“There is no perfect performance management system.” But, Leong Chee Tung, who uttered these words, feels that he has the answer that comes close.
Leong, co-founder, and chief executive officer of EngageRocket, believes that today's performance management processes need a rethink.
“First, [performance management systems] are trying to do too many things all at once,” he said.
Most performance management systems try to measure the performance of their employees, provide developmental feedback to their manager, and help allocate proper compensation.
“The challenge of trying to do these three things at once is that they get in the way of each other,” Leong observed.
He noted that it is difficult, for example, to have a development conversation with an employee who knows that their bonus hinges on what they say. “It is then difficult to highlight areas that they feel they need help.”
Allocating the right compensation offers another headache. “You need to normalize performance across the different or same function across different roles. These are nontrivial challenges,” said Leong.
A Yesteryear Framework
At the heart of the issue is that today's performance management systems were developed in an era where the managers were the domain experts. Calling it "Industry 3.0," Leong noted that in such organizations, the managers were often "de facto domain experts." They are in the right position to assess the performance of their "apprentices."
In today’s Industry 4.0 age, the situation is now in reverse. “Many managers are charting the direction of the company and helping experts to perform.”
“Suddenly, the nature of middle management changes. They do not have a monopoly of the knowledge, need to find ways to engage with their teams, and groom and coach [ team members] who may have far more functional capabilities in specific domains.”
Leong sees the situation becoming more challenging, "especially when today's students will work in jobs that have yet to be created."
Answer in Data
So, how can a performance management system offer an accurate picture of an employee’s performance?
“Our answer is better data and more timely data,” said Leong.
This is, in a nutshell, what the performance management module from EngageRocket does.
It allows companies to make their performance reviews real-time, frictionless, and transparent. Leong believes such an approach will enable companies to tackle a host of biases that plague conventional methods.
One is recency bias. Often managers tend to remember their reviewee’s most recent achievements or projects, and not those done earlier in the year. Because the system tracks in real-time and across the year, managers will be able to get a more “360 viewpoint.”
War on Bias
The higher level of transparency can also help to root out gender bias. "Are your male employees getting more compensation and promotional opportunities than their female peers. The system can highlight these."
From an organizational standpoint, the real-time view allows management across the organization to see how their employees are performing. Management can then take “early actions on those who need support, and isolate the drivers to improve the performance.”
The idea behind EngageRocket’s effort is to create a more realistic understanding of the contribution of each employee across different roles.
Leong noted that past performance review systems tend to favor those who have a direct impact on revenues, like sales. “But it is not easy to identify the impact of an audit colleague, especially when it comes to compensation.” With a real-time performance, this is now possible with more data points.
Tech Alone Is Not the Answer
Real-time performance may solve offer clues on how to rethink the way we manage performance. But it does assume that the organization is ready for real-time -- a tall order for those used to annual and quarterly performance reviews.
“This is a human question, and not one technology can fully address,” said Leong. He noted that no matter how well the software is designed, there is still an element of change management needed.
“There needs to be a greater amount of education around why we are doing this, what the data is going to be used for, and how it is going to be used. The reality is that every company will have different levels of acceptance.”
While Leong noted that machine learning and artificial intelligence can help to improve performance management, he firmly believed that you cannot remove the humans from the equation.
“There is a simple premise behind performance management, and it is managing performance. That is what managers do. It is not something that HR or vendors can do for the managers. If you want your team to do well, as a manager, you need to manage their performance.”