Customer/member centricity, Innovation, Member/Customer Engagement, New Tools, Organizational Culture, Relationships

Rethinking Performance Appraisal and Business Growth: the Continuous Development Model

How have your annual performance appraisals been working for you?

 Are they true learning and motivating opportunities for all involved or tiresome, even dreaded, rituals?  Do they make a difference to individual and organizational performance?

In theory (while non-profits rarely have the “teeth” to enforce it) the goal of conventional performance appraisals has been to ensure accountability through incentives and rewards.This model is changing dramatically. An article in Harvard Business Review, titled The Performance Management Revolution, reports that more than one-third of U.S.companies are abandoning the traditional annual performance review in favor of less formal, more dynamic and frequent “check- ins” with employees throughout the year. These conversations provide immediate performance feedback in specific contexts and aim at future improvement rather than rewards or punishment of past actions.  (See also How Netflix Reinvented HR by Patty McCord for another example of a company applying a ifferent process for performance appraisal). 

The problem with traditional performance reviews, the authors explain, has been that by focusing on individual accountability for past results, they neglected what mattered much more to their ability to compete: the present and the future. What they needed were tools and practices for helping employees improve current performance, change unproductive behaviors and develop talent and capabilities for the future. 

Having more frequent and specific conversations with employees catches problems as they occur; boosts motivation, engenders mentorship and collaborative relationships and improves outcomes.  With the preset rate of change, at any rate, “employees’ goals and tasks can’t be plotted out a year in advance with much accuracy.” Neither can the needs and tastes of consumers. Constant and dramatic changes in consumer behavior requires capabilities for rapid innovation.

This means that to be competitive you must invest in continuous development of employees rather than rely on the passive incentives of annual rewards or punishments.  




New frameworks for doing business

 The Lean Start-up  and Design Thinking methodologies, like the flexible performance appraisal methods, are two example of agile new frameworks and tools for thinking,solving problems, designing new products, building and conducting business in an age of speed and uncertainty.

The Lean Start Up  methodology debunks the assumption that it is possible to predict “most of the unknowns of a business in advance, before you raise money and actually execute the idea” and “favors experimentation over elaborate planning, customer feedback over intuition, and iterative design over traditional “big design up front” development.” And, despite its name, this method is used by organizations  large companies of the business model, including product features, pricing, at any stage of development. 

Design Thinking applies design principles to problem solving and the crafting of products or  solutions in place of linear planning and product development.

Rather than try  to predict risks that are impossible to predict, and complete the design of a  product before launching, both methods offer a structured process of learning by doing through an iterative process of launching prototypes and developing through repeat customer feedback. Lean start-ups, ‘use a ‘get out of the  building’ approach called customer development to test their hypotheses. They  go out and ask potential users, purchasers, and partners for feedback on all elements, and affordable customer acquisition strategies. The emphasis is on  nimbleness and speed: New ventures rapidly assemble minimum viable products and immediately elicit customer feedback. Then, using customers’ input to revise their assumptions, they start the cycle over again, testing redesigned offerings and making further small adjustments (iterations) or more substantive ones (pivots) to ideas that aren’t working.”

What do Design Thinking, Lean Start Up methods and agile  appraisal reviews have in common? They all represent responses to a new environment in which change, speed and disruption are the norm– abandoning formal, rigid systems     and  processes and adopting capabilities for flexibility and entrepreneurship. They move more quickly than conventional    methods and respond in real time to employee performance,  customer and employee needs and feedback.

One common thread is the theme of continuous development. All three have shifted from transactions to collaborative, learning relationships, and replaced formal processes with informal interactions that involve thinking on one’s feet and improvisation rather than following formal protocol; deep understanding of human psychology and relationship building. 

The emphasis is on continuous learning, development, retention and re-configuration over one-time formal knowledge/information mastery, transaction, customer acquisition and addition (of new products for example).

Take a fresh view at the core pieces of your business–performance appraisals, metrics of success, product development; the way your organization thinks, addresses problems, develops products, conducts and grows business—and evaluate how well they are aligned with this new framework.