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Are You Leading Like It’s 1980?

The world of work has changed an awful lot in the past 30 years. It’s time for your performance management to catch up.

(originally published by Booz & Company)

Employment isn’t what it used to be and it’s not what it should be.  Reid Hoffman said it right, “You can’t have an agile company if you give employees lifetime contracts—and the best people don’t want one employer for life anyway.  But you can build a better compact than ‘every man for himself.’”

A new compact needs to be forged that’s win-win, one under which employees provide skills that build businesses and employers offer experiences that build careers.  A key element to making this shift is changing the focus of the annual performance review process from a backward-looking, narrow perspective that answers, “What have you done for me lately?” to a forward-looking, productive conversation that asks, “How can you contribute to the company, and how does this benefit your career?”  And when the “gives” don’t synch up with the “gets,” it’s time for direct, grown-up talk that allows each party to get on with their lives.

There’s broad agreement that the traditional performance-management approach, (courtesy of GE in the 1980s) has outlived its usefulness. According to research from advisory firm CEB, “two-thirds of employees who receive the highest scores…are not actually the organization’s highest performers” and “conventional reviews only generate a 3–5% increase in employee performance.”

The field of neuroscience provides wonderful insights as to why the current system generates lots of paperwork but little progress. According to David Rock, the problem is that the traditional approach fires up a threat state in the brain and limits a person’s ability to hear messages. The traditional approach to performance management, where the leader acts as judge and jury and does all of the talking, evokes a defensive reaction where feedback is rejected and current behavior is rationalized. 

Keeping the brain in learning mode requires that feedback be designed in ways that maximize rewards along the five social needs:

Social Needs Circa 1980s Circa 2010s
Status: relative importance versus others “Meet me tomorrow at 2:00 so I can give you your performance review.”  “When should we meet to discuss your progress and future plans?”
Certainty: ability to predict the future “It’s time for our annual performance discussion.” “Whom should I solicit feedback from?”
Autonomy: sense of control over events “This is what you need to do.…” “What do you want to improve?”
Relatedness: sense of safety with others “You really messed up.” “I remember when I made that mistake.…”
Fairness: perception of fair exchanges between people “Given your salary and performance ranking, this is your raise.” “Given your contributions relative to others, this is where you stand and this is why.”

With this in mind, progressive companies, like Juniper Networks, are reshaping performance management, positioning leaders as process facilitators and coaches to help their employees decide what and how to change.  In 2009, the company partnered with several leading experts to design a brain-savvy “Talent Matters” program that includes:

Self-developed objectives aligned up and across the organization against five common dimensions of performance.

Future-oriented evaluation, completed by managers and employees, which uses past performance as context for future plans in four areas: career alignment, capabilities, connections, and contributions. The company eliminated the traditional five-point rating scale and introduced a common assessment rubric that helps managers rigorously and consistently assess past performance and future potential.

Sharing calibration results to communicate relative ranking across peer group, clearly indicating if an employee is contributing (“J Player”) or not (“Non J Player”). The company eliminated forced distribution of ratings across a bell curve and aims for 100 percent of employees to become “J Players.”  

Frequent conversations (twice-a-year “Conversation Day”) to discuss future aspirations (career goals and capabilities) that set the stage to discuss performance (contributions and connections) and develop improvement goals.

With the introduction of “Talent Matters,” participation in the semi-annual performance discussion increased from an estimated 30 percent to over 95 percent, with 82 percent of employees rating the process as helpful. In addition, providing unvarnished feedback regarding company fit proved beneficial, with 65 percent of “Non J-Players” self-selecting out of the company.

The brain hasn’t changed since the 1980s, but our understanding of how it works has. If GE leaders knew then what we know now, they probably would have designed performance management to create more favorable conditions to stimulate change. Talented individuals don’t need or want lifetime employment—they have plenty of options and are attracted to leaders who help them realize their dreams. If you want them, make sure they want you. Such an approach is imperative for success in today’s competitive customer and talent marketplaces.

Susan Cramm

Susan Cramm, leadership coach, author, and former CFO and CIO, is committed to the principle that the best leaders take care of business by taking care of the people entrusted to their care.


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