Individual performance management

Welcome to this sixth talk on performance management. I am Pietro Micheli. I'm a Professor of Business Performance and Innovation at Warwick Business School. The topic for today is individual performance management.

Individual performance management often connected to rewards but in this talk, we're going to look at this first and then in the next talk, we're going to talk about rewards more specifically, is something that is very difficult to do. Organizations evaluate the performance of individuals, often on a yearly basis, and then rank individuals according to their performance vis-a-vis their peers. In a team of 10, for example, you would have a league table of the top performers, the middle performers and the bottom performers. This is often related then to the ways in which people are rewarded or sanctions and so on. This approach has been used for a long time. The company that is most often associated to this is General Electric or GE, because of its charismatic CEO in the 1980s and onwards. Jack Welch, he was a great believer in the fact that individuals have to be assessed in a way that it was rigorous, but also gave them a strong sense of the organization to who were the top performers and who were the bottom performers. In the case of GE and many other companies, the bottom performers would then be sacked and asked to leave the organization. The top performers would then be given more opportunities, maybe promotions and so on and so forth. Now, what do you can see over the last five, possibly 10 years is a shift away from this. Now, it's still popular in a sense to have the typical ranking of employees and so on. But organizations have moved away from it for a number of reasons. One of them is, of course, the fact that individuals don't necessarily work as individuals. They may be part of teams, so it's very difficult to rank people when it's the team output that matters, not the individual output. But also organizations have started to work a lot more on the short-term goals. Trying to achieve something that is not in the full business cycle. The yearly cycle typically, but something that may be more related to a project or a specific activity that lasts a lot less than a year. In more agile and more dynamic absent environment that's more typical than the ones where you can have a planning cycle that is maybe five years and then a shorter plan of a year or so. The other point is that it's been recognized that this yearly assessment that we use has been used for awhile. It's not particularly useful because it almost happens away from the context. It's an assessment that is done once a year, that doesn't necessarily lead to much improvement. In fact, what may work better is the more frequent type of ongoing type of discussion interaction between managers and employees. This may move us away from the Early Assessment to something that is more frequent and that is also tracked digitally. Now, we don't need necessarily the typical paper and pen approach where somebody will be assessed almost like a teacher assesses pupil at school, but something that can be done more frequently and more digitally and we have a lot more rich data if you like. There are examples that there is a known case study of Deloitte, but also IBM, Adobe, many organizations have used this approach of more frequent digital way of appraising, evaluating employees and their individual performance more related to shorter term goals, often may be looking at this in the context of a team and so on. This is shift in the sentiment, if you want, in a general sense, away from the 1980s, 1990s where the one-year performance assessment was done and the ranking of individuals was done to something that tends to be a bit more developmental, if you like.