Why Your Old Performance Management Sucks – The Overhaul Needed for Agile Digital Transformations

I despise the yearly performance management process.

Once a year, managers and leaders care enough about their employees’ goals and development plans and must ceremonially record objectives in HR’s performance management system. At a designated mid-year time, the alerts go out to managers to complete their midyear review, and sometime toward the end of the year, they complete a final evaluation.

Even worse is that behind closed doors, and often through a super-secret process, leaders convey and debate who the high potentials, the “HiPos,” are in the organization.

And then bonuses, raises, and promotions go through several rounds of vetting. The results include tired managers and frustrated employees even in the best of years. Don’t even get me started on how performance improvement plans or “Pips” are instituted.

In a recent Coffee with Digital Trailblazers titled “Performance Management - What Needs to Change in Leading Agile and Digital Transformation,” we chatted about why and how performance management needs an overhaul.

5 issues with traditional performance management practices and systems

I teed up the conversation by pointing out these five ways that challenge legacy performance practices.

1. We learned the importance of empathy over performance during the pandemic, yet performance management systems rarely have room to express individual circumstances.
2. We drive agile practices focusing on multi-disciplinary team collaboration and meeting short-term sprint commitments – yet performance systems focus on individual goals.
3. Leaders want data-driven decision-making, seek ongoing experimentation, and want to learn from failure, yet these objectives are hard to express, evaluate, and measure in traditional performance management practices.
4. The organization identifies digital transformation as a strategic objective, yet performance management practices focus on smart goals, often miss the realities of changing priories, and rarely address the incentives required to embrace transformative change.
5. Organizations struggle to hire and retain talent – even amid layoffs and recession – because employees want space to innovate and the opportunity to excel in hybrid work environments, while many leaders want “butts in seats” management practices.

As of this writing, I’ve hosted sixteen episodes of Coffee with Digital Trailblazers, and this episode had the highest attendance. Debate these points if you want, but leaders, Digital Trailblazers, and employees are frustrated. I believe now is the time to overhaul how organizations think and implement performance management. 

Digital Trailblazers recognize why performance management needs a transformation

I am not the only Digital Trailblazer that feels that legacy performance management practices undermine agile ways of working and digital transformations.

“In many companies that have been in business for a few years, you will find a middle management group that I refer to as the ‘layer of clay,’ and this is where transformations go to die,” says Martin Davis, CIO and managing partner at DUNELM Associates. “This group are experts at being seen to support a new initiative while doing absolutely nothing because they know that if they wait long enough, a new initiative will come along, and the original one will be forgotten.”

Jeff Eissinger, VP of enterprise strategy and solutions at Comcast Cable, also joined me on stage to share his perspectives around the issues with yearly goal setting. “When measuring success, we must acknowledge that the goalposts can move,” he said. “As business needs evolve, the definition of success can change. Digital Transformations are a constant evolution; the more you achieve, the more opportunity is unlocked. Success should not always be a measure of completing the goal as originally stated, but whether or not the work moved the organization closer to the overall vision the company has for itself.”

Joanne Friedman, PhD., CEO, and Principal of smart manufacturing at Connektedminds has joined me on stage at every Coffee with Digital Trailblazers episode. “After more than a decade of consistently high failure rates, enterprises that raise a white flag on digital transformation efforts do so largely because they have failed to secure the workforce’s heart share needed for success,” she says. “Why not flip the usual script and, instead of starting with the technology and trying to fit people into it, do the reverse?”

Separating people, performance, technology capabilities, and transformation objectives is one reason many digital transformation efforts bump along and sometimes grind to a halt. “Adopting human-centric design (HCD) means starting with the needs of the people and designing the technology to meet those needs,” says Joanne. “By taking a human-centered approach,  companies can create digital systems and processes that are more intuitive, user-friendly, and ultimately more successful.”

How to transform your performance management process

In a recent post, What are HR’s Important New Roles in Uplifting Digital Transformation, I urged CIOs to partner with CHROs on driving digital transformation and culture change in their organizations. “It’s a big, strategic miss when CIOs leave out HR or only request human resources to take on administrative responsibilities and tactical assignments,” I say.

And when transforming performance management practices, I urge CHROs to partner with Digital Trailblazers, including CIOs, product management leaders, and data specialists.  

That partnership will help transform traditional “waterfall” performance management practices to ones that better align with agile collaborations and digital transformation objectives. Here are two examples:

• Consider that scrum teams use sprint retrospectives to discuss process improvements. Performance management plans should include whether teams follow through on the recommendations and to what extent they improve collaboration and help deliver better results.
• Vision statements can serve as a point of dialog around how Digital Trailblazers and their teams perform and respond to customer feedback. The goal is not to hold people accountable to the original vision because we want teams to question, experiment, and learn. Performance management processes should review how well leaders collaborated with their teams and how effectively they made scope, priority, and design decisions.  

Therein lies the challenge because these evaluations can’t be performed once or twice a year. These reviews can only happen if the organization’s evaluation practices align with how teams operate, not as a separate and disconnected yearly performance management process, as is the norm in most businesses.

I will publish several other recommended performance management practices that align with digital transformation and agile ways of working in a white paper later this year. If you’re interested in an early preview, please use this link to sign up for the Driving Digital Newsletter.

Please consider joining our discussions and learning insights during the Coffee with Digital Trailblazers that meets Fridays at 11 am ET. To sign up for the next event, please use this link: https://www.starcio.com/coffee/next-event.