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Manager’s Guide to Tackle Challenges in Performance Management

23 min read

performance management challenges

Deloitte does it differently.  

During performance reviews, it asks leaders not what they think of team members but what they would do with them.  

Don’t be stuck in the past. Yank into the future. Possibilities await there.  

This redesign is an attempt to snatch back extra hours spent on performance management. Deloitte had spent as many as 2 million hours (about 228 years) a year on completing forms, organizing meetings and drafting ratings. This left a lot to be desired for engagement strategies.    

The firm soon realized that people rate others inconsistently, but they are more candid about their own feelings and intentions.  

So, Deloitte asked supervisors closest to individuals – team leaders – about their possible future actions with individuals.  

This is done through ratings statements like: Given what I know of this person’s performance, I would always want him or her on my team. (This may measure the ability of the individual to work well with others.)  

Thus, Deloitte shifted its performance management approach from stopping at rating performance to deciding action on them. Today, the firm focuses on recognizing, seeing and fueling performance.  

The forward-looking approach is a break from the norm. Yet, 80% organizations today stress the past in their performance management systems, says research in ‘Employee Relations’. 

Today, many performance management challenges stare at managers. And Deloitte’s initiative is instructive. It highlights the need for a rethink, a shift from performance management to performance development 

Such a reimagining is necessary as obstacles posed by the covid-19 pandemic continue to linger and the hybrid work format is becoming more common.  

Executive truisms like “management by walking around,” and “under management’s watchful eye,” are losing their sheen, especially in the digital age.   

What is performance management? 

A manager is responsible for the application and performance of knowledge.

Peter Drucker, former management consultant

According to ‘Performance Management’ by Herman Aguinis, it is a continuous process of identifying, measuring, and developing the performance of individuals and teams and aligning performance with the strategic goals of the organization.  

There are two main components of this definition:  

  1. Continuous process: Performance management is an ongoing process. It is a continuum of several activities including goal-setting, coaching and feedback. 
  2. Alignment with strategic goals: Performance management requires that individual efforts are aligned with company strategy and goals. It makes the individual contribution to the company clearer. 

Cost of Poor Performance Management 

A poorly managed performance management system may demoralize your workforce and batter your business. The cost of poor management is high: 

cost of poor performance management infographic

1. Employee attrition 

If the system is perceived as unfair and biased, employees may quit. Similarly, those who stay may resort to ‘quiet quitting’. This is when employees resign to a minimal level of working efficiency, without putting in extra effort.  

2. Use of misleading information 

If a standardized system is not in place, suggests Aguinis, there are multiple opportunities for fabricating information about an employee’s performance.  

3. Time and money wastage 

Poorly undertaken performance management is a burn on resources. In systems focusing on manual interventions, such a wastage is more profound.  

Research by Deloitte has suggested that a manager spends 210 hours on performance review. 

4. Unjustified demands on managers’ and employees’ resources 

Poor systems may be avoided owing to competing duties. Aguinis points out that sometime managers may simply choose to “avoid the system altogether”. And employees may feel “increased levels of overload”.  

5. Burn out and job dissatisfaction 

In the absence of valid and fair assessments, employees may feel the burnout. They may become increasingly irritable, according to a paper by G. T. Gabris and D. M Ihrke in ‘Public Personnel Management’ 

6. Increased risk of litigation 

Any perception of unfairness in performance management may prompt employees to seek legal remedy. To mitigate compliance risks, Adobe suggests due diligence on regulations or acts, non-compliance penalties, compliance status, risk ratings and obligations.

7. Bad reputation

Opinions of dissatisfied employees or those who quit owing to tardy performance management may lower the company’s net promotor score. It may tarnish the company’s image and lower its brand equity.  

Need to Rethink Performance Management

A changed business context after the covid-19 pandemic and a thrust on remote work demands a shift from traditional approaches. Thus, a change from past-oriented performance management’ to ‘forward-looking performance development’ is needed.  

Peter Cappelli and Anna Tavis believe such a shift is necessary because:  

  1. Today’s tight labor market creates pressure to keep employees happy and groom them for advancement.  
  2. The rapidly changing business environment requires agility, which argues for regular check-ins with employees.  
  3. Prioritizing improvement over accountability promotes teamwork. 

The only viable management style going forward will be ongoing coaching conversations that establish a rhythm of collaboration and create shared accountability for performance and development.

Performance Management Must Evolve’ by Gallup

Moreover, Gallup suggests the new approach should be “more collaborative, adaptive and individualized based on conditions on the ground”. It spells out three essential characteristics of modernized performance management:  

  1. Agile, collaborative goals that morph as conditions change  
  2. Ongoing conversations, timely recognition and informal dialogue on a weekly basis 
  3. Quarterly progress reviews with accountability and incentive adjustments 

How Can Managers Overcome Performance Management Obstacles  

Tackling performance management hurdles today requires going beyond the norm. It requires agility, innovation and a sharp focus on workforce development.   

1. Look beyond SMART goals  

Most managers are familiar with the SMART checklist for goals – specific, measurable, attainable, realistic and time-bound.  

These are not enough, suggests the Harvard Business Review Guide on Performance Management.  

The guide points out that “a goal can be SMART without being important, challenging, or congruent with unit or organizational strategy”.  

Thus, broader criteria for setting goals are needed:  

  • Aligned with organizational strategy and beneficial to the company 
  • Specific and measurable 
  • Framed in time, with clear deadlines 
  • Achievable but challenging 
  • Future-focused 
  • Tailored to the individual 
  • Documented but not forgotten 

 2. Counter bias 

A McKinsey & Company  research shows that 60% of the respondents who viewed the performance-management system as fair also perceived it as effective.  

The firm believes that systems are perceived as fair when they do three things:  

  • Transparently link employees’ goals to business priorities and maintain a strong element of flexibility 
  • Invest in the coaching skills of managers to help them become better arbiters of day-to-day fairness 
  • Reward standout performance for some roles, while also managing converging performance for others 

Research in American Sociological Review’ points to the pervasiveness of gender bias in performance reviews. Many times, the bias influences how managers rate employees.  

This results in women having to meet a “a higher bar than their male colleagues to advance professionally.” The bias affects men too – those who don’t show initiative are viewed as being “too soft”.  

The authors suggest ways to remove gender bias in performance reviews: Tie evaluations to performance, ensure transparency and hold managers accountable for reviews. Using consistent criteria for all employees can also help. 

3. Finetune performance review

Only 2 in 10 employees strongly agree that their performance is managed in a way that motivates them to do outstanding work, according to a Gallup survey.
Employees want to be compared with themselves not others, research by Jinseok Chun, Joel Brockner and David De Cremer suggests 

They reveal that “employees consider temporal comparison evaluations to be fairer than social comparison evaluations.” 

4. Rely on data more 

Basing performance assessments on data can make them fairer, objective and meaningful. MIT Sloan Management Review says the next-generation performance management depends on “digital monitoring and tracking platforms to generate real-time analytic insights.” 

Similarly,  Harvard Business Review article advises identifying KPIs about performance and using the right data to measure them.  

5. Commit to a continuous feedback culture 

Managing performance should be an ongoing process and not a year-end exercise. MIT Sloan Management Review advises that executives must “define the feedback experience for their people”. This helps build consensus around what high performance means.  

That effective feedback is important is attested to by a study in Journal of Applied Social Psychology’. Researchers found that respondents, who received “effective feedback”, were satisfied with the performance management system even in case of lower performance ratings.  

Continuous feedback at work at IBM

IBM has redesigned its performance management by taking inputs from employees. It introduced a system wherein employees could set yearly goals and short-term milestones. Depending on changing circumstances, employees can also update them. The key to this process is continuous feedback from supervisors and regular check-ins.

6. Coach, don’t boss 

Less than 30 percent respondents in a McKinsey & Company survey said that their managers are good coaches. Managers as coaches are enablers as they help employees perform their best. 

The firm suggests organizations invest in the capabilities of managers to help them become more agile. 

Coaching is about “asking questions that help people discover the answers that are right for them, suggests executive coach Ed Batista. 

A good performance accountability is about having a positive conversation between manager and employee. A manager is a coach and communicator, not command and controller.

Dave Ulrich, co-founder and principal at the RBL Group

7. Spot potentials  

To ensure continuity of organizational processes, succession planning is the key. Managers must focus on leveraging talent management systems to create a ‘talent inventory’. This can be created based on available information in performance management systems around skills, competencies and past performance.  

Being future-ready at Pepsi

PepsiCo’s uses its performance management system to identify high-potential employees (HiPos) through the Leadership Assessment and Development (LEAD) initiative). This ensures availability of talent for future jobs and leadership opportunities.

8. Introspect to avoid set-up-to-fail syndrome 

Often, the poor performance of employees can be pinned on their managers. This is called the “set-up-to-fail” syndrome, explained by Jean-François Manzoni and Jean-Louis Barsoux in Harvard Business Review.  

The authors explain how the syndrome plays out:  

  1. You start with a positive relationship.  
  2. Something—a missed deadline, a lost client— makes you question the employee’s performance. You begin micromanaging him. 
  3. Suspecting your reduced confidence, the employee starts doubting himself. He stops giving his best, responds mechanically to your controls, and avoids decisions.
  4. You view his new behavior as additional proof of mediocrity—and tighten the screws further 

To avoid this, the authors suggest establishing expectations with new employees early on. And to loosen the reins as they master their jobs. Managers must regularly challenge their own assumptions.  

9. Create a supportive culture 

A supportive performance management culture spells out desirable traits and behaviors that count as high-performance.  

Webb suggests that crafting such a requires three steps:

  • Define the sort of culture that will support performance in your work group or business unit
  • Check on what the current culture is
  • Form a plan to create or sustain your desired culture

How to Identify and Bridge Performance Gaps 

A Performance gap is the difference between the actual and the potential performance levels of an individual, a unit or an organization. Underperformance can leave a lot to be desired and is a sign of a disengaged workforce or inefficient resource use  

identify and bridge performance gaps

You can bridge performance gaps by taking the steps:  

STEP 1: Identify cause 

Zero in on the causes of lower productivity levels and underperformance by reviewing past records and holding surveys. Identify patterns of underperformance in comparison to expected outcomes.  

STEP 2: Conduct competency gap analysis 

Know the gap between current competency levels of employees and levels required for them to perform better. This can reveal which skills, behaviors or knowledge gaps are causing underperformance. Follow a data-driven approach to complete the analysis.  

STEP 3: Plug gaps 

This involves multiple interventions such as:  

  1. Train and develop: To develop desired competencies in employees 
  2. Reward and recognize: To motivate employees to perform better. This can aid in reinforcing behaviors that further business objectives.  
  3. Reiterate expectations: There should be clarity and consistency in defining role expectations. All employees in a function and their supervisors must be clear on what performance is. Variance may cause misalignment.  
  4.  Cultivate high-performance culture: Lack of accountability and transparency must not be tolerated. Standards of behaviors constituting high-performance should be spelt out, communicated and reinforced.  

STEP 4: Monitor efforts  

Calculate the business value of high performance that plugging gaps will generate. Monitor progress towards that aspirational value by tracking performance metrics and taking feedback from employees and managers.  

Elements of Ideal Performance Management System 

There are some characteristics of a performance management system that may increase the likelihood of its success, claims Herman Aguinis in ‘Performance Management. Managers must keep these in mind while devising strategies:  

ideal performance-management system infographic

  • Strategic congruence 

There should be alignment between individual, unit and organizational goals.  

  • Context congruence 

The system should account for the context in which the company operates– the business and the cultural environment.  

Aguinis cites the examples of Japan and United States. While in Japan organizations focus on measuring both behaviors and results, in the US there is greater emphasis on results.  

  • Thoroughness 

This can be understood along four dimensions, suggests Aguinis:  

  1. All employees should be evaluated  
  2. All major job responsibilities should be evaluated (including behaviors and results)  
  3. The evaluation should include performance spanning the entire review period, not just the few weeks or months before the review  
  4. Feedback should be given on both positive performance aspects and those in need of improvement. 
  • Practicality 

The system must be practical and not exert excessive strain on resources and time. It should suit the needs of the organization.  

  • Meaningfulness 

The standards and evaluations conducted for each job function must be considered important and relevant,” suggests Aguinis. Further, the assessment must cover only those functions under the control of the employee. And evaluations must be held at regular intervals.  

  • Specificity 

This involves being clear about what is expected of employees and how they can meet these expectations.  

  • Identification of effective and ineffective performance 

  • Reliability 

This means having measures of performance that are “consistent” and “free of error”. 

  • Validity 

This means assessment should be for relevant performance facets only.  

  • Acceptability and Fairness 

To gauge the perceived fairness of a system, feedback of employees is necessary. Aguinis suggests this can be done along four dimensions: distributive justice, procedural justice, interpersonal justice and informational justice.  

  • Inclusiveness  

This includes giving a voice to stakeholders who may be affected by the outcome of performance assessment.  

J.D. Elicker, P.E. Levy, and R.J. Hall in a paper in Journal of Management claim that inclusive systems may reduce employe resistance and improve performance.  

  • Openness 

Assessments should be continuing. There should be a two-way communication. And what constitutes desirable performance should be stated clearly.  

  • Correctability 

This is to deal with subjective bias during reviews. An appeal process must be set up to take up grievances.   

  • Standardization 

  • Ethicality 

Assessors must keep aside personal prejudices. And all information must be kept confidential.  

How to Link Performance Management with Business Goals 

Having individual goals in conflict with company goals and strategy could prove disastrous for both employees and the firm. For employees, this may mean unpredictability, and lack of recognition and purpose. Whereas, a company may lose its competitive edge and resilience to scale uncertainties. So, aligning performance management to business goals is essential.  

organization strategy and performance management infographic

Gartner suggests ways to link performance management to corporate goals:   

1. Align systems to strategy 

The research firm advises organizations to not use performance management simply as a tool to measure performance. It must also be used to align employee behaviors with organizational goals.  

2. Prioritize objectives  

Performance management should focus on a few vital goals. These should be transparent and clear. The path to achieving them should be defined. 

3. Align employee metrics to goals 

Gartner believes that successful companies use “tracking mechanisms that align employee metrics to future goals, track task completion as well as metric success, measure the effect of that success, and reward those employees who encourage the right outcomes in the right way”. 

How to Use Tech to Manage Performance Better 

Using technology, you can track, improve and scale performance management   

As many as 65% of respondents from companies that have launched performance-related mobile technologies in 18 months said that they had a positive effect on the performance of both employees and companies.
– The Fairness Factor in Performance Management, McKinsey & Company

Keka, which provides HR technology solutions for growing firms, presents managers with a refreshing approach to performance management:  

  1. Continuous feedback: This lets organizations set up feedback as an ongoing process. As a result, organizations can regularly reinforce desirable behaviors among employees and course-correct their efforts in time.  
  2. OKR and goal-setting: This can help track employee efforts towards measurable outcomes. As a result, both employees and managers can view expectations clearly, including ways to fulfil them. Organizations can also align individual, team and department goals with that of the organization.   
  3. Performance development: The 9-grid matrix and bell curve, integrated with Keka, can help managers identify performance levels of employees. They can accordingly define development paths, reward and recognize desirable efforts and assign people suitable tasks.    
  4. 360 degree feedback: This facilitates rounded performance appraisals, that may be more acceptable to employees and perceived as fair. 
  5. One-on-one meetings: These allow both managers and employees to share feedback. The meetings offer an opportunity for continuous coaching too.  

Power your performance management with Keka.  

Book free trial 

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    Meet the author

    Sidharth Yadav

    Storiesssssssss…Ah! That was a long one. I am already high. Pass me the wordstray please. I need to stub my thoughts.  A chainwriter. A stash of wit is found on me, always. Rolling Tones of sentences to suit your taste. Sniffing books for inspiration. The only addiction I ain’t giving up. And it’s natural.


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