Thank goodness the end is in sight for the hated annual performance review. Because the idea that you can manage performance through an annual conversation is as outrageous as expecting to manage your marriage through your anniversary. No wonder annual appraisals have become to recruiters what Christmas is to divorce lawyers.
In July, Accenture led the charge by ceasing annual reviews across the organisation. Netflix, Microsoft, Adobe and Deloitte have all ditched performance management as we know it and caused a lively debate about the role of the system in the process. In fact, almost nine out of 10 organisations have either revised their performance management system in the last 18 months, or plan to do so soon.
But if their objective is to boost performance, they’re looking in the wrong place. The system you choose will make little difference to performance if your managers don’t know how to get the best from their people. All the debates about rankings, reviews and performance-related pay may in fact be missing the point. A performance management system - however a company decides to instate it - is essential for tracking trends, ensuring fairness and meeting legal requirements. But believing that a system, with or without rankings and reviews, will improve performance will leave managers disappointed.
The key to performance doesn’t lie in a process; it lies in encouraging the right behaviors to build a high performance culture. It lies in setting up and maintaining certain psychological conditions that keep people performing at the top of their game.
At Mind Gym, we call these the ‘six conditions’ and they are:
1. Purpose
‘Why am I doing this?’ is a question most of us have asked ourselves. The richer our answer the more likely we are to perform at the top of our game. There are three types of ‘purpose’ that directly affect performance:
- Task purpose. Knowing our work counts and isn’t futile.
- Collective purpose. Seeing how our work combines with others’ to create something none of us could achieve alone.
- Social purpose. Recognising that our work makes a worthwhile contribution beyond the success of our organisation.
Whether we work in the back office of a bank or the front line of a charity, we can derive purpose from a task well done, by achieving goals as part of a team, and by paying attention to our social impact. Managers should tell their reports about the impact their work has had and show how they are contributing to team and company objectives.
2. Challenge
We perform best when we’re suitably challenged. The question is: how much challenge is reasonable?
There’s much more to challenge than simply setting goals and measuring performance. The most performance-enhancing goals are:
- Just out of reach. If you believe your goal is just about possible but can’t currently see how you’d achieve it, it’s probably the right level of stretch.
- Aligned. Individual goals that are aligned to strengths, motivations as well as the organisational strategy.
- Always up for review. The world around us changes fast and so goals need refreshing too.
One six-year study of 229 entrepreneur CEOs concluded that business growth was largely driven not just by stretching goals but by helping employees believe they could achieve them. In building this belief, the manager’s responsibility is to help the individual appreciate the goal is ‘just about possible’. The individual’s responsibility is to take on the challenge. Goals should be reviewed frequently to check they are still appropriately stretching.
3. Attention
The feedback that makes the biggest difference is:
- Descriptive. Saying what you see someone do has more impact than evaluating it.
- Informal. Comments given frequently as part of conversations are easier to digest and allow time for reflection.
- Informed. Managers have awareness of what everyone is doing.
The simple act of noticing and saying what you noticed can be the most powerful feedback. Employees who know their manager is involved and invested in their work are far more likely to feel appreciated and raise their game. The key to paying attention is lightly and often. A quick observation, delivered informally can have more impact than a formal conversation.
Frequent feedback is best, at the very least once every two weeks. And be sure your feedback is descriptive, not just evaluative.
4. Growth
We grow faster when we have:
- A growth mind-set - believing we can get better.
- A role that plays to our strengths and skills.
- Sight of better prospects. We can see that by getting better now, we’re more likely to attain something that matters to us in the future.
Those who cannot see how their working life can progress get stuck. They have lowered aspirations, diminished self-esteem, are less engaged, perform worse and are ultimately more likely to leave.
When promotions and pay rises are scarce, ‘moving’ needs to mean more than moving up the hierarchy. Progress may include new skills, project opportunities, lateral moves, job rotations, secondments, shadowing, leadership opportunities or even a sabbatical outside the company, all of which help people ‘unstick’ and get moving. Managers can try setting aside 1:1s each month specifically focussed on career coaching with their direct reports.
5. Recognition
We feel most appreciated when recognition is:
- Fair. Based on clear criteria and applied consistently across the business.
- About me. Not the person giving it.
- Differentiated. The difference between how the best and worst are recognised is proportionate and based on objective, performance-related criteria.
One of the largest predictors of satisfaction is social comparison: employees who look around them and perceive they aren’t being recognised fairly don’t perform as well. And so, though we might tell ourselves that the question which matters is: ‘is it worth the effort?’ we’re actually more affected by the answer to: ‘am I being treated fairly?’
Recognition done well delivers a significant boost in performance. In service organisations this can be by as much as 15%, rising to 30% when combined with feedback. Managers should understand each team member and what they are motivated by, ensure process and communication is fair and consistent, and watch out for their own personal biases.
End-of-year reviews (if they happen at all) should feel part of an ongoing conversation, not a surprise. They should be an opportunity to take stock of the year past, and look forward to what’s next.
6. Choice
We keep performance high when we:
- Create support networks. Building a strong network of technical, emotional and practical support.
- Adopt an optimistic outlook. Interpreting challenges as short-term, specific and insightful.
- Focus on what’s in our control. Drawing on inner strength and grit to maintain effort and interest over time to sustain performance in spite of setbacks.
Together with leaders, managers can reflect on where it’s possible to give people autonomy and ownership to maximise their choices. When discussing plans they should explain the choices people have in how to implement them. Managers should be open with their teams, sharing mistakes, risks, successes, challenges and opportunities - reframing failure as an opportunity to learn and sharing examples of their own. Mangers can be responsible for creating peer networks so everyone has a variety of support to call on when things get tough.
So put aside the discussions about rankings, annual reviews and flashy new HR software. Creating the right conditions for everyone to perform at the top of their game is the performance management approach that works. And it’s based on the psychology of human behaviour.
