Guide: Transform Your Performance Management Processes

Chapter 1: Start thinking about performance management in a different way


For many years, companies have made a plethora of attempts to optimize their performance management process. Some changed their rating models, while others have attempted innovating with pay structures.


HR leaders are expected to own the performance process. A process where tracking completion rates is still the number one priority.

Despite all the resources deployed, the organizations are still struggling to set up a system that drives consistent results. It’s high time we moved away from “spraying and praying” and start rethinking performance management at a foundational level – by enabling performance in the flow of work.

If you’re reading this guide, I’m sure you’ve embraced that change is needed. Change isn’t necessarily getting rid of annual performance reviews or incorporating trendy fixes. Change needs to happen with company-wide mindset and culture.

Performance management exists for two philosophical reasons: competitive differentiation and coaching & developing. Competitive differentiation involves comparing employees to their peers when rewarding and promoting them. Coaching and developing, on the other hand, provides details about the past performance of an organization or an individual that would enable future growth. 

How has Performance Management evolved?

The Purpose of Performance Management is changing with the change in Economy. It is essential to ask leaders what they are doing for performance management and the possible outcomes they are trying to achieve through performance management practices.  

Bersin’s study, conducted in 2006, found out that 80 percent of the companies have a performance process designed to put individuals on a nine-box grid. A nine-box grid refers to performance versus potential when deciding the person to receive more money and promotion, as well as giving managers a coaching tool. 

Some clients believe that performance management process forces managers to communicate toughly with other employees within an organization. For example, in an organization where all people are friendly, managers can improve on accountability by forcing the distribution of ratings. This also helps them to determine people who are performing low or high in the organization.

This idea is real for some companies, especially those that are complacent. Typically, it takes place when leaders realize that most employees are not well-trained and cannot deliver according to what the company wants. Microsoft, for example, has been using a forced ranking approach to fuel its highly competitive culture. This culture enabled it to be the most leading company in Windows in the world. Even though most people did not like this approach, it helped the company to overpower its competitors.

Things have majorly changed in today’s times. The top-performing companies will admit that the goal of performance management is “growth and development”. This involves enabling your team to perform better and grow with their role. 


Chapter 2: How can you meet the expectations of millennials?


It is both appalling and intriguing. On one hand, we are talking about the fourth industrial revolution where man and machine will work side by side. Yet, we have managed to stay in the Flintstone age when it comes to talent management systems, used by organizations. Worse, we are resisting doing something about it.

The problem exists at multiple levels.

Firstly, it is the question of, who do these archaic talent management tools serve – the ‘talent’ or the ‘management’? Most employees will recall (painfully) the experience of filling year-end appraisals on this difficult-to-use, boring tools. The experience is like typing an SMS on those single-line display push-phones of the early 2000s. I am not even talking about the difficulty, a field staff faces while accessing these systems remotely. Even, HR folks themselves have a night-marish experience, often resorting to manual excel-based follow-ups, to complete the process.

Secondly, the problem is at the level of the very talent philosophy these tools support. We are still appraising employees once a year – despite all the talk about continuous dialogues. The entire process of performance rating is a black box for most parts. Even recognition waits for the occasional townhall and most people are not sure of the criteria applied to select those who are awarded. There is no transparency or consistency in the process.

Few key questions here are:

  • Is this the kind of talent philosophy organizations believe in?
  • If not, why is there a gap between the philosophy we propagate, and the one we practice?
  • Whether a tool does or doesn’t enable the talent philosophy; should this not be a key decision-making criterion for CHROs to sign-off on tools?

Thirdly, the generation of millennials is not one that conforms. They are not those who will do something, just because they are told – unless they see sense in it. They need to know how they are performing, here and now. They are not okay with waiting for a full year to hear a year-end prophecy about their future in the organization. They are not afraid to ask questions and express their disagreement.

We are watching this story unfold in every organization. Take two of our clients. One of them is among India’s largest e-commerce platform. They are an organization who is as millennial as it gets. The other client is a Big 4 audit firm at the cutting edge of talent practices. Yet, both found themselves struggling with tools that are status quo in the market, which neither support their talent philosophy nor are well accepted by employees.

Times have changed. The technology has changed. Users have changed.

If organizations fail to change their actions, they will be much like the Emperor, parading in the past, to be called out in the open, by their very own employees.

Chapter 3: The Essentials of Continuous Performance


Performance management exists for two philosophical reasons: competitive differentiation and coaching & developing. Competitive differentiation involves comparing employees to their peers when rewarding and promoting them accordingly. Coaching and developing, on the other hand, provides details about the past performance of an organization or an individual that would enable future growth. 

Feedback is now a buzzword

Many people across the world think that feedback plays a significant part in performance management. Yes, it did before, but nowadays, companies are using check-ins, checkpoints, and conversations to collect essential information about the performance of people working there. 

According to Ashley Goodall from CISCO, it is helpful to use a tool for feedback because most people are always busy. As such, they do not get enough time to communicate with their managers. In such a situation, getting feedback online can be helpful. 

This isn’t as easy as it sounds though. Another study by Josh Bersin shows that only 22% of companies use feedback systematically. Some cultures promote open feedback in all directions; others do not. And this is often an issue-driven by company maturity.

Lastly, the term feedback is still a problem when looking at it from an HR point of view due to its negative implication. A new system of feedback can either improve or slow company performance. However, to improve on their market performance, companies should train their employees on feedback by giving the guidelines and tools to use. These companies should look at feedback as a cultural thing but not a tool for getting responses from each and every person.

Setting Goal: OKR Models and Intrinsic Motivators

For a company to succeed, it needs to have a budget, financial goals, and market targets. However, most companies do not consider all these things; they focus only on making a higher profit. Leaders, on the other hand, think about their projects and customers. The process of setting a goal is essential for the success of any business and is achieved by the good relationship between the employees and their employers, as well as their teams.

Although most managers are not familiar with the OKR model, it is the most successful model because of its simplicity. Some of the simple practices this model focuses on are;

  • Goals should have an outcome (objective leads to a result) and we should evaluate people based on a result, not just achieving a goal.
  • Goals should range from “simple and operational” to “stretch and developmental.” Everyone should have some goals for personal improvement and some aspirational goals each year.
  • Goals should be transparent so others know what you’re working on.
  • Goals should be simple and understandable, so we can actually achieve them and measure them.
  • Goals should be updated and reviewed regularly. At many companies, they are reviewed weekly in standup meetings, quarterly business reviews, and other management practices.
  • Goals should be aligned and supportive of the company goals (needs no explanation).

Although there is a need to have individuals who can set goals and share them, it is vital to have a developmental and collaborative process that will enable people to spend most of their time doing jobs. Most companies using performance management in their workflow perform better than those that do not implement it.

On the other hand, intrinsic motivation is also essential for your business. 

Many studies have shown that while goals are important, paying people for goals can hold people back. Intrinsic motivators (doing work you love, serving others, innovating, creating) are far more powerful than simply getting a bonus for closing a deal, so make sure your goal setting process is expansive and not too linked to pay. 

The need for Recognition

Employee recognition is a very powerful engagement tool. Even in a format as simple as a quick shout out in a slack group. 

Researchers have proven that when you thank someone, it releases oxytocin, a hormone that makes people more relaxed, collaborative and happy.

A Harvard Business Review study showed that recognition was the most impactful driver of employee engagement.

Companies are building a culture of recognition through social reward systems. New-age methods like weekly or monthly appreciation, and a general culture of recognizing all your workplace peers.

Key to enabling success here is to create a social environment where recognition can flow from peer to peer, freeing managers from being the “gatekeepers” of praise.


Develop both Managers and People

The final thing we’ve seen in the last few decades is that – there’s no point in giving someone feedback without showing them how to improve. 

One of the important trends, in fact, is the need to evaluate managers based on their ability to engage their teams. 

Yes, managers have to get work done; but that alone is not enough. We have to show them “how” to get work done well, and that means they need development too.


Chapter 4: Performance process audit and implementation


Auditing the current system

Interestingly, most people find themselves launching new systems without understanding how systems operate in helping them achieve their business’ objectives. Auditing the current system of your business is important as it enables you to concentrate on specific areas that impact your business positively. 

The two main factors you should consider when auditing your system include; 

  • Structural Analysis: Just like in building construction, it’s necessary to have a solid understanding of the foundation you’re building on. This can be enormously helpful in designing the blueprint for a system that is built to last. Look for answers to questions like:
  • Where is the current program already working well?
  • Where is the current program falling short?
  • Which areas can be improved immediately, and which will require more time and effort?
  • Identify and involve key stakeholders: A performance management program impacts everyone in the organization, from last week’s new hire to the CEO. That’s why it’s crucial to gain buy-in from all levels. Learn the history of your current program, identify its key stakeholders, and get their input. They will be instrumental in the success of this initiative.

How to meet and exceed your Employee expectations

In order to meet the needs of your employees, it is important that any initiative or change on your performance management enhances peace, unity, and cooperation in your organization. 

The system should be objective, autonomous, should foster feedback in real-time, promote the development of skills, be transparent and enhances the growth of your company and employees.


  1. Technology: Do not use a product because other companies are using it. But make sure the technology you choose gives you a competitive advantage. There are many tools you can select from to help you achieve your objective.
  2. Integration: Before launching your new system, it is good to consider how it will integrate with the other administrating systems because it will help you understand if the new system will promote efficiency in the business.
  3. Intuitiveness: Since modern employees like to interact with systems which provide a delightful user experience, an intuitive tool will definitely play a part in winning the votes of your employees.
  4. Communication: Communication plays a vital role in the success of any business. As a business person, you should ensure that the new system improves business communication.