The accelerated pace of today’s business world makes it increasingly difficult to think in multi-year cycles and set rigid top-down goals on an annual basis. You can handle this by reducing the cycle time and implementing an iterative, interactive process. That way you can deliver results while being able to adequately adapt to internal and external changes.

This article is part of the series “How Lean | Agile Enterprises Push the Reset Button on Performance Management”

#1: Shift to an iterative, interactive process aligned with your optimal cadence

The Performance Management cycle is typically aligned with the financial reporting and HR calendar, which run on an annual basis. Consequently, most organizations set performance goals once a year. According to the 2014 ERC Performance Management Practices Survey only a small number of companies make it a semi-annual (7%) or quarterly (2%) occurrence.

Yet, no matter what industry you are in, you are likely to experience the accelerated pace of today’s business world. It has become increasingly difficult to think in multi-year cycles and set rigid top-down goals on an annual basis.

A Performance Management system that is set out to define and evaluate goals every 52 weeks is simply not able to keep up with the speed and demands of the digital age. This is especially challenging for Agile teams working on a 1 to 4-week cadence.

The lengthy 1-year cycle robs you of the opportunities to learn and adapt to internal and external changes. However, you can respond by shifting to an iterative, interactive performance process and by reducing the cycle time to best fit the flow of your value streams.

Getting the cadence right is the first step towards accomplishing an optimal balance of responsiveness, predictability, and reliability. Make sure to understand the importance and impact of varying times in order to establish the right cadence for your teams. You don’t want to have iterations that are too short (<1 week) for real achievement and learning, nor do you want them too long (4 weeks +) with the risk of losing focus and agility. The majority of teams run on 2-week iterations. If in doubt about your flow, this might be a good starting point for you too.

Each iteration follows a clear path with the common ambition of delivering tangible results to the customer(s). This is the ultimate goal of Lean | Agile teams. And that makes performance their key driver.

University of California, Berkley accurately defines Performance Management as an “ongoing process of communication including clarifying expectations, setting objectives, identifying goals, providing feedback, and reviewing results.”

Agile approaches embrace all these elements in such a way that they are not only the core parts of each cycle, they are also deeply embedded in the workflow and routines. But this is not done in a top-down approach. It is a collaborative effort involving each team member.

The shift to an iterative, interactive Performance Management process will give you a competitive advantage in a fast-paced, complex business world where the ability to learn fast and adapt swiftly is key.

Are you ready to push that reset button?

Traditional Performance Management systems are in deep crisis. Their industrial era approach is unable to meet the demands and thinking of 21st century people and organizations. Lean | Agile enterprises press the reset button and move from an administrative Performance Management process to a successful iterative performance flow.

The results of the SHRM Survey, “HR Professionals’ Perceptions about Performance Management Effectiveness,” show the hard truth: Only 2% of organizations attest that they practice a grade ‘A’. In other words, a staggering 98% of enterprises are not satisfied with their current solution.

Other studies paint a similar picture with a long list of complaints – from employees, managers, and HR alike. Here are some of the most common criticisms:

• Performance Management is driven by calculating incentives rather than defining meaningful and inspiring goals.
• Goals usually are quickly outdated, obsolete, or simply forgotten.
• Goals cannot be translated into daily actions and fail to drive accountability and engagement.
• Cycle times are far too long for a fast-paced, evolving business setting.
  Reviews are all about appraisals and not (enough) about opportunities and development.
• Annual appraisals are too ritualistic and cannot keep up with the need for fast, constructive feedback.
• Bonus models undermine collaborative behavior and do not foster people values.
• Reviews are wasted on explaining a number and not used to reflect, learn, and grow.
• The whole process is bureaucratic and time-consuming, yet organizational development is completely ignored.
• Forced distribution/staked rankings are demotivating and wreck our best people.

So, no matter how you look at it, current practices have long ago lost their intended ability to align goals, encourage joint efforts, and foster great results. They do not inspire meaning and growth, and there is no way they can keep up with the pace and energy of Agile teams.

Rooted in the industrial era, traditional Performance Management approaches are not made for 21st century organizational challenges. We need to push the reset button – now more than ever!

Here are 7 steps to move from an administrative Performance Management process to a successful and inspirational iterative performance flow:

#1: Shift to an iterative, interactive process aligned with your optimal cadence

The accelerated pace of today’s business world makes it increasingly difficult to think in multi-year cycles and set rigid top-down goals on an annual basis. You can handle this by reducing the cycle time and implementing an iterative, interactive process. That way you can deliver results while being able to adequately adapt to internal and external changes. Read full article

#2: Share an understanding of vision, set inspiring goals and clarify expectations

We operate in a complex and highly demanding world with an endless need for innovative and mind-blowing results. Being able to inspire people to greatness is imperative. It takes a strong vision that people share (not just a nice plaque on the office wall). This vision is your anchor for a roadmap with inspiring goals that answer the Who/What/Why (but not the How). Read full article

#3: Empower self-organizing teams and hold them accountable
The digital age belongs to knowledge workers who think outside the box. No wonder constricting processes and micromanagement are not going down well. Make sure to bring these talents together in collaborative, self-organizing teams and throw fast feedbacks, constant communication, access to data and knowledge, and decentralized decision-making into the mix. If you are a manager and worried about accountability; here are the good news: Contrary to popular belief, Agile is a highly disciplined way of working. And Agile teams prove that every day. Read full article

#4: Embed individual and organizational learning and development into your workflow
Companies must constantly evolve to meet new challenges and opportunities. Learning and development is a key part of the equation, not only on a personal level but also on an enterprise level. You must provide the time and space for people to inspect and adapt in order to create a learning culture that is supported by work practices and daily routines. Read full article

#5: Motivate through mastery, autonomy, and purpose rather than cash incentive
Due to the industrial era belief that money is the strongest (and only effective) motivator for employees, traditional Performance Management approaches are strongly linked to cash incentives. But ever since Daniel Pink’s “Drive” (and decades of scientific studies), we know that 21st century knowledge workers are, in fact, intrinsically motivated and driven by mastery, autonomy, and purpose. It is time to rethink your motivational theory. Read full article

#6: Eliminate performance ratings and annual appraisals in favor of open dialogue and continuous feedback and sharing
Companies excel at calculating ratings. They judge, force rank, provide infrequent and limited feedback, and assess outdated, obsolete, and irrelevant goals. And then they wonder why appraisals are so despised! Forget performance ratings and annual appraisals. Instead, create a culture of mutual respect where candid dialogues, continuous feedback, knowledge sharing, and learning are integral to the workflow. Read full article

#7: Accept that handling (poor) performance is a leadership mandate and don’t hide behind Performance Management
Organizations misleadingly believe that their Performance Management will miraculously separate their people into groups, rewarding the stars and dealing with the low performers. They might even apply forced rankings to guarantee an adequate separation between the two. Stop pretending! You don’t need annual reviews to know your players. Accept that handling poor performance is a leadership mandate. And no approach will (nor should) take that responsibility away from you. Read full article

Are you ready to push that reset button?