Performance Management 2.0: Are You Ready for the Future?
By Erin Koss, CPA is an Andersen Business Consulting Alumni (1993-1999), and CEO of Syte Consulting Group, Inc.
Performance management is often top of mind with our manufacturing clients, as they look at where they are and where they need to go in the future. So today, I thought I’d do a quick roundup of some of the most relevant trends I see coming up in the area of performance management, particularly in the manufacturing world.
What I like about this list is that it speaks to three key components of every manufacturing business organization: technology, process and people. At Syte, we’re big believers in the importance of bringing these three elements together for more impactful outcomes, in any aspect of the business, and performance management is no exception.
Whether you’re in a good and steady operational groove or you’re seeing big change on the horizon, I hope you’ll find this information useful and consider integrating some of these more modern practices into your own performance management matrix.
Managing Performance for the Future
First, I want to differentiate a bit here between “measuring” performance and “managing” performance. Obviously, they’re closely connected — the old adage that “you can’t manage what you can’t measure” is popular for a reason. But I think it’s important to distinguish them because one is quantitative (measuring), and the other is more qualitative (managing).
Each side of the coin requires deliberate intention. What I mean is that having the processes and technology in place to manage performance is critical, but creating the right culture around managing performance is just as important.
Let’s dive in.
Leveraging Technology to Serve Employees (Not Vice Versa)
As ERP consultants to family-owned manufacturing companies, a core part of what we do here at Syte focuses on technology. We help our clients identify and implement the right technology solutions to take their business where it needs to go.
But it’s never just about technology. One thing we urge our clients to do upfront is a thorough assessment of the systems, processes and people they already have in place, and an honest appraisal of where things are working — and where they aren’t.
So when it comes to technology, it’s worth asking: How can we use technology to help our employees improve their performance? Does our current technology help or hinder our employees in their day-to-day jobs? Performance management isn’t only about setting productivity goals for individuals or teams, and measuring performance against those benchmarks. It’s also about putting technology in place that elevates performance.
Data Transparency That Empowers Employees
One of the things we see most often when we work with our manufacturing clients is that no one person seems to have an end-to-end view of the organization’s business processes, and the inputs and outputs at each checkpoint. Employees end up operating in silos, without any visibility to upstream or downstream impacts.
As one technology executive put it to the folks at McKinsey, many companies only have half the systems they really need, and the systems that they do have aren’t connected. When you can bring disparate systems together, you create data transparency. Suddenly, employees have access to more data in real time, enabling them to take action on insights that they couldn’t see before.
Related to this is an approach called active performance management — using technology to gather data, monitor performance and take any required corrective measures, all in real time.
Team Performance Over Individual Performance
In our role as consultants helping manufacturing companies implement new technology and processes, we see firsthand just how much cross-functional collaboration it takes to make these large-scale initiatives a success. So I’m happy to see the start of a shift away from individual-based performance management toward team-based performance management.
There are a lot of organizational and operational wins that come from a team-focused model. You can build teams intentionally to level people up, and that’s good for operations, for company culture and for individual morale.
And as business processes and deliverables increasingly depend on cross-functional cooperation, an emphasis on team performance, rather than individual performance, makes a lot of sense. Individuals succeed when the team succeeds.
A team-based model also helps to create a culture of transparency. Employees develop a bias for collaboration, which can lead to even more innovation in the long term.
Ongoing Feedback for Continuous Improvement
Many companies follow the traditional structure of annual or semi-annual performance reviews. Some prefer it because it builds predictability into the process, and provides formal “checkpoints” for setting expectations and discussing areas for improvement. Unfortunately, that approach can also be a little rigid. Twelve months is a long time to wait to provide (and receive) feedback on performance.
I think that’s why a model called “continuous performance management” is on the rise. It uses a continuous feedback loop between managers and employees around near-term business objectives and performance. One of the benefits is that these conversations happen within the daily flow of work. Everyone has context, and specific behaviors can be encouraged or corrected quickly.
We’re big proponents of this model. I always caution our clients that it requires buy-in, commitment and training to do it right — but it’s worth it.
Human-Centered Performance Management
It should go without saying that managing people’s performance is about people, but the process itself can often feel pretty impersonal. The emphasis tends to be on the business’s goals, and whether or not an employee has delivered on them. But as we all know, there’s so much more to doing a job well than merely hitting metrics or production numbers.
With employee retention being more important than ever, it’s important to make employees feel valued and heard. That’s not to say that you shouldn’t emphasize accountability, but modeling other behaviors that build empathy, respect boundaries and encourage personal and professional development will raise everyone’s game.
This kind of intentional change isn’t easy — it’s work. But at the end of the day, you’ll go a lot farther if you can create a culture of coaching and collaboration, instead of a culture of judgement.
Performance Management Is a Key Business Process
We tend to think of performance management as a pure HR function, a sort of monitoring and measuring system to ensure that the organization continues to deliver on all of its business processes and goals.
But if we start to view performance management itself as a business process (and a critical one at that), we can give it the attention and the intention that it deserves.
Are you rethinking your own performance management policies and procedures? I’d be happy to chat more about how we can help you map out a path forward. Go ahead and schedule your complimentary consultation session right here.