The Guide to Modern Employee Performance Management Modern Performance Management Practices

Just like the people it is designed to support, modern performance management never stops learning, growing, and evolving. Let's take a look at how modern performance management systems have evolved over time and where they are headed.
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As employee expectations continued to change over time, performance management underwent necessary changes as well. Practices became increasingly progressive and people-focused, with frameworks like Peter Drucker's Management by Objectives gaining popularity.

Management by Objectives (MBO)

Peter Drucker introduced MBO in his 1954 book, The Practice of Management. At the time, it was revolutionary for each employee to set clear performance goals and assess performance based on facts.

While MBO alone is no longer considered modern, it established the principles on which more progressive practices are based.

MBO applies the idea that what gets measured gets done. This is why goals and rewards must be set carefully to incentivize desired behavior and avoid unintentionally incentivizing undesired behavior.

The approach also focuses people on the purpose of their work, rather than busying themselves with the activity of it.

Objectives and Key Results (OKRs)

Andrew Grove created OKR as CEO of Intel in the 1970s and described it in his book, High Output Management, in the 1980s. It was designed to focus every employee as they made a big change from a memory company to a microprocessor company.

John Doerr took OKR to Google in the 2000s, which leaders then spread to Twitter, Facebook, Slack, and many more innovative companies.

An OKR has two parts:

Objective

  • Where do I want to go?
  • High-level, explicit, and ambitious time-bound goal

Key Results

  • How will I measure to see if I am getting there?
  • Measurable elements of the objective's success
  • Each scores a full '1' if achieved or exceeded.
  • Each scores a decimal (.6 for example) if partly achieved.

This practice helps employees clarify intentions and take accountability in a simpler way than Management by Objectives.

OKRs are often shared internally for transparency and collaboration, which is a more engaging way of cascading goals from overall organization to individual employees.

360 degree reviews

As with many methods, multi-rater feedback came out of World War II, this time from the German military. It was adopted by Esso in the 1950s to address rater bias, and reached popularity in corporate America by the 1990s, remaining in some capacity at about half of companies today.

In addition to supervisor assessments, 360-degree reviews collect feedback from varied perspectives of other superiors and other stakeholders, including peers, subordinates, customers, and self-assessment too.

Traditionally, 360-degree feedback was used to determine how senior leaders were perceived when there was a concern or if they were being considered for promotion.

With purpose-built software and a more modern approach, this tool can offer all employees and their managers more information, from more diverse and trusted sources, to help with awareness and growth.

Netflix replaced their annual performance reviews with informal 360-degree reviews on what colleagues should stop, start, or continue.

1:1 (one-on-one) meetings

Regular manager-employee one-on-one meetings may not seem especially modern, but traditional practices tend to underutilize them.

When managers meet weekly with their direct reports, they can provide timely, thoughtful feedback in an informal way that emphasizes learning and improvement. And when managers are skilled at coaching, they establish a dialogue with their subordinates that builds mutual understanding, trust, and ownership of objectives.

Regular coaching allows for more flexible goals and more support with stretch goals, which provides employees more of the autonomy and mastery they need to be engaged high-performers.

Effective techniques for 1:1 meetings include:

  • Employee-led agendas focused on the employee’s interests
  • Encouraging reflection with thoughtful questions on themes and processes
  • Alternating weekly between long-term progress (i.e. career goals) and medium-term progress (i.e. projects) for fresher and deeper conversations
  • Soliciting feedback on what management and the company can do better

Continuous feedback channels

Currently, 81 percent of companies have or will have continuous feedback tools within the year.

Managers alone cannot and should not be responsible for observing and recognizing every employee’s every contribution. Adding frequent and timely feedback from other sources provides employees more comprehensive information they can act on immediately.

Continuous feedback reveals which contributions are most valuable to colleagues, and to the organization as a whole. Peers are excellent sources because they often work more directly with the employee and may be more directly impacted.

Managers and peers just need the tools and culture that support continuous, crowdsourced, concrete vignettes of what worked and what didn’t.

For example, Deloitte managers end every project by responding to four statements on a five-point scale:

  • Given what I know of this person’s performance, and if it were my money, I would award this person the highest possible compensation increase and bonus.
  • Given what I know of this person’s performance, I would always want him or her on my team.
  • This person is at risk for low performance.
  • This person is ready for promotion today.

What's Next?

Congratulations! You're now familiar with the past and present of performance management. Now let's talk about the future!

In the next chapter, we'll cover some easy ways you can implement these insights and strategies in your own modern employee performance management program.

“Management by objectives … refers to a system in which overall objectives are clearly stated and agreed upon, and which gives people the flexibility to work toward those goals in ways they determine best for their own areas of responsibility."

- Bill Packard, Co-founder, Hewlett-Packard

"If you talk simply and honestly about performance on a regular basis, you can get good results—probably better ones than a company that grades everyone on a five-point scale."

- Patty McCord, former Chief Talent Officer, Netflix

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