Skip to main content

Traditional enterprise performance management is changing at a rapid rate.

Originating from a time when human capital was plentiful and employee performance was directly linked to compensation, performance management has been forced to adapt to a new, ever-evolving workforce.

With most Millennial and Gen Z employees no longer hoping to have long careers with a single employer, the “company man/woman” is an aging employment model that will soon be obsolete. Similar to the evolution of today’s labor market with its candidate-first approach, modern-day performance management is now an employee-driven exercise in development.

How did we get here?

In part one of our two-part series on performance management, we will provide a high-level overview of the main challenges that are compelling companies to rethink their performance management systems (i.e., evaluations and appraisals). In part two, we will review the best practices that can help modern enterprises in improving their specific performance management framework.

Let’s get started.

Challenge #1 in Performance Management: Global Talent Shortage

In the United States, there are more job openings than unemployed people – a situation called “full employment” by economists. Although this does not mean that everyone has a job, most people who look for work will get it. And, if they quit a company, they’re likely to easily find another place of employment. In a candidate-driven market, individuals can choose who they want to work for and when.

How does this impact the modern-day enterprise? Well, a recent study by Employee Benefits News shows that the average cost of losing an employee is 33 percent of the employee’s annual salary. If you factor in recruitment fees, lost productivity and training, a high turnover rate and unhappy employees can have serious financial consequences for enterprise organizations.

Challenge #2: The Rise of Team Performance Management

According to Deloitte, in order to effectively engage in digital age problem-solving, enterprise organizations need “the ability to leverage knowledge across the enterprise with online, seamless, integrated and intuitive collaboration tools that enhance your employees’ ability to work together.”

Studies have proven time and again that businesses benefit from assembling diverse teams capable of inter-departmental collaboration. As a result, we’re seeing a strong tendency towards teamwork and a shift away from the isolated silo mentality of years past.

With a new focus on team-driven problem solving and people/process interdependencies, it is little surprise that traditional appraisals and performance evaluations have fallen short in the digital age. Success in 2020 requires collaboration. Individual accountability in an organization’s performance management framework – especially in the model of archaic and competitive performance evaluations – does very little to stimulate the team driven-attitude that agile enterprises need to thrive.

Challenge #3: Fluid Company Objectives

Modern-day enterprises operate in an agile business environment in which goals and objectives quickly evolve and change in response to unpredictable market environments. In a landscape where rapid innovation can be a strong (if not the strongest) competitive advantage, rigid performance management frameworks fail to reflect this new reality.

With both consumers and strategic partners demanding self-organization, self-direction, and adaptability, it no longer makes sense to formally evaluate employees once every 365-days. Not only is this ineffective in providing employees with actionable feedback, but it’s a formal process that has come to be despised by managers and employees alike. What does make sense, as we will see in part two of this series, is to provide employees with actionable evaluations on an ongoing, consistent and per-engagement basis.

Challenge #4: The Appetite For Feedback is Growing

According to Joblist, Millennial employees not only see feedback as valuable, but they want it on a more consistent, face-to-face basis. Managers that fail to consider performance feedback to the extent necessary to satisfy Millennials (i.e., the largest generation within the U.S. workforce) run the risk of limiting their organization’s agility and long-term scalability.

A lack of regular, holistic and goal-oriented conversations with employees can foster frustration, lead to churn and ultimately result in lower productivity for those employees who remain. In fact, employees unsatisfied with the recognition of their work are almost two times as likely to be actively job hunting. Managers that offer consistent, constructive feedback can help their organizations more effectively combat talent loss in the face of today’s talent shortage.

Banner of Avature's e-book on performance management best practices and a link to the landing page to download it.

Where Does Enterprise Performance Management Go From Here?

With enterprise organizations now navigating a new paradigm for performance management, success awaits those companies willing to rethink their employee appraisal strategies. Part two of this series will review the best practices for doing so, and how enterprise organizations can take the first necessary steps towards meeting these new challenges. Read part two here.


More related content

Five Best Practices for Performance Management

In part two of our performance management series we explore the best practices for employee feedback and appraisal in the digital age.


Nowadays, specialized talent is scarce and companies need to retain the brightest minds. It’s time to adopt a fresh approach to performance management.


Connecting an Engaged Workforce at Pontoon

Employee engagement is a top priority for many organizations, and is recognized as a key to attracting and retaining top talent. Hear from Terri Lewis, SVP global human resources at Pontoon on how they are engaging 1700 employees in 40 different countries.