Reinventing Performance Management

Performance management has long been the source of chagrin, frustration and disappointment. In spite of being debated on, researched, and written about for decades, somehow it remains one of the most dysfunctional HR systems, poisoning our company cultures and wasting our precious resources. It’s time we shake things up a little!

According to Gartner, less than 25% of HR professionals believe that performance management is effective at achieving its primary objective and 81% are currently working on changing it.

The rise of remote and hybrid work models and the shifting employee expectations make rethinking the purpose and value of performance management programs today more crucial and urgent than ever. In this article, you will find three emerging performance management trends that we have observed. They highlight an opportunity to reinvent performance management in a way that fuels a sense of meaning at work – one of the three pillars of a thriving culture.

Trend 1: Outcomes-based culture

The status quo

Sadly, many organisations today still miss the opportunity to tap into their employees’ need for a sense of meaning at work. Instead of helping them to see how their work contributes to the organisation’s wider goals, they focus on superficial input metrics, such as the number of processed customer tickets or the number of orders. The line of sight between employee performance and the organisation’s mission and the key objectives is lost in the process.

The new reality

Hybrid or remote working means that not everyone is working in the same place at the same time. This situation presents unique challenges for managers and organisations who are used to managing inputs or even outputs. How can they ensure that the employees are doing what they are supposed to when no one is watching?

There are additional risks here – in a hybrid-work environment where managers have some team members working from offices and some working remotely, a manager who spends most of their time rewarding inputs risks not only stifling innovation and initiative, they might be favouring those they can observe in the office, potentially creating an inequitable experience for distributed team members. This can lead to resentment, disengagement, and unfair performance management outcomes.

The opportunity

Cultivating an outcomes-based culture (OBC).

The outcome-based model stands in opposition to an input-based work culture, which measures employee effectiveness by the time spent at a desk or performing specific tasks. In OBC the outcomes are the metric of measurement, not the time or method taken to get there.

Outcomes-based performance management supports flexibility in where work happens — and also when work happens. As organizations adopt more geographically dispersed location strategies in their hybrid work models, the number of time zones and schedules across which teams collaborate will continue to grow. While some companies encourage these distributed teams to adopt core “working hours,” where they’re expected to be online for spontaneous collaboration, this pressure for more online-together time can be relieved when a workforce has clear guidelines on the outcomes they’re expected to achieve. Trust and autonomy empower workers to move toward those outcomes in a way that’s consistent with the organization’s vision and values.

In summary

Old-school performance management focuses on following superficial input metrics, often set by the management and rigidly followed for a set period. An outcome-based work culture (OBC,) on the other hand, encourages employees to achieve a clear set of objectives, while at the same time allowing the flexibility and autonomy necessary to respond to changes effectively. The new world of work calls for performance management that focuses on outcomes, not on inputs.

Trend 2: Ongoing socially-based feedback

The status quo

The annual performance review has been getting pushed out of the HR space for quite some time now. In 2016, Harvard Business Review reported that there was a performance management revolution happening. Performance management practices did go through a significant change; for example, ongoing managerial feedback and coaching have become mainstream. These conclusions have been confirmed in a PWC study, “The Way We Work — in 2025 and Beyond.” However, the new reality we are facing at the moment makes it difficult for us to rely solely on the ongoing managerial feedback.

The new reality

Implementing ongoing feedback has always been a challenge as in most organisations, it requires frequent interactions with the manager. This is proving to be even harder in the remote or hybrid models.

Having examined many ONA (organizational network analysis) results of companies we and our partner, Maven7 work with, one thing is clear – the frequency and the quality of employee interactions with their peers greatly exceed the quality and frequency of interactions with their managers. This is especially true in the post-pandemic landscape and amid the rise of agile and self-managing teams.

Employees, however, still need to check in on their progress with goals and current projects and get some insight into what they are doing well and what needs more attention. So what can we do about it?

Solving the problem by increasing the frequency and quality of interactions with a manager might seem the obvious and necessary course of action. But is it?

The opportunity

Cultivating ongoing socially-based feedback.

Outcome-based cultures thrive on creating a socially-based feedback system. As A social feedback system provides the employee with a significantly larger amount of feedback (often 50 or more instances over the course of a year) from peers and others. This reduces the emphasis on receiving feedback from the employee’s manager alone. Additionally, it has the potential to create a deeper sense of meaning, focusing on the interpersonal aspect as the employees get an opportunity to experience the impact their work has on the people they interact most with – their peers.

Companies from Spotify and Amazon to ING Bank and Haier are using agile, self-organizing team-based structures. In these models, teams and small organizational units have both autonomy and accountability for results. There is no formal boss, so the traditional boss-employee performance management system is no longer applicable. Our guest in the CultureBrained Community, Heiko Fischer, will talk about this topic in our upcoming Fireside Chat.

In summary

Relying on managerial feedback to guide employees as to how to achieve the best outcomes has many faults and has become especially hard in the hybrid or remote-first model. An alternative that emerges is ongoing peer-to-peer feedback that gives employees a deeper insight into how they are doing as well as the impact their work has on the colleagues they interact most with.

Trend 3: A holistic approach to goal setting and performance management

The status quo

Meaning is not a new concept when it comes to performance management. In the past couple of decades, successful organizations demonstrated they understood its importance at work by goal setting and feedback conversations where the focus was on helping employees directly link their contributions to the organization’s wider goals. The link was often created by the manager or the organisation that came up with specific KPIs as matrics of performance. Data and emerging trends indicate that this will no longer be enough going forward.

The new reality

Here are some interesting findings from Gartner 2021 EVP Employee Survey:

82% of employees polled by Garter said they want their organization to see them as people, not just employees, yet only 45% of employees believe their organization actually sees them this way.

Looking at the issue from the perspective of performance management, it’s clear that goal setting where the focus is only on how employees help their organisation be successful and make an impact will be helpful but no longer sufficient.

The opportunity

Focus on employees’ personal goals and aspirations.

My research on the three pillars of thriving cultures revealed that each of them has three distinct levels: individual, interpersonal and collective. Most performance management systems focus on what I call the collective level that deals with how an individual helps the organisation be successful.

In the next iteration of performance HR leaders will seek to integrate personal goals, such as career, well-being and even acquiring skills not directly related to their work. Fostering an environment in which employees can openly and honestly discuss these personal goals with their managers or peers is going to be what differentiates good companies from great ones. The new workplace will support employees in pursuing and evaluating their progress against both personal and professional goals.

In summary

The social contract at work has shifted – employees are no longer willing to put up with being seen merely as cogs in the machine; they want to find meaning, bring their whole selves to work and integrate their private and work lives in a way that is enriching and fulfilling.

Goal setting and performance assessment will either integrate and leverage this shift or they will become irrelevant and obsolete.

The emerging trend that we observed in organisations is a holistic approach to goal setting and performance assessment where personal goals and aspirations are as important as organisational ones.

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