What’s the real key to boosting employee performance?

Measuring people doesn’t improve employee performance, and organisations need to look at the real drivers of performance to make a sustainable difference

Measuring people doesn’t improve employee performance, and organisations need to look at the real drivers of performance to make a sustainable difference, writes Stacey Barr

It’s widely assumed that measuring employee performance is the essential way to improve the performance of the organisation. Around 90 per cent of companies are still doing it, and in particular linking pay to performance. But how many of these companies have sought out proof that it works, proof that managing people by numbers is really boosting the overall performance of the company?

The current research says it doesn’t. Daniel Kahneman found that linking pay to employee performance was demotivating. Dan Pink shows that the true motivators are intrinsic. Nicholas Bloom’s research points out that traditional performance management works in manufacturing, where outputs are tangible and consistent and largely within people’s control, but not in non-manufacturing organisations, where outputs are intangible and varied and impacted by factors outside people’s control.

In a recent McKinsey Quarterly article, Ewenstein, Hancock and Komm argue that the traditional methods of managing employee performance no longer fit in today’s more complex and less deterministic business world, and in their place we need more fluid and in-situ coaching for performance that can respond to this new reality. They cite a very thorough study conducted by one company in the Middle East that found that purpose, and not pay, was the single most important driver of motivation.

So measuring employee performance to rank people, to reward them, and to reprimand them is a bad habit organisations have to shake. Because it doesn’t work. Anecdotally we know this. Performance review meetings are too little, too late. They feel superficial and are based often on numbers – like perception ratings – that are mere proxies to real performance. They create competition between employees, when we know that it’s collaboration that makes the difference to overall organisational performance.

Just because we’ve always managed employee performance in this specific way, doesn’t mean it should continue. And to find what to do instead, to help employees improve their performance in a way that improves the organisation’s performance, we need to look at the reasons why the current employee performance management system fails. And much of the reason why measuring people doesn’t work stems from the beliefs and attitudes people have about being measured that reinforce a downward spiral in overall organisational performance.

“Measuring people’s performance to rank them, to reward them, and to reprimand them is a bad habit organisations have to shake. Because it doesn’t work”

Managers want people to perform better so they monitor them to assess their performance. When people know they are being monitored, they feel judged. No-one likes to feel judged. People will then take the judgement personally and that makes them feel threatened.

When people feel threatened, they get defensive in an attempt to protect themselves in any way they know how. The most common method to protect themselves from the threat of performance measures is to hide performance problems so the measures look good. Or they will manipulate the measures to make the results look good. Or they will set targets for measures they know they can achieve. In Measurement Madness: Recognising and Avoiding the Pitfalls of Performance Measurement, the authors share an unbelievable number and variety of stories of how people have unwittingly gamed the measurement system in all these ways and more.

When the important performance problems are hidden, performance gets worse. Why wouldn’t it get worse if it’s being ignored? Managers will pick up that performance is worsening, probably by the upstream impacts on higher level performance measures. And so their instinct is that more monitoring is needed. More monitoring means that people are feeling the scrutiny of more judgement. And the spiral continues downwards.

Employee performance management is an essential part of managing a workforce. We can’t dispute that. But what we can dispute is the role of performance measures in this process. Rather than expecting the measures will motivate the right behaviours, managers should be coaching the right behaviours. Rather than measures being a rod for people’s backs, they should be a tool in their hands.

Instead holding employees accountable for hitting targets, and “performance managing” them when they fail to, the notion of accountability needs a reframe. With our current definitions of accountability, we’re ensuring we have lots of inaccurate good news. What we need for true performance improvement is accurate bad news. So to truly improve performance, our definition of accountability has to change. It has to still be a challenge to encourage people to reach and stretch outside their comfort zones, but it cannot fill them with fear.

“Measuring the business results takes the threat out of measurement, and helps employees align with purpose”

A new definition of accountability has three parts. Firstly, routinely monitoring the important performance results. Secondly, validly interpreting the measures of those results. And thirdly, initiating performance-improving action, only ever when action is required.

When an employee is responsible for a specific business result, like problem resolution or accuracy of advice or eliminating rework, they can be accountable for routinely monitoring that result with a performance measure. This drives the behaviour of people focusing on the results that matter; the results that are about the organisation and not about them personally. Measuring the business results takes the threat out of measurement, and helps employees align with purpose, as Dan Pink suggests they need.

And as that employee takes responsibility for monitoring a performance measure, they can be accountable for interpreting what that measure is telling them about the business result it measures. This drives the behaviour of people seeking feedback about how the results are actually tracking. Because the measures are about the business and not about them, it means they can practice the openness and curiosity that is not negotiable for learning about what really works, and what doesn’t.

And as the employee takes responsibility for interpreting a performance measure, they can be accountable for deciding what kind of action is needed, if at all. This drives the behaviour of people working on their processes, and not just in them. Rather than pushing and rushing to hit daily or weekly targets, they are creating leverage to make higher levels of performance the new norm, by removing waste and bottlenecks from their business processes.

Managers provide the coaching needed for employees to fully practice this alternative definition of accountability, of using measures to improve business performance. It sets organisational strategy and performance as the context for feedback for and development of employees; to hone their attitudes and knowledge and skills and behaviours to better serve the organisation’s goals. And that’s the true link between people’s performance and organisational performance.

Image source: iStock