Reboot, how to implement agile performance management > Insight

The film Ford vs. Ferrari tells the true story of Ford's quest to defeat Ferrari by the orders of Henry Ford II and the story of Shelby American behind it. In the movie, Ford's vice president says, "Even the RPM of the racer is under my control."

In fact, that era(1960's) was an era in which people at the top think and decide, and people at the bottom carry out their task just as they were told to do.

However, under the rapidly changing Race environment, the more management involved the lower was their performance. 

And as the professionals were given the authority to judge and respond according to the situation, they were able to win the championship three times running.

What is the present day like? Is this an era where survival and growth are possible if we instruct from above and execute from below? Although there may be slight differences according to industries and functions, the recent trend which has emerged from the radical environment changes requires organizations to take agile actions such as rapid goal changes, making the yearly goal setting quite obsolete. Furthermore, Generation MZ, the future main workforce, is looking for long-term growth and recognition of its contributions rather than short-term rewards. As such agile goals, flexible thinking, leading implementation, communication and collaboration, recognition and encouragement, and continuous growth have become important. 

So agile performance management has already been spreading around companies.

That is, even if it wasn't Covid-19, the change in the way of working due to the rapid environmental/technological/generational change and the change in the performance management method were already planned and required by the 'Zeitgeist(spirit of the times)' in which we live. It is only fair to say that Covid-19 has accelerated change. Therefore, it is desirable to understand agile performance management as an inevitable change to respond to the environmental changes. And there are only two decision points for execution, 'when' and 'who'. 

New Performance Management, prepare and implement like this.

Discourses about performance management tend to evoke negative emotions in employees. This is due to the fact that the existing measures to improve performance management did not have much effect or it was perceived as a backward step by the employees. Therefore, in order to introduce a new performance management, it is necessary to start by understanding exactly how the existing performance management is internally recognized. 

[Diagnose]: Facing the limitations of the existing performance management program

If your company has reached the end of its traditional performance management and has a good understanding about agile performance management, this step is unnecessary. However, if you are trying to find it out because 'leading companies like Google do this', we strongly recommend that you go through this step so as not to suffer from another change with no better result.

Employee surveys, employee interviews (especially with the MZ generation), and analysis of the existing evaluation results are possible ways to check out what employees think about the evaluation system and what they expect from the new evaluation system. It should be a priority to get the top management to see what employees think about the traditional performance management. Next, we need to convince our executives and employees that agile performance management is not a futile matter, but that changes are already taking place around us by way of example. 

[Discover] : Clarifying eligible object and perspective

In fact, one of the reasons why companies are hesitant to adopt agile performance management is, "It seems to be the optimum option for specific businesses & functions, but is it also effective for other businesses & functions?"

If this is the case, it is possible to clarify the strategy for introducing agile performance management by examining the 'essence' of the performance our company creates.

For example, if division A creates short-term/individual/financial performance, it is reasonable to maintain an absolute evaluation based on the individual's annual financial performance as it is now. On the other hand, if division B creates long-term/team based/strategic performance, it is desirable to induce actual performance improvement by introducing agile performance management focusing on individual contribution to team performance. By dividing the targets and viewpoints in this way, 

it will be possible to judge whether it is appropriate to ① introduce agile performance management across the company vs. only for a specific organization ② whether it is appropriate to introduce it at once vs. whether it is appropriate to introduce it in steps.

[Design] : Implementing new policies, processes and tools

Previously, 'The five characteristics of agile performance management' were explained. And also'The three most important points for agile performance management' were mentioned by citing cases of agile performance management of various companies.

First, agile performance management was not newly "invented" to "replace" the existing traditional evaluation, but "evolved" to "complement" the shortcomings of the existing evaluation system.

Second, Even if it is a leading company that has already introduced agile performance management, it is rare that it has all five characteristics.

Third, the most common characteristics of agile performance management are 1st on-going review 2nd crowd-sourced feedback 3rd rating-less evaluation, each corresponding exactly to the limitations of existing traditional evaluation systems.

Therefore, You can conversely decide which characteristics to implement for New performance management system based on the core issues identified in the first step(Diagnose) and the nature of performance identified in the second step(Discover). 

For example, if fairness is the main issue due to one-way(top-down) assessment, strengthening peer feedback could be considered as a solution. If the feedback of the year-end and relative evaluation causes low employee engagement and high turnover rate, absolute/unrated evaluation could be considered as a solution. 

Especially in pandemic/untact era, it seems that On-Going Review which set simple but measurable goals and provides frequent feedback is essential.

[Deploy] : Disseminating and educating the purpose and method of the system

No matter how good the system is, it is not easy to settle in itself if it does not get enough empathy from the employees. In particular, agile performance management is sufficient to raise the question of 'Is this possible?' in the generation or managers accustomed to traditional performance management. As the dependence on human competence is greater due to the high degree of flexibility and freedom of the system itself, it is important to provide employee sufficient education and coaching on intent, methods and cases.

In fact, there are cases where a project is re-ordered even though agile performance management has already been introduced. The reasons are as follow; ① the system was superficially designed ② there is no agile performance management app (ex. Performance Plus) to implement the system ③ employees are not familiar with the new methods (ex. OKR setting method, CFR method, etc.) Therefore, for the introduction and settlement of agile performance management, it is also important to invest in tools (apps) and skills (know-how).

Nevertheless, nothing changes unless leadership changes.

If we think about the Zeitgeist (spirit of the times) once again, I think that traditional performance management is a system based on the 'theory X'. Therefore, it was attempted to correct the evaluation error with various systems/procedures/devices, 

which made the system heavier and more complicated than necessary. 

On the other hand, I think that agile performance management is a system based on the 'theory Y' of trust and respect. 

Therefore, there is a high degree of freedom in evaluation and high flexibility. But at the same time, the manager's performance management competency and sense of responsibility play an important role. And this point acts as a psychological and practical obstacle to the implementation of agile performance management. 

Let's improve employee experience and 

engagement with agile performance management.

HR's job is actually to support the success and growth of the company and its employees. But if employees dislike what HR does and if it doesn't contribute to the company's success, something is wrong. In retrospect, that's what the evaluation system has been like so far.

It is often said that "evaluation is the most important" in HR. However, the true meaning is often missed. The reason why evaluation is most important is not because ratings are derived and used to determine rewards/promotions, but because the purpose, method, result of evaluation and the way how evaluation results are used determines employee experience and engagement. 

And ultimately who gets superb reviews and excellent rewards defines the culture.

Then, it is necessary to seriously consider whether it is for the employee or the company or for the manager or HR to determine both compensation and promotion by year-end relative ratings based on goal achievement. 

At the same time, it is necessary to realize that implementing a performance management system that stimulates actual expected performance and improves employee experience and engagement is one of the most important topics in HR.

Although this article is about agile performance management, the truth is that the answer does not have to be one thing nor does it have to be followed like a fad just because everyone is doing it. However, I hope that this will not be regarded just as a trend in the time series, but seriously considered so that it could be the beginning and an opportunity to consider the best evaluation model for each company.

Written by Duksung Chae, Director, Consulting Biz Unit (dschae@e-hcg.com)