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Performance management and performance appraisals are often used interchangeably in meetings, but they couldn't be further apart. If you're trying to figure out the difference, this article will put the glaring differences into perspective for you.
Briefly, performance appraisal rating systems have their roots in how the US military rated personnel recruited during World War 1. That's right – methods still widely used in business today originated around 1917 when legislation was passed to recruit soldiers to join the war. So not only are performance appraisals based on material from more than 100 years ago, it’s aligned with rigid military thinking!
The concept of performance management was born into mainstream HR thinking in the early 2000s. HR and business thought leaders started realizing that performance appraisals yielded nothing of value and consumed massive amounts of time. What they wanted was a performance management system that delivered results in real-time, included employees, and was agile enough to cope with evolving business environments.
The main shift was from a punishment versus rewards approach based on historical information to a development, coaching and mentoring approach. The first method assumes that employees either do or don't follow instruction well to get the best results for the company. There's no consideration given to personal attitudes or motivations. The latter adopts the approach that employees are naturally keen to do their work well and want to contribute to the success of the company.
Which one makes more sense to you?
Hopefully, that familiar feeling of dread that comes as you prepare for the annual performance appraisal meeting should soon become a remnant of the past.
I had a wonderful chat with Julie Alexander, creator of Culture Incorporated, about how companies are changing their approach to performance management. I asked Julie what performance management is to her, and she gave a very insightful three-pronged perspective.
"Performance management is the overarching system of process where you align the company objectives and the individual – their skills, motivations and development plans. It includes appraisals – giving regular feedback. A performance management system encompasses everything, including terminations, performance promotions… It's the overarching bigger strategic piece that overlays the entire organization to ensure that you have the right people in the right place at the right time."
We moved on to being performance managed, which is something completely different, but still falls within the performance management spectrum.
"Being performance managed is when people are having their work performance managed. Which means they're underperforming and not reaching all the areas of their role. It involves giving them feedback about parameters where there are shortfalls, or where they need to comply. Consideration is also given to clear up possible misunderstandings between the leader and the employee. It helps them understand the gaps and what they need to do."
It doesn't end there, though!
"Performance appraisals are often confused with performance management, but it's just one of the pieces that make up performance management. Performance management, in itself, is an ongoing process of one on one feedback. Appraisals have traditionally been an annual meetup to discuss what happened over the past year – looking backwards at what had happened. Whereas what I prefer calling them is performance previews, so we look forward with an employee. Together we look at how we can develop them and what challenges they need in their role to keep themselves stimulated."
All this interaction, evaluation and feedback can seem off-putting to leaders considering implementing a performance management system. But that's only if you haven't considered all the digital tools available to facilitate easy internal communication and people analytics.
Internal communication platforms can be integrated with HR systems and optimized to meet individual industry or company needs. They keep a record of all interactions, so it's not necessary to file regular reports.
Julie is a big believer in the value that F4S brings to employees and role development that, in turn, ultimately contributes to companies meeting their goals and objectives. By integrating this people analytics platform into performance management, you can strengthen employee engagement by building people up.
She continues – "That's what I love about F4S. It allows you to say - we understand you as an individual and know your motivations. How can we use those superpowers to really bring out the best in you and also bring out the best in your role? And where do you have development opportunities (known as blind spots in F4S) that can be pulled in? Blind spots are areas that can be improved with coaching and mentoring. If we're able to bring those up, people will look forward to doing them. We do things better when we love what we're doing, and it motivates us. If we can achieve that, what will it open up for the employee and the organization?
For the individual, it will encourage them to do great things, develop and take on new challenges. That will automatically expand roles and give them a new angle. And for the organization, it means meeting their overarching objectives."
Not really. There are different definitions out there, but performance management isn't intended to be a rigid process. Each company must devise its own interpretation and systems that, at the core, will have the same intentions.
Ultimately, performance management is an ongoing communication process between a manager, or team lead, and an employee. The two prime intentions are:
These communications are both formal and informal.
Formal communication would happen for all new hires within a day or two of their start date. Existing employees will meet at the start of a new project and then every quarter to evaluate progress and map the way forward. Informal communication is ongoing, daily interaction between employees and management. It's unstructured and happens on a needs basis throughout projects or business cycles.
Moving from a rigid system that has been done the same way for over a century could meet with resistance, so implementing a performance management system is more of a process.
Unlike the outdated annual performance appraisal rating system, a performance management process involves every aspect of a business. To reach business objectives and succeed in an ever-changing world, companies must review their existing policies as well as their working environment.
Based on your findings, you can start creating an environment where employees are comfortable and enabled to perform to the best of their abilities. (Is it fair to evaluate someone if they have to crank up outdated equipment every few hours or navigate their way around hazards every time they get up?)
The most challenging aspect is to approach attitudes and ingrained mindsets. If the work environment is dominated by fear or disrespect, engagement and productivity are going to be very low. Implement ongoing training to address leadership and management styles, issues around discrimination, bias, bullying and harassment, and mental health and wellbeing.
A toxic culture or poor leadership communication won't right itself; bring in outside consultants to realign your management, workforce and company. The great thing about outsourcing interventions is that the trainers and coaches are neutral and unbiased, making people more inclined to listen and cooperate.
Embracing change has to come from the top down. Business leaders must have a shift in mindset for performance management to work. If you stay wedded to the past and specific structures, you’ll get resistance.
People need to understand the need for change to accept a new way. It’s vital to make change an evolution, starting with identifying the attitudes and motivations of team leaders and managers.
It's crucial to see performance management as an evolving cycle that takes place throughout the year, rather than a set program. Ongoing discussions happen between management and employees and change focus depending on current projects and goals.
The phases in cycles are planning, goal setting, production, checking in, collaboration, delivery and review. Throughout the cycle, the manager is evaluating performance, attitude, actions and results. The employee is ensuring they meet standards and goals and also giving feedback.
It begins when a new hire starts and follows through until an employee leaves the organization. Performance management features in onboarding through to exit interviews, or off-boarding. It encourages open communication between managers and employees throughout the organization to grow and develop employees and enable companies to meet their goals and objectives. It also contributes to the value of a company brand as well as its employer branding.
Employers regard their employees as their most valuable asset and invest time and money in their wellbeing and development. There's no one-size-fits-all approach, and each employee gets treated as an individual. Responsibility for performance management also shifts from HR to the direct manager or team lead. Who knows best how someone is performing daily?
The role of HR becomes one of facilitation and tracking. Also ensuring that there are safe and confidential channels for employees if they feel threatened or discriminated against. To succeed though, any concerns raised must be addressed discreetly, fairly and promptly so that employees feel safe and heard.
To create this all-encompassing work environment employers have to focus on people analytics and understanding the motivations of each individual (including management). It's about getting to know your workforce so that you can build high-performing teams.
When you understand individual motivations, strengths and blind spots, you can move people within the organization to strengthen teams. Someone who has a blind spot that directly affects their job or performance within a group can affect productivity and even demotivate others. Moving them while explaining the reasons is likely to make them feel understood and appreciated as opposed to being branded the weak link in the team.
Most people are used to businesses being rigid with all kinds of rules, policies and processes. So implementing a management system that doesn't come with a handbook of steps and regulations can seem intimidating.
If we look at how the business world has evolved over the past few decades, we can see that rigidity is no longer the answer to success. New products, systems and options are available almost daily, and we have to adapt continually to stay relevant.
And now the world has been blind-sided by the Covid-19 pandemic! It's going to change the world of business forever. Remote teams will become more common, and company culture will have to adapt or die. On-site employees will also have altered expectations, plus they'll have to adjust to changes in the working environment.
You have to understand how the world around you and your industry has changed. Then you have to figure out what changes you need to make to stay competitive.
How will this impact your company culture and is your previous culture even relevant anymore? Business owners and C-suite executives will have to remap their company culture to re-establish their boundaries and requirements. And then they'll have to win over the confidence of their employees by sharing future objectives, current changes and making a mutual commitment to success.
Now, more than ever, employers and employees need to get to know each other. For organizations to recover and thrive and for employees to pull through, mutual trust is essential.
We don't build trust on rigidity, judgement and fear. Trust comes from knowing, understanding and the conviction that we have each other's best interest at heart. Excellent conflict resolution skills will be essential when working with remote teams.
People analytics tools and training managers in performance management and how to evaluate, mentor and measure employee success is more relevant now than ever before. Ensuring that everyone remains committed to the process is essential, and that might be difficult to begin with. But as employees and managers see the value, especially if they’re equipped with the right digital platforms and tools, it will become the norm.
Back to my chat with Julie: I asked her how she thinks the current pandemic is going to impact businesses.
“Covid-19 can bring out the best in people. We’re all in the same storm, just in different boats. Employers who previously feared they’d lose control if employees were allowed to work from home have had a complete change of heart. Employees are proving to be more productive off-site than on-site.
Communicating remotely gives us a window into each other’s world. We realize that we’re all humans with a life, and that makes us more authentic, empathetic and accepting of each other.
Understanding who your team members are as individuals will enable you to communicate with them in a way that matters to them. Seeing each other from another level of insight breaks down the us-versus-them mentality that hinders so many potentially good relationships in the workplace.
For business owners and executive management - take your employees along on the journey. Don’t dictate - collaborate. Learn to check-in on people, not to check-up on them.
When we learn to have empathy for each other, we’ll unleash performance, not manage performance.”
Now more than ever before organizations need to get to know the people behind the employees who are going to move them through the challenging times that lie ahead.