What Does Your Company Gain by Focusing on Performance Management?

In the 1860s, when Great Britain sent prisoners to then-recently established penal colonies in Australia, the British government hired ship captains who were compensated for each prisoner who embarked on the ship. The survival rate of the prisoners who arrived in Australia was barely 40%, owing to the precarious conditions and the poor treatment.

In 1862, the economist Edwin Chadwick suggested a change in the incentive structure. The ship captains were no longer compensated for every prisoner who got on the ship in England, but, instead, received payment for each live prisoner who disembarked in Australia. Not surprisingly, the survival rate increased to more than 98%. This is an example of the importance of a system that motivates and induces desired behaviors.

In recent decades, many companies have introduced and operated performance management systems to induce the desired behaviors of their employees. This traditional performance management had goals of:

  1. Linking corporate strategy to employee behavior. Connect the work of the employees with the strategy. A process was needed that permits verifying the behavior and the goals of all the company associates to the corporate goals.
  2. Maximizing corporate performance. The introduction of KPIs (Key Performance Indicators) should stimulate a strong attention to the objectives in an organization or in its members, and in theory creates strong motivation.
  3. Aiming for completely objective performance management. With an unsatisfactory performance evaluation system, it’s most likely that talented people will depart the company unsatisfied due to the lack of rewards and recognition for their contributions to the company.

Strategic Performance Management is a set of tools to build a corporate structure oriented towards objectives, linking evaluation and fairness in compensation. In the new models of performance management, however, the focus is on the strong points of the worker and on how to continue to recognize and develop them. One reference for best practices is Professor Carol Dweck, of Stanford University, who concluded that a “growth mindset” is most effective and attains superior results.

However, it seems that few companies can be certain that those performance management systems had fully realized their potential. According to Deloitte “Annual assessments have become an outdated method for the ever-changing world; year-end formal reviews are increasingly ineffective compared with feedback given in real time between managers and employees.” And it’s with that view that professionals and leaders in Human Resources must review and revise their processes and methods, in order to find and sustain those who can best meet the challenges that the company must face.

How is performance management carried out in your company?

The objective of Connect HR Strategy is to help you obtain organizational efficiency through investigating the real causes of problems that hold back the company and implementing concrete solutions applied in the specific context of your business.

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