Performance management is routine. HR departments tend to change the process a bit every few years, but the fundamental annual cycle of setting goals, appraising people and giving pay increases is standard. The processes look pretty much the same from company to company. The biggest difference is how seriously the organization takes the process—some invest a lot of effort while others just go through the motions.
The performance management process is supposed to be about goal setting, motivation, coaching, reward and development. However, in America there are two underlying reasons why HR wants performance management. One is that they need a piece of paper justifying any pay increases. Secondly, they want a paper trail in case they want to fire someone for poor performance. Everything else is secondary.
However, there is serious interest in re-inventing performance management. This is driven by the new enterprise performance management software. At the very least the software can help manage the administration of the traditional process—that's certainly a benefit. But that is not what excites management; and it's not the sales pitch the vendors are promoting. The vendors are saying that at last we can really do performance management the way it ought to be done.
Specifically, they promise that you can cascade goals (the CEO sets his or her goals, the next level down sets goals based on those, and so on down the organization). This means that the whole organization should be working together to achieve the CEOs goals, and everyone should understand the role they need to play.
The software vendors also offer the promise of more frequent cycles—so that goals can be set, measured, and updated quarterly, monthly or even weekly. The process (they claim) can be freed from the annual cycle—and it doesn't need to be the same cycle for every employee group.
There are a host of other possibilities vendors cite such as linking the performance management system to the staffing system so that recruiters can assess the quality of hire or linking performance management to the learning management system so that employee development really does get appropriate attention.
Now, anyone who has been around IT for the past couple of decades knows there have been a whole string of management software programs that made great promises only to lead to great disappointment. The common problem is that technology is only an enabler; it can make a good process better but if the various cultural and business issues of a process are not worked out then technology just becomes an expensive investment in a process that doesn't work.
However, just because we have reason to think many enterprise performance management software implementations will fail does not mean that they will not come roaring into your organization. HR managers need to be ready for this.
I have two specific pieces of advice: One is to be alert to the fact that there is a huge difference between the traditional view of performance management (which was largely about documentation) and the new view which is about driving the business. In the new view justifying rewards or laying off poor performers is very much secondary. Instead, they care about setting goals, making sure goals are aligned, using the right metrics, tracking those metrics, quickly making changes in response to business needs and integrating performance management with other processes. HR managers will have to understand this change and be ready for it.
Secondly, HR needs to know that there is a lot of room for failure. The software may support cascading goals, but your firm may not have the culture, skills and processes to do it well. HR needs to make sure the firm doesn't get carried away by the rosy pictures painted by vendors.
There is one other aspect non-US managers should be aware of. All the talk about performance management in the US is grounded in the assumption that it is always better to have highly specific goals, explicit measures and clear links between metrics and rewards. The idea that being clear is better than being vague is unquestioned. But this is not true. There are many times in the world where being vague is more effective than being specific. The fundamental reason for this is that the world is a complex, complicated and ambiguous place—the world is vague. Since the world is vague there are times we want to be vague too. This is a blind spot in the American approaches and one we should be alert to.
While I think many enterprise performance management projects will be disasters, I also think it is generally a good idea. I'm sure that twenty years from now everyone will have some kind of enterprise performance management system. It's a good time for HR managers to start exploring this area.
David Creelman is CEO of Creelman Research providing writing, research and commentary on human capital management. He works with a variety of academics, think tanks, consultancies and HR vendors in the US, Japan, Canada and China. He occasionally gives speeches. Mr. Creelman can be reached at firstname.lastname@example.org