Why traditional performance management doesn't work
Eighteen months ago, the global consultancy and management firm, Accenture, decided to do away with performance reviews and traditional performance management. The company has 330,000 employees, so this is not a trivial decision. But it’s a move that many companies and public organisations are considering. Performance management seems to be on the way out. Let’s look at why.
Objectives versus behaviours
The performance regime is based upon setting objectives for the employee to fulfil. There’s generally a monthly or quarterly reporting round and once a year the employee sits down with a line manager and goes through an appraisal, identifying how well they performed against the objectives. This creaky and bureaucratic method is simply not sufficiently agile for today’s world, in which change is constant. It doesn’t allow a company to react quickly enough to a business environment in continual flux.
In addition, objective setting and the use of metrics to measure results isn’t an appropriate way to create the kind of organisation that top business leaders want to see. After all, in the performance management regime, the employee who says they found a different way to do something, or didn’t do it at all because it didn’t add value, will be marked down. Yet these are the very behaviours that most forward-looking organisations want to encourage.
And there’s the difference. The previous view of an organisation was quasi-military, with people forced into rigid roles defined by objectives to be met. The new view is a more diverse and organic model, where culture is an important factor in producing behaviours that drive the success and growth of the organisation. The performance management regime is usually purely a tick box exercise. Not surprisingly, the brightest employees quickly learn how to game the system.
Selecting the right staff, then trusting them
The Accenture CEO has said that leadership is not about evaluation and measurement of employees. It is - and this is crucial - about selecting people with the right qualities and trusting them to get on with it. The annual performance review is replaced with ongoing, informal feedback and encouragement. He also emphasises that younger workers are happy to work hard but they want
ownership of their work; an autonomy that allows them to prove themselves. Add to this the demand for a culture that allows them to be themselves at work, and it becomes clear that the performance management regime - which uses up a lot of management time - isn’t fit for purpose any longer.
The abandonment of performance management is also due to changes in the way work is organised. Instead of a hierarchy, where everyone has a strictly structured ranking, much work is now organised on an assignment or project basis. Employees with different skills are brought together in teams to carry out a particular job. Someone may be on several different teams, working on projects based in different parts of the organisation. It doesn’t make sense for a line manager they may have seen only intermittently during the year, to have a make or break appraisal with them once a year.
For senior staff with complex roles, it’s even less appropriate. The organisation’s interaction with its senior managers is also becoming more organic, with coaching and feedback as elements of a more personal and authentic relationship.
More and more companies are breaking away from the tyranny of performance management. This is often as part of a wider transformation of their culture, in order to equip them to face the unprecedented level of change they are encountering. Few people will mourn the passing of the annual appraisal.