Performance management has been a hot topic for a few years because the traditional performance management systems have proven to be highly ineffective, costly, and increasingly obsolete. Let's explore some of their major flaws.

#1 MISALIGNMENT OF GOALS
Every year, companies set objectives that they want to achieve. Every year, employees set goals that they want to achieve. Typically, there is a disconnect between the two activities, which leads to employees’ individual goals not directly contributing to the company objectives. When there is a disconnect, it becomes a lose-lose situation, because the employees won't get rewarded for meeting their individual goals. This can lead to significant loss in productivity and engagement. We need better (and easier) ways to cascade company objectives down to employee goals.

“95% of employees do not fully understand company goals or what’s expected of them to achieve them” - Harvard Business Review

Pro tip? Clearly define and communicate the skills and values you want your employees to work towards top-down. Effective performance management starts with goal alignment. Always.

#2 LACK OF CONSTRUCTIVE FEEDBACK
In most companies, there isn’t enough training, processes, or tools to help employees understand how to provide and receive constructive feedback (knowing how to receive feedback is just as important). How many times have you given or received feedback like “you are very smart”? While this example sounds harmless, it is not constructive. It’s easier to understand why this example isn’t constructive when we flip it - “you are very dumb”. Trait-based feedback like this isn't constructive because the receiver can’t act on it. It doesn’t point out the specific actions that the receiver can repeat or correct. Also, most people have a tendency to get defensive when you comment on their traits.

Additionally, feedback should focus on strategy, process, and effort, instead of results. Most managers focus on results way too much in feedback (e.g., “good work achieving 30% savings”). The fact is, there are many factors that drive an outcome, and many of them are out of people’s control. We should focus on the things people can control (i.e., strategy, process, and effort) when giving feedback, so that these controllable factors can be repeated or corrected. In the simplest terms, constructive feedback means actionable feedback. 

Pro tip? Use our Feedback Cheat Sheet (https://www.pavestep.com/post/feedback-cheat-sheet) whenever you provide or receive feedback. Share it with the other party in advance to set expectations.

#3 SUBJECTIVITY
Let's face it. Feedback is subjective, because ... well, people are biased. This is one of the biggest things that employees complain about. Biases can come in many forms. Biases can be based on things like race, gender, sex, and age. They can also be based on things like differences in skill levels. For example, a professional public speaker may think that you are bad at public speaking, even though you're quite good.

Traditional performance management systems have no way of really identifying or calibrating for these biases effectively. It especially doesn't help when your performance review is based on one manager's view of your performance. Way too subjective! When employees think that feedback is inaccurate or that the performance management processes are unfair, they do not listen to the feedback they receive.

"Almost 9 in 10 HR leaders say the process doesn’t yield accurate information” - CEB Research

Pro tip? Write down the specific actions that you observed. Use those actions as the basis for your feedback. Before you give feedback, take a step back and think "would I think and react the same way if he/she were someone else? Somewhere else? At a different time?"

#4 INFREQUENT
Many companies are still stuck doing annual performance reviews. I personally think this is the worst offender of them all. Where do I even start?

We live in a world in which employees are changing functions, teams, and roles very frequently. Annual performance reviews just do not work well in this environment. It is hard to track down employees' former teams to collect feedback, compare and calibrate with all the other teams' feedback, and create any meaningful and relevant performance reviews for employees, who may now be in totally different roles.

Continuous feedback and recognition are required if you want your employees to develop skills and be engaged throughout the year. By not sharing continuous feedback and recognition, you are doing your employees and yourself a big disservice. If they are doing a good job, you should let them know and celebrate! If they are not doing a good job, you should let them know and course correct as soon as possible!

Lastly, does it make any sense that you rely on someone else's memory of your performance over the last 12 months to determine your career progression and incentives? How does that make any sense? We can all do better than that.
Pro tip? Encourage your teams to share at least one feedback with a colleague per week. Store this information. If done correctly, you should see a dramatic improvement in productivity and morale.

Now that we have discussed why traditional performance doesn't work. I will post next about the cost of performance management! If you have questions, feel free to get in touch with me at harrison.kim@pavestep.com.