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What is Continuous Performance Management?
Continuous performance management is an increasingly popular approach to employee appraisals in the digital age.
Most readers are likely familiar with the traditional stack ranking model.
You know, the classic “yank and crank” appraisal model pioneered by legendary General Electric executive Jack Welch… the one that helped GE increase their market value from $12 billion to $410 billion during Welch’s 20-year reign as CEO.
As the most popular of a number of traditional appraisal models, the competitive model is based on the annual ranking and forced removal of the lowest performing 10 percent of employees. While highly effective at cutting costs and stimulating growth, the purest version of the model has fallen out of favor with employees in recent years. In a clear reflection of the modern era in which enterprise organizations are now operating, many are shifting to a more holistic approach. From global talent shortages to labor’s increasing appetite for actionable feedback, the challenges of the digital age are forcing companies to search for a more fluid approach to enterprise performance management.
The continuous model is the framework they have found.
What is Continuous Performance Management?
To start, it is important to note that although “continuous performance management” is increasing in visibility as a thought leadership topic, its application tends to vary from organization to organization.
Generally speaking, continuous performance management can best be defined as a shift in employee appraisal philosophy.
Whereas most traditional performance management models focus almost exclusively on employee compensation and rankings, continuous performance management is founded on the principle that evaluations should occur on an ongoing basis. Rather than looking almost exclusively at past actions, the continuous model encourages a more comprehensive, forward-looking evaluation scope.
Key Elements of Continuous Performance Management
Although most companies implementing the continuous performance management framework are likely to adapt it to the specific needs of their organization, there are a number of key components that remain consistent at the enterprise level. Most variations of the model are likely to include the following:
- Dynamic goal setting
- Ongoing feedback
- Robust data collection
- Employee self-evaluation
Element #1 – Dynamic Goal Setting
Beginning with dynamic goal setting, we find the first major deviation from the more traditional frameworks of performance management.
While traditional evaluation models tend to prefer an annual, rather inflexible approach to goal setting, practitioners of the continuous model favor a strategy that recognizes the need to regularly measure and reevaluate objectives – on both a direct report and company-wide level. Although the traditional model proves effective in ensuring that direct reports are instilled with a strong clarity of purpose for a measurable period of time (i.e., most goals will be measured against an entire fiscal year), it fails to empower organizations to the degree necessary to adapt and evolve with the challenges of the digital age.
Dynamic goal setting encourages management to more consistently and collaboratively assess both goal progress and relevance with their direct reports. In most continuous performance management organizations, this tends to manifest in the form of the “QBR.” At its most basic, a QBR (or “quarterly business review”) is a formal, once a quarter meeting with management that focuses on employee performance evaluation and development.
Element #2 – Ongoing Feedback
A second key feature of the continuous performance management model – and one that can be quickly explained with a simple thought experiment – is ongoing feedback,
Let’s pretend for a moment that you, an aspiring chef, invite me to your home for dinner. You are trying out a recipe for an upcoming competition, your Italian masterpiece, a delicious and heartwarming risotto. Now, let’s imagine that, after intimately sharing with me your passion for the culinary arts, you ask me for some feedback on the meal – the ingredients, the presentation, the portions, etc.
How would you feel if I responded:
“Hey, thanks for the meal. I’ll get back to you in 2021.”
Does it make sense for me to give you feedback in a years’ time when optimal performance demands that you receive it now? Not for you, and probably not for most digital age employees.
In fact, with a majority Millennial and Gen Z workforce that is increasingly looking to effectively perform across a number of interrelated performance management spheres – everything from career development to skill attainment – the ongoing nature of the continuous model better equips management to assist employees in reaching their full professional potential. The model accomplishes this by replacing the once-a-year appraisals of yesteryear with ongoing and ever-evolving discussions. These discussions can further be broken down into check-ins (i.e., weekly “1-to-1s”), performance conversations (i.e., formal quarterly evaluations), and crowdsourced feedback (i.e., constructive criticism and real-time recognition from peers).
Element #3 – Robust Data Collection
A third element of the continuous model is a strong organizational emphasis on robust data collection.
Organizations implementing the continuous performance management framework often look to implement the following data collection best practices:
- Diversify the origin of employee evaluation data
- Increase the frequency of data capture
- Automate data capture processes
These best practices go a long way in helping digital age organizations harness the power of factual data to make informed judgements and decisions regarding performance management. It is a shift that evolves the role of management from that of data keeper to interpreter, thereby empowering managers to improve the quality of the evaluations they provide to their direct reports. A heightened focus on the interpretation of actionable data points also assists management in their quest to stimulate accountability and self-reflection on the part of direct reports – a critical piece of the continuous performance management puzzle.
Element #4 – Employee Self-Evaluation
A final, uniform element of the continuous performance management framework is a strong organizational emphasis on employee self-evaluation.
In a significant departure from more traditional models, the continuous framework advocates positioning direct reports to reflect critically on their own performance, accepting responsibility for both their achievements and performance shortfalls. This is typically accomplished by providing direct reports with access to data insights and their evaluation KPIs. The resulting two-way dialogue leads to a powerful mixture of dynamic goal setting, ongoing feedback and data-driven self-reflection. It is also a process that goes a long way in improving employee buy-in – a historic performance management challenge at the enterprise-level.
What About Traditional Models? Are They Still Relevant?
For the Gen X, Y and Z readers of this article, there’s a good chance that you have lived through the experience of being traditionally ranked by a current/previous employer. In fact, I’d bet that some have probably even been “yanked,” and I imagine that all are probably anxiously asking the question above.
The answer is, “well, it depends.”
Although formal performance ratings are not one of the hallmark elements of the continuous performance management model, the decision to retain or eschew this traditional evaluation mechanism will be unique to each organization. While some notable companies like Adobe, Accenture and Microsoft have eliminated rankings in recent years, other modern and forward-thinking organizations continue to deliver them at the end of the fiscal year. Some continuous model organizations have even implemented hybrid models, eliminating compensation-based ranking systems but retaining the year-end evaluation.
Whatever the framework or model deployed – continuous, traditional, or hybrid – what matters most is how closely a performance management model is aligned with organizational culture and values. While there is no one-size-fits-all approach when it comes to performance management in the digital age, implementation of the continuous model is on the rise, and, as such, warrants serious consideration.