New systems and trends in performance management

Written by Lin Huiwen, Performance and Goal Management Expert/Senior Consultant of Kang Shiteng

Over the years, as a corporate consultant and lecturer, I have had many opportunities to get to know different companies in depth, and more often than when I was a HR executive in the company, I heard the following question from department heads of different companies on the topic of performance management on different occasions: "I work with my subordinates every day, and I know very well that I really need to spend so much energy and effort every year (or every six months). Goal-setting and performance appraisal assignments?"

A number of well-known multinational companies have announced the abandonment of traditional performance appraisal cases

In 2013, Microsoft announced the end of the grading system, which attracted a lot of attention and discussion at the time. Microsoft's approach is neither unprecedented nor unprecedented, and in recent years there have been a number of well-known multinational companies, including GE, IBM, Goldman Sachs , Accenture , Morgan Stanley , and Adobe Even Netflix, which is currently the world's largest tech employee in terms of personal productivity, has also carried out a major reform of the performance management system, either by eliminating grading, or by eliminating forced allocation ratios, or even more boldly by eliminating the requirement to set KPIs in advance at the beginning of the period. In February 2016, the Economist also proposed a discussion on this wave of performance appraisal reforms.

Compare the old and new systems of performance management

At first glance, it may seem like these companies are trying to overturn the traditional performance management system completely, but a closer look reveals that the old system will be replaced by a new system that will identify talent differences more immediately, more frequently, and more clearly, and that instead of using rigid traditional performance appraisal methods, there may be colleagues who give feedback on your performance directly on the performance system on a daily basis. In other words, performance is no longer assessed once every six months or a year, but a person who has a work interaction with you can give you a performance evaluation through the performance system at any time, and the performance system regularly settles the total score as the individual performance appraisal results. Performance reviews are equal to daily occurrences.

Regular performance appraisals help the organization achieve its long-term goals

Immediate performance feedback certainly has the effect of immediate motivation or alertness (positive or negative), but in practice, immediate feedback focuses on short-term performance, and long-term, important work tasks still need to be achieved by a formal overall evaluation mechanism. If the regular (semi-annual or annual) appraisal mechanism is abolished, employees will focus on daily work execution in the long run to get immediate feedback and positive evaluations among their work partners, but the correlation between actual work content and organizational strategic goals may be weak.

Whether the new wave of performance management methods can show the expected results, the daily coaching, performance interviews, and people management ability of supervisors are more critical than ever

Many people criticize the traditional performance management system for easily leading to peer competition and even struggle. Interestingly, no matter how flexible the new system is, companies that are abandoning traditional practices to make a major change in performance management and abolish forced assignments or performance rankings are emphasizing that they must return to the labor market as quickly as possible to find a better fit. Therefore, the new wave of performance management system will not solve the pressure of competition, but will rely more on the daily communication, performance interview, and personnel management ability of supervisors.

Redefining performance management

There is no one management system that can solve all problems. Regardless of the definition of the new system and the old system, the spirit of performance management is still there, and companies need to devise a set of methods to identify talents, and for employees who are positioned as "talents", enterprises must provide sufficient differentiated rewards to truly retain those who want to stay. Since there must be a standard for identification, there must be a measurement standard, and the setting of goals and KPIs must be indispensable, and in response to the new business model, the setting of goals and KPIs will only become more and more sophisticated. Differentiated rewards include financial rewards (e.g., bonuses, dividends, salary adjustments, travel or gifts for high-performing employees, etc.) and non-financial rewards (e.g., promotions, public formal recognition, personal development plans, opportunities for dialogue with management, qualifications for high-end training courses, etc.). As for the differentiated reward, in addition to in heaven, resources must be limited, and a certain degree of grading/grading performance evaluation can help enterprises efficiently allocate limited resources to the right people and assist enterprises to retain and develop talents.

No matter how the performance management system is changed, achieving the overall goals of the organization and developing talents is always the expected effect of performance management. Are you ready for the next wave of performance management trends, executives?!