New performance management models have become imperative to improving engagement and retention, innovation and company performance.  Research done by Bersin by Deloitte’s in their Global Human Capital Trends for 2015 indicates that “the transformation of the aging performance management process is long overdue” and that in 2015 “the importance of performance management rose significantly, with 75 percent of respondents rating it an “important” or “very important” issue, up from 68 percent last year”.  The 2014 Global Human Capital Trends found that the traditional performance management models being used today is damaging to employee engagement, alienate high performers and costs manager’s valuable time.  Only 8% of companies reported that their performance management process drives high levels of value while 58% said it is not an effective use of time.

Focus for performance management is shifting and aligning with the new agile way of doing things (self-organising and highly adaptable) and emphasizes coaching and feedback, continuous employee development, agile goals/targets as well as new technologies to make performance management easier.  In short it is evident that performance management needs to catch up from the post Industrial Revolution era to the new Computer/Technology era that is constantly forcing organizations to change at an unprecedented rate to cope with the reality of volatile, uncertain, complex and ambiguous world (VUCA).  Agile Performance Management is designed for the new world of work, it shifts the focus from annual evaluation and rankings to continuous feedback and development. It is more collaborative, social and faster moving.

As far back as the 1970’s, research has showed how incentivising with money makes people less interested in their work once they have been paid their incentive and that other people who aren’t offered money, do their work longer and with more interest (Edward Deci). His work uncovered the powerful and significant difference between extrinsic motivation (the kind that comes from outside), and intrinsic motivation (the kind that comes from within yourself). So how do you attain that intrinsic motivation and what does this mean for performance management today? Dan Pink, in his book, Drive, lists three elements that talks to intrinsic motivation: autonomy, mastery, and purpose. In situations where people are paid fairly these three elements drive, engage, and stimulate us to do operate at our best.

Agile performance management moves us towards the concept of intrinsic motivation, it not only talks to the rapid exchange of information prevalent in our world today but also to what has been proven to motivate people to perform better. Unlike traditional performance management it keeps pace with the rate of change, is more flexible, it uses simple techniques and focusses on regular reviews as well as growth and development.  If used correctly it incorporates the three elements identified by Dan Pink:

Autonomy: Talks to our sense of self. Managers who allow autonomy by helping employees make progress through giving meaningful feedback, choice over how to do things and encouragement has resulted in higher job satisfaction and better job performance.

Mastery: We want to master our skills or get better at doing what we do. A sense of progress, not just in our work, but any of our capabilities, contributes to our inner drive.  This is why truly agile companies offer incentives to master new skills, be they work related or not e.g. scuba diving, attending a hackathon in another country, etc.

Purpose: When people have purpose, a reason to get out of bed in the morning, they have unlocked the highest level of the motivation. Pink says that it’s connecting to a cause larger than yourself that drives the deepest motivation. Powerful cultures where people are linked to a company’s mission and vision create a common purpose so powerful that it drives highly motivated, performance inspired teams.

How does agile PM promote autonomy, mastery and purpose?

  • Social recognition, self organisation and crowdsourcing play a part in creating autonomy
  • It should have an emphasis on development and forward looking performance for mastery with regular check-ins and feedback. It should also recognize the importance of coaching and just-in-time learning rather than just formal studying.
  • Agile performance management is designed for a collaborative environment that drives clarity of vision and purpose
  • In addition to promoting autonomy, mastery & purpose, it takes into account that goals can change if business priorities shift. Rewards are frequent and not just annual; they are given as a form of continuous recognition.  Continuous recognition promotes autonomy and mastery, it recognizes mastery of skills and accomplishments and fosters a sense of purpose.

Compelling reasons to move away from traditional performance management:

  • Employees and managers dislike it intensely and consider it a waste of time
  • It doesn’t achieve what is was designed for – to improve performance
  • Nobody does it well, despite extensive training as well as time and budget allocation to getting it right (the cost is almost not worth any derived benefit)
  • It promotes unhealthy competition not collaboration and innovation

In conclusion, agile performance management has been proven to work for both the company and individual.  Top performing companies like Google, General Electric, Microsoft, Apple, Atlassian, Spotify, Deloittes, Accenture and IBM are successfully using or implementing varying forms of agile performance management.

We are collaborating closely with clients to explore the best approaches to transitioning from traditional performance management models to more agile, talent based, brain friendly and engaging dialogue based performance management models.  Contact us, we will happily share our ongoing learning and journey with you.