Fixing Performance Management

As reported recently in the McKinsey & Company report, many companies believe their performance management model either achieves nothing in increasing company performance or may in fact hurt the overall performance. Many survey respondents communicated that time spent on performance management was often seen as wasted time.

However, a minority of companies believe their performance management model is key to overall company performance. Most HR professionals will ask themselves "Well I know performance management best practices - who doesn't?".

The interesting insight here is that the problem is not with the best practices. The problem is when employees do not see the overall performance management model as "fair". Fairness, and in particular the widely held perception of fairness, is what makes the overall model significantly more successful.

In studying this situation, the researchers at McKinsey found three critical aspects of making the performance management system seem fair.

Those aspects are:

First, linking performance goals clearly to overall company goals.

Second, coaching employees effectively.

Third, differentiating compensation across levels of performance.

If employees to not think the company performance management approach is fair, they will no only value the process but can potentially be demotivated by it.

Learn more about McKinsey's research here.