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Good goals are the ones that people set for themselves and it is the same at work. Cascaded goals fail by the end of February and if you don't believe me, read Marcus Buckingham's research or just look back at your employment history. The way we manage performance doesn't work for many reasons one of them being that it aims to measure performance not to improve it and the second, that always bugged me, that it is "too fair."
In this article, I want to tell you about the performance management system/structure I just finished building for a small construction/design company of 650-ish people. These were some of the basic principles I incorporated. The owner of this company was super open to new ways of managing performance and he came up with crazier ideas than I:-)) So here it is:
We started from scratch and made a decision not to copy-paste anything without good reason. Lucy Adams, in her work, also confirms that companies that start from scratch when redesigning are more successful at transforming their performance management system. "One of the most common mistakes we see is HR teams trying to hold onto the old system whilst encouraging the move to frequent check-ins. They retain the annual cycle, the end-of-year forms, and sometimes, even the ratings – and then try and layer frequent check-ins over the top. You can understand why they adopt this approach as it feels less scary if they can point to the incremental nature of the change. But rarely do we see frequent check-ins become the norm whilst they cling to the old structures. If the old structure remains intact, the focus on the check-in gets lost. Managers continue to see performance management as a formal process that they have to do at certain points in the year. Completing their forms and giving out ratings remain the key outputs."
First things first, employees' goals are the same as the company's goals! Most of the time you find them misaligned. We measure how Debbie is behaving but it is not in the KPIs or Objectives etc... We also agreed to keep it simple with a maximum 5 KPIs and objectives which are broken into two categories: Business objectives, the hard revenue KPIs etc. and job-related objectives that need to be completed even if it is not directly linked to achieving the hard KPIs. For example, for HR it was the rollout of the performance management system by the end of 2024. This has. timeline for the entire year which can be easily tracked.
People set their own goals in alignment with the company's goals and objectives. They also adopted this approach to performance development. Involving people in their performance is key and social pressure and competitive spirit also kick in and corrects for setting low personal goals. So if the team must make 100K per month and you have 10 people on the team, they get to decide how much each commits to bring in. It is not the "fair" system that everyone must contribute 10K equally, This approach ignores talent and fails to acknowledge differences in performance and average performance out.
Reward high performers! They introduced variable compensations quarterly and moved away from annual bonuses. Now this was tricky because each department required a different approach. Sales were easy. Base salary + variable compensation based on sales targets. The operational department had base salary and their variables depended on delivering projects and deadlines. In the same case, they broke variables into 2-3 areas so even if the business didn't grow because of external circumstances, employees stay motivated because they are rewarded for implementing or doing something that was not in their set goals. Now here is the best part; the company rewards the top 10% of performers separately. No, they don't care about the equality speech and I was all for it. If you stand out and perform well they will appreciate it with MONEY! Not with silly certificates or cinema vouchers, but with money. You must reward and invest in your top performers because they are the ones who move your organisation forward.
Leadership's and the management's KPIs fall into two categories; business and employee experience. BOOMMMMM The basic principle is; do you make money and do your employees have a great time? Both are easy to measure without going into behavioural competencies which they abandoned halleluja! We don't need Debbie's behavioural competency framework if we measure employees' experiences because we don't care how the management and the leadership achieve that. If the staff is not having a great time we find out why and develop managers and leaders based on that and not based on a pre-determined framework that is detached from reality. We have made an agreement that I insisted on, no matter how well the manager or leader delivers their business KPIs, if their people KPIs are below the required within 3 consecutive quarters they will be said goodbye to. Let's see how that works:-)))) I am holding my breath!
Competency Framework without behavioural competencies. God yes! We don't need competencies you cannot measure like my strategic thinking, communication, influencing or self-developing skills. Their competency framework is personalised for each department and linked to the roles. They are broken into two categories; knowledge and technical skill which for we will be designing assessments. Easy!!! Now, as for the behaviours, they use the values. Voila!
Performance management is not difficult, all you need is a few clear goals, keeping people focused on those goals through frequent measurement, and when they achieve it, reward! If your employees' goals in their appraisals are not the same as the organisations' goals you are wasting your time and just going through the notion. Make those goals the same so they are clear to me as an employee what I need to do in my role. If it is customer satisfaction and I am cleaning the toilet I know that I need to clean it well and I need to smile at the guests/customers otherwise I will not achieve the goals.
Performance management is easy however, it must be customised for each department & organisation and this is what companies are not willing to do along with putting high performers on a pedestal. If I am the best waitress or the best manager and I am rewarded and compensated the same as your average or worse waiter, what is the point of me making an effort? Nothing, I will chill because I'll get the same.
Don't be scared of rewarding and compensating people based on their performance but for that, you must be clear about those performance goals.
PS: Do not mix and confuse performance management and development!
Exciting news! My second book, "Blind Leading the Disengaged - From Kindergarten to Employee Experience," is dropping in April! It's a treasure trove of solutions and cool ideas to shake up your people management game. But before we get there, let's chat about where we're at now—The Corporate Kindergarten, as I spilt the beans in my first book. Check it out, and let's transform your workplace from a daycare to an awesome employee experience hub!:
Join me on YouTube and learn about designing Employee Experiences:
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