If performance management is the process of ensuring employees perform better, you first must define what you mean by “better.” Front-line managers may define it as staff accomplishing daily tasks. Senior leadership may define it as improving the organization’s overall efficiency. A team member may define it as developing new skills to advance a career. Good performance management tools must link all three definitions.
When you have clear performance standards—and straightforward metrics for demonstrating whether they have been achieved—you can fit those standards into your organization’s culture, leadership styles, and business model.
With the dawn of the Industrial Age and its shift from farming to factories, came a more organized approach to performance management.
A quick look at the history of performance management can help you decide on the best strategies, methods, and evaluation metrics for employee performance.
Performance management is as old as work itself—our ancestors could count whether this year’s hunting had more success than the last’s. Farmers could assess their fields’ productivity year by year. Merchants evaluated which items were becoming more popular with customers.
With the dawn of the Industrial Age and its shift from farming to factories, came a more organized approach to performance management. Supervisors devised new tools to improve productivity such as assembly lines. An innovator named Frederick Winslow Taylor was among the early proponents of scientific management: the science of doing each task exactly right with a minimum of wastage. Both Henry Ford and Frederick Taylor used time and motion studies to determine work processes and performance standards.
However, not every new idea was an advancement. Douglas McGregor of MIT devised Theory X, which says that employees love to shirk their duties and take no personal pride in their jobs. Managers adhering to this type of performance management model were prone to pay poorly, limit rewards, fire workers who struggled to meet quotas, and place more emphasis on meeting daily targets than on the employees’ potential for long-term contributions to the organization. Early managers disregarded the inherent human differences in their employees, often to the detriment of both the organization and the staff.
Management theorist Henri Fayol believed that while individual interests should be subordinate to the organization, the organization must allow employees to innovate and should build team spirit. However, most work environments were not designed to encourage positive employee involvement in these ways.
While advances have been made since those early years, deplorable working conditions still exist in today’s world, as evidenced by the horror stories that have come out of Sports Direct’s U.K. warehouses.1 (Goodley and Ashby, 2015; Lawrence, 2016). Some managers have yet to learn that treating employees well and enabling their rise in the organization is crucial for long-term business success. Unrealistic performance standards and punitive working conditions create attrition, absenteeism, and health issues; and leave the company susceptible to legal and regulatory action.
Going back to the history of management, the Hawthorne experiments began changing managers’ long-held notions by showing that creating a positive social environment among employees can improve their productivity.
In time, McGregor’s Theory Y, which argued that people desire to work hard toward goals and will respond to positive reinforcement, gained a greater following. Today’s norms of feedback and employee engagement are proofs of how communication, attention, and consideration can improve employee performance. However, despite these positive shifts, human relations movement remained more paternalistic than progressive.
Until the 1950s, the most popular tool for measuring performance and results were annual appraisals conducted by the supervisor. These appraisals were kept confidential and served as a basis for promotions, increase in salaries, incentives, and dismissals. In most cases, decisions were not reviewable. Many employees felt that performance management was out of their control and often more punitive than beneficial. Even today, managers who maintain dictatorial control over performance appraisals reduce the efficacy of performance management as a tool for employee development and engagement.
Peter Drucker revolutionized perspectives on performance management with his Management by Objectives (MBO) technique, which included tenets such as identification of organizational objectives; the creation of specific, measurable, achievable, realistic, and time-based (SMART) goals; joint goal-setting between employee and supervisor, periodic feedback about performance, frequent monitoring of performance, and honest evaluation of results. The change was meaningful: as employees gained a voice in their performance standards, they saw a link between their performance and the organizational objectives. They could also then improve performance based on transparent feedback. Today’s performance standards have built on the MBO approach by linking themselves to the firm’s strategic objectives through the Key Result Areas (KRA) and Key Performance Indicators (KPI).
In this new approach, employees communicate more easily with supervisors, are better aligned with organizational objectives, and tend to accept decisions stemming from their appraisals. Employees are also more likely to improve performance according to the received feedback and remain engaged in their work.
In the last few decades, performance appraisals have begun to include an estimation of an employee’s potential. This metric compares the employees’ historical performance with their potential for further development. Potential appraisals can provide HR managers with a rich source of internal candidates who can be developed to rise within the organization. However, this entails several caveats. First, supervisors must be trained as mentors or coaches in order to effectively identify the employees’ capacity for professional growth. Second, performance management must be supported with development opportunities. Finally, employees must be given opportunities for promotion and other rewards that build trust and faith in the system.
In this new approach, employees communicate more easily with supervisors, are better aligned with organizational objectives, and tend to accept decisions stemming from their appraisals.
In this era of agile HR, performance management has become a highly sophisticated exercise. Rapidly developing software, artificial intelligence, and swift advances in communication technology can help in determining standards, providing feedback, and measuring performance while eliminating psychological errors.
Despite vast historical changes in performance management and the degree of technological sophistication available to your organization today, one thing remains unchanged: unless employees truly believe your performance management system can help them develop, they will lose faith in it just as their predecessors lost faith in the punitive systems of the Industrial Age.
Today, you can apply a sophisticated performance management tool that systematizes goal setting, synchronizes employee expectations, monitors employee accomplishments, gives continuous contemporary feedback, and decreases time spent on writing performance reviews. That tool is called Perfecting Employee Performance.
1Goodley, S. and Ashby, J. (2015) ‘A day at “the gulag”: what it’s like to work at Sports Direct’s warehouse’, The Guardian, 9 December.
Lawrence, F. (2016) ‘This is a brutal and inhumane way to treat staff – and Sports Direct is not alone’, The Guardian, 8 June. Available at: https://www.theguardian.com/commentisfree/2016/jun/08/inhumane-sports-direct-mike-ashley-workforce.