2016 marks a year for change in performance management, with half of organizations we surveyed planning to make changes. Following the wide press coverage of new approaches to performance management in 2015, a wealth of fresh ideas has emerged. However, sometimes the rhetoric exceeds the reality.
The challenge for organizations attempting to change performance management is a need to move past a dialogue centered on process. Questions of “to rate or not to rate” and “how to distribute rewards” are now at the heart of the performance management dialogue,with process outshining the purpose. The current dialogue loses sight of the bigger question: What is the point of performance management?
2015: The Year that Killed Performance Management
Performance management has, for many years, been a process united across organizations. Our survey of 1,056 organizations in 53 countries found remarkable consistency in the performance management process despite organizational differences in geography, industry, size, and market.
This universality prompts the question of why so many organizations follow the same process — particularly when performance is delivered in such different ways and the culture of performance is so markedly different across organizations.
Organizations and employees are beginning to hold performance management to account, with dissatisfaction growing:
- In the business, only 3% think exceptional value is delivered by performance management.
- For managers and employees, 95% are currently dissatisfied with performance management.
- In HR, 48% are currently reviewing performance management or plan to review it.
2016: The Year of the Performance Culture
Mercer’s point of view is that performance management should be right for your context: challenging the status quo and the rhetoric to find the right approach to drive actual performance in your organization. The changes planned to performance management in 2016 reflect organizations seeking to create a performance culture.
We have unpacked the concept of the performance culture to understand what it is and how to create it.
Building a Performance Culture Through Performance Management
Our point of view outlines three steps to understand and build a performance culture through performance management. They build on the idea that a performance culture will not be developed through a discussion of performance management process or views of what other organizations are doing. A performance culture starts with a back-to-basics approach to create an aligned understanding of the purpose of performance management.
- Define Purpose: Why is performance management needed? How does it underpin strategy execution?
- Understand Performance: How is work done and performance delivered?
- Design the Approach: What is the right process to inspire performance in your context?