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Mar 30, 2016
This article is part of a series called Editor's Pick.

Adobe did it. Gap, Netflix, and GE are doing it.

Microsoft played with it. Yahoo is being challenged in court for not doing it.

Revamping performance management is on nearly everyone’s minds. It’s a hot topic based on a hard reality check: Old-school methods of tracking talent, forged in the post-war 1950s, simply won’t work in today’s business environment.

Worthy intentions, but an approach that misses

Performance management has worthy intentions: To drive organizational performance while supporting individual development. But, it’s the approach that misses.

Just consider performance reviews, which elicit universal groans, destroy trust between management and employees (and employees and employees) and put a damper on employee engagement.

HR professionals (myself included) know it. Studies are showing it: In a 2015 survey by Deloitte, 75 percent of respondents believed performance management was a key issue, and 89 percent were either in the process of changing their system, or were planning to do so within the next 18 months.

To avoid treading on the same old ground requires a “that was then, this is now” form of clarity. So let’s look at why performance management needs a total revamp.

The 8 fatal flaws

It’s all based on eight (8) fatal flaws:

  • Fatal Flaw #1A theory without evidence is just a (bad) theory. There is no sound evidence that traditional performance management leads to improved performance. There is plenty of evidence connecting engaged teams to high-performing organizations, but performance management as we know it often leads to disengagement. To wit: A recent CEB (formerly the Corporate Executive Board) survey found that 66 percent of employees felt the performance review process interferes with their productivity; 65 percent said it wasn’t relevant to their jobs.
  • Fatal Flaw #2 —  Nobody really opens up with the person who pokes them in the eye. Traditional performance management impedes the reception of feedback and limits honest dialogue. An employee can’t have an open and honest conversation about their performance, hopes, fears, and goals with a person who is going to judge them, especially if the judgment affects salary, recognition, promotion and other life-changing issues.
  • Fatal Flaw #3 — Nobody remembers the good work. Performance reviews tend to emphasize the negative. Unfortunately, it’s the rare bad moments that stand out like beacons. Managers find it very difficult to remember the good work an employee did in the beginning of the year, and employees who receive “good” ratings often leave performance discussions feeling disappointed and downtrodden. Too often, too much weight in such discussions is placed on areas of improvement; too little on an individual’s strengths, contributions, and potential.
  • Fatal Flaw #4 — No man (or woman) is an island. In traditional performance management, the focus is on the individual, even though system or organizational challenges often have a significant influence on individual performance. It’s often impossible to separate the performance of the employee from the performance of the group, team, or organization as a whole.
  • Fatal Flaw #5We are not machines. Fairness and standardization in ratings and the judgment of performance simply cannot be achieved. We’re all human — and therefore biased. Can we really objectively parse criteria to rate someone as a 3.1 performer instead of a 3.2?
  • Fatal Flaw #6 — We are not machines, redux. Review output is unreliable for making talent decisions. Given that we’re biased humans, how can we rely on the output of performance appraisals to make decisions on important business functions such as compensation management, succession planning, development goals, and employee performance reporting?
  • Fatal Flaw #7 —  Let me introduce you to your competition; now play nice together! Comparing people to one another erodes efforts to create a collaborative culture. If we truly want creative, agile organizations in which people with diverse skills and backgrounds and perspectives can collaborate and are willing to take risks, then we must dismantle the competitive constructs (such as stacked (forced) ranking, or ratings brackets) that erode those ideals.
  • Fatal Flaw #8 — We are not Pavlov’s dog. Pay-for-performance does not deliver improved performance. Traditional performance management is based on the assumption that extrinsic motivators (those things you do to avoid punishment or get a reward) are the best way to get employees to work harder and better. But we know now that people are much more motivated by doing things they find personally rewarding. The workplace culture has changed a great deal since the 1950s.

Wanted: A modern performance management solution

Once we absorb the fatal flaws with performance management, what’s the next step? It’s to shift our thinking to fit today’s world of work.

We can step back to look at our strategic goals, and set out to build a program that works for our particular organization. There’s no such thing as one size fits all.

The goal should be a modern performance management solution, tailored to drive organizational performance, aligned with the environment and culture of the workplace, and created to support and engage its people.

This article is part of a series called Editor's Pick.