#132 Performance Mgmt. & Development

132- Performance Mgmt. & Development

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We invite people to send in questions or subjects they’re wrestling with on business practices and we select one to try to build a show around. As a thanks, we also started sending them one of our new “GET a Second Opinion” Ceramic Mugs. We are building this episode off one of them in particular that we thought might be interesting to our audience.

The subject is, “What will the future of Performance Mgmt. look like, in say 10 years? Big companies are giving up annual reviews and 360 degree feedback. What will replace it?”  Harvard Business Review gives us some hints and some history of performance mgmt. practices. But we can guess that they are still from an earlier paradigm and need some evolving.

  • We have a paradigm problem with the most recent offerings found in HBR. They have identified some of the problems on the surface but did not dig deep enough and ran toward a new idea standing in the same outdated paradigm.
  • They missed their own blind spots, which is ironic considering the first article by Buckingham and Goodall gives a good rundown on the old performance review position. With some impressive research, they show the holes including cognitive biases, which they are demonstrating in their own example.
    • Then they tell us, we have to overcome these biases with a new set of practices. They do acknowledge they are stuck on one problem they cannot solve. WE will come back to that problem. But they missed the biggest blind spot. They are still in a behavioral paradigm and cannot conceive of another way to enter the field of performance Review. The same is true in their new book out this summer – Nine Lies About Work.
      • Let me remind people what they will notice as we look at these articles and examine the behavioral view behind their thinking.
        1. It requires external assessment since people cannot see themselves. That is the core driver. A regenerative paradigm wildly disagrees with that.
        2. This external assessment extends to external motivation with incentives and rewards determined by others. A Regenerative paradigm points to an undermining of deeper intrinsic motivation. You can’t do some of each and have a sane human being.
        3. They propose to shift to manage behavior, close in time and space, and less about outcomes.

The HBR article by Cappelli and Travis follow the ups and downs of performance management (adhere to standards) versus performance development (grow people) as it moves from military designs to commercial.

  • But as inflation and other environmental challenges arise. As getting and retaining talent became important, development became important. But when they were flush with people in down markets, they went toward managing for performance. We are always surprised when they forgot in historical overviews that most workers managed themselves before corporate America existed. Pretty much everyone worked for themselves in the craftsman era.
  • Before the behavior theory came along there was no performance management in America. Small businesses families paid attention to external force and adjusted their behavior accordingly. They listened to the people who bought goods and services from them. Then with the Military, and particularly WWII there, post behaviorism, there was a sudden loss of human capacity to be self-managing. So, let’s call that the Second Era after self-managed crafts people.
  • The current Era is beginning to see the problems with the performance systems designed under that theory of change. Behavioral that is. Buckingham and Goodall offer a clear explanation of the downsides of the Second Era adopted from the military.
  • Overall, there  new ideas was founded in a Deloitte survey that found performance management did not drive employee or higher performance- the whole reason for the exercise. As a result they targeted three shifts in objectives for the new system Deloitte designed for themselves.
    • First, no cascading objectives from the top down to individual performance; second, no annual reviews that ended up in rankings of every employee against every other or subgroups. And, finally, no feedback tools from multi-levels and positions across the organization.
  • In the military era, no matter where you where, the objectives were set at the beginning of the year. After a project is finished, it is up to the person’s manager to rate them as to whether objectives are met. To make comments on where they did or did not meet or exceed performance objects. Then a single year-end consensus meeting happens where a select group reviews it all.
    • Everyone is examined relative to their peers and given a rank and rating. An intermediary who fought for you was the best you could hope for. This is so clearly based on the assumption of averages with higher and lower placement from behavior rules as well as only someone else can judge your performance. We have covered that several times. There is no such thing as average.
  • After realizing that managers spend about 2 Million hours a year on this activity which did not improve much, Deliotte shifted to having the immediate manager be the one who gave feedback, and to do so in real time. Preferably weekly or more.
    • The focus being on removing the idea of evaluating backwards and instead  look at the coming week or so, quickly making shifts in priorities as well as speaking to any problems or given recognition immediately where they are exceeding performance measures set.
    • It is still facing inward and not out into the market which we will look at as we look at the regenerative view. There were a few other changes but all in the same behavioral paradigm of only someone else can see us and rate us. They did point out that research shows that, without a doubt, the evaluations of others tells us more about them and less about the person they are evaluating because of biases and projection of own ideas and limitations.
    • The biggest challenge for me is the external assumption, that only truth comes from someone else. And that it leaves out the most important external consideration.
      • External to the company—the stakeholders beginning with the customer/consumer. This is the starting point of performance, what drives everything in the Regenerative paradigm. And all interactions with the manager and workers are focused on close-in activity which negates innovation thinking and working at more than one level at a time as a small business owner does and Regenerative Business have everyone doing. This feels they made it worse.

The Principles of a Regenerative Performance Management Approach

  • There are eight objectives in a Regenerative paradigm, which by the way was launched in corporations (P&G Soap group and a few other companies, in the 1960’s; about the same time as the military model).
    • Each objective is seeking development of potential in each person in the organization, the business as a whole, including it financial effectiveness tied to each worker directly, and ensuring that the businesses stakeholders each having new capacity beyond just having their needs met. The eight objectives cannot be understood from a behavior point of view.
    • Or the human potential paradigm as evidenced by Holacracy.  The ideas we are offering would seem impossible, irrelevant or not needed. That is because they are pursuing different ends than the objectives of the military and even Deloitte et al.
    • The Regenerative objectives are:
      • People are directly connected to market forces including particular customers and expected to create endeavors individually or in teams to contribute through self-initiated contribution plans.
      • In order to be connected to the market and company strategy, every person is part of a Market Field Team (cross functional,  reflective of the organization as a whole) taking on nested strategies to the business strategy.
      • There is developmental infrastructure to ensure unique contributions within the context of the strategy, the organization’s day to day work and at different levels over time, or contribution. This has no hierarchy of persons but roles for working with greater complexity and duration to accomplish. The developmental infrastructure has only open cells to point to domains to provide the guardrails for work and the template for a Developmental plan.
        • These three directly contradict behaviorism In the following ways but also solve Buckingham and the other authors problems of cognitive bias and transparency.
        • When people are directly connected to the market they no longer need intermediaries to digest and reduce information for them. Their connection to customers and the market gives them the clearest picture they need to go about engaging in their work.
        • Being part of a market field team also ensures that one is connected to cross-functional teams within the business. So while one is externally facing customers and the market, one is also connected to the whole of the business and its various aspects without isolation or fragmentation of information.
        • Developmental infrastructure is designed specifically to grow you as a person so that you can contribute directly to the market and customers lives in a way that builds transparency.
    • Here are the next three principles
      • All ideation, creation and evaluation is led by the individual with the developmental plan engaging their MFT in meeting  their criteria for serving the market they steward) to ensure alignment with strategy and they work with the Portfolio Investment Team to know when the measurable objective for evolving a stakeholders capacity are achieved and a pay action is triggered, which may be a raise or gain sharing based on the plan. It is tied to stakeholder contribution as well as personally achieving the new targeted ableness demonstrated in completion of the work promised and plan met. They are always in a developmental contribution plan. When one is completed another is developed.
      • Pay is tied to the proposed and aligned plans, co-created in dialogue with teams. First, a rotating, (working transparently, in that anyone can attend a meeting and watch the process and principles at work) for managing the portfolio of funds that is available for dispersion in a window of time, usually annually.
        • The Portfolio Team invests in proposed projects where funds are requested and approved, including specialized education, and for increasing salaries and other compensation. The membership is chosen by market field teams who are up-to-date on strategies for their market and keep all activities tied to the market.  This important role is often part of a developmental plan for strategic improvement of the business and markets.
      • A developmental plan, included development of Business Effectiveness (how it is to be achieved for customer and in terms of earnings, margin, cash flow improvement) Functioning Effectiveness, ( how the organization functions in key activities, leave the org better for your work), and Organizational Effectiveness of teams, organizational activities and even the developmental infrastructure described here).
        • Plus, learning to work at multiple levels at the same time. E.g Get the work done.Plus,  Think how to give better positioning in the market as you work, plus improve systems for all and build new capacity in self and others. That is foundational to all plans overtime. And is a common way of working for all members of a Regenerative Organization after a few years working in one.
    • The key here again is that strategy is nested in a developmental plan, in the same way that these teams are nested inside the organization. This nesting allows for direct communication and full information for decision making, while enabling those on the teams to be working on themselves in the context of the business.
      • Activities are initiated by a member of the organization which leads to and enhances the three core human capacities. E.g. Locus of control-taking full responsibility for all outcomes from a self-managed position; demonstrating external considering for those we serve as well as work with as other co-creators in the offering. The activity itself is an exercise of Personal Agency.
      • This is all possible because on ongoing, recurring Developmental Thinking sessions, beyond training, to increase living systems thinking skills and personal self and team management.
        • If people want to see more about these principles, and stories of how they are carried out, check out The Responsible Business for looking at how strategy is connected, The Regenerative Business on how work systems can be structured to make this work through a series of stories to show how this varies a great deal.


And thanks again to Max Skhud of Microsoft in San Francisco, for suggesting our topic. We are sending you a Get a Second Opinion Mug, holds your favorite hot or cold beverage. If you want one of our Get a Second Opinion Mugs, send us your topics on practices in business that need a second opinion. You can email us carol@businessSecondOpinion.com or find us on Twitter @biz_second_opinion . If we use it to develop an episode, you get a mug. Also your ratings and reviews on any platform helps people find us and spread the word. Sign up for our newsletter so you get connections to the show notes and much more.

Harvard Business Review and Strategy and Business Articles: Used for this episode

Reinventing Performance Review, by Marcus Buckingham and Ashley Goodall, April 2015 Harvard Business Review. What Deloitte is doing now and is still stuck figuring out.

  1. The Performance Management Revolution, by Peter Cappelli and Anna Tavis. Harvard Business Review. October 2016.

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