undconsorten LLP

Performance Management trends revisited


Some trends in performance management are controversially discussed on a regular basis: doing away with individual targets and bonuses, no more ratings and, above all, much more feedback - all this is being hotly debated in many companies. We also have witnessed adaptations or even the complete relaunch of performance management systems for a number of our clients. But what remains of the hype surrounding the "revolution” of PM? Together with top managers from more than 20 companies, we took stock in our Round Table and looked to the future. The focus was on four topics in particular:

Effective target setting


Traditional performance management assumes that individual targets are anchored in a complex system of key performance indicators. In this case, less is more. A transparent and clear orientation towards action for the employee can only be achieved by means of simple and catchy targets - even if they do not reflect reality 100%.

Goals at company level that nobody understands are useless.

In many companies, individual target systems are now supplemented by collective targets. These should reflect the overarching corporate strategy, but at the same time should be located at a level with which the employees can identify themselves. The collective target "Company EBIT" has to be reflected from an incentive perspective for a line employee or team leader.

Optimized ratings


Ratings, in other words, the culmination of an assessment to a number or other categorization, are being loudly abolished by many companies. The main arguments are above all their partially demotivating effect and a lack of development orientation.

But there are also many voices that warn against a loss of objectivity and transparency - "shadow ratings" could eventually take the place of a controlled system. Temporary solutions also play a part here, for example, rating individual aspects and factors without ultimately combining them into a single number per employee.

Ratings force managers to engage in unpleasant conversations that they might otherwise avoid.

There is no universal solution. However, some factors can contribute to making ratings more highly effective. A key aspect here is to avoid the "surprise effect" at the end of the year. This can be prevented by regular cooperative feedback on the employee's level of performance.

Even if ratings are used, performance management should not only be on the radar screen once a year. There is also the question of the psychological implications of rating scales.

How many categories are there, how are they defined and in what context are they explained to employees? Here, not only the content but also the communicative aspects of the design have to be taken into account.

Motivational incentive systems


Bonuses linked to the achievement of individual goals can encourage a silo mentality, create a tunnel vision of individual goals and hinder cross-team collaboration. This is why many companies are pushing for their removal. The impact of shift in priorities of Generation Y and Millennials should not be underestimated in this matter.

An individualization of incentive systems according to the wishes of employees can also be an important instrument for motivation, retention and employer branding, as it enables incentives to fit precisely at various stages of life, preferences and career models.

Good performance must be rewarded - but not necessarily with money.

However, there are still unanswered questions regarding the implementation of such cafeteria systems - especially against the background of tight legal framework conditions.

Effective Feedback


For many companies but also for employees, feedback only once a year around Christmas does not seem to be up-to-date anymore. The concept of the disciplinary supervisor as the only feedback provider is also losing relevance due to increasing team and project work. 360° feedback is considered an answer to these developments.

But how does it have to be designed so that it actually serves the development of the feedback recipients?

Feedback is much more than performance management.

Possible starting points are the focus on individual central points of discussion, the change of feedback providers for each session, the possibility for the feedback recipient to decide about the transparency or anonymity of the feedback, decoupling the dialogue from formal consequences or the support of the processes by digital solutions.


Conclusion

Once again, our Round Table has shown that the trends in performance management have led to an extensive - and important - discussion of the paradigms to date. Many concepts are already being implemented. This shows that many roads lead to Rome and that there is no single solution. This must continue to orientate itself towards the individually defined goals of performance management, corporate culture, the target groups under consideration and, last but not least, the leadership skills of the managers who are decisive for implementation.

Thank you!

We would like to thank all participating companies for making this event a successful exchange of ideas. We would also like to thank our co-host Deutsche Bahn for the excellent collaboration in the preparation and conducting of the Round Table.