awareness, build agility, establish the pattern and build the performance culture.
To these two elements, we add risk free. Risk free is the environment in which performance information is considered and discussed. If this performance information is used to reprimand people or reduce compensation, the whole approach will rapidly degrade.
Where Goal Science Comes In
The application of game mechanics to business is the delivery system for these ideas. First, we build a structure that allocates points for:
Process and project activities are based on the strategic importance, performance and the role of both the individual and team within the process and project.
Points are awarded based on achievement of a development plan. Collaborating to help others learn through coaching, mentoring and taking on apprentices are all great to make an incentive for.
Allocate points for contribution to corporate values. This can also look like feedback for a job well done, such as praise or a positive review on a project.
If this performance information is used to reprimand people or reduce compensation, the whole approach will rapidly degrade.
This solution enables visualization and improvement of performance by publishing the points-earned and target points based on strategic importance using gaming elements of awards, certifications, leveling-up and leaderboards. It also helps establish frequency of meetings to fine-tune the game strategy. Transparency is key. Making sure everyone can see how the team is performing keeps employees engaged in participating, just like in any other game. The conversation becomes about the game and better scores, not about the individual, making it a risk free, psychologically safe environment.
Companies are struggling to fix performance management approaches to make them simpler, coaching-oriented and development focused, rather than overly complex and missing engagement, performance or retention goals.
A Bersin/Deloitte study found that only 8% of global organizations believe their performance management process is worth the time they put into it. How did this process suddenly become so obsolete? It could be due to several factors, including:
- An influx of younger workers and tightened demand for skills, making it increasingly important to focus on coaching and development, not just competitive evaluation.
- The “up or out” model of talent management does not work well when talent is highly mobile, specialists are increasing in value and people want more career mobility.
- Companies need to determine who the future leaders and high potentials are, but to accomplish this they risk alienating others, which hurts the entire organization.
- In most organizations, people often have many managers — teams are frequently led by team leaders and work is cross-functional, so the traditional manager-led evaluation is limiting.
- Feedback should come from many places, not only a single manager.
- New research on the neurology and psychology of work shows that numeric ratings, rankings and formal evaluations without positive feedback reduce performance, despite intending to create a more competitive workplace.
- Companies, especially those implementing game-mechanics, have found that by eliminating traditional ratings, they can dramatically improve engagement, retention and performance.
- The concept of the “bell curve” to understand performance is not truly representative of employee value. Research shows that “hyper-performers” are alienated by the traditional model of performance distribution, which forces people into categories.
- Social tools, like game mechanics, let people share goals, recognition and work-related information in a transparent way, creating a new peer-to-peer dynamic for performance evaluation.
Applying game mechanics to business allows L&D professionals to create better performance management solutions that makes performance everyone’s job. It can replace the old, ineffective 360-degree review and other peer-review techniques with a solution that makes performance visible, drives improvement and is completely transparent
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In this series of videos I'll walk you through where that misinformation came from, why it is wrong, why you should include OKRs, and how to include OKRs