Recently I had the opportunity to implement a performance driven culture in a division of a Belgian multinational. The main driver of the company to build that stronger performance-driven culture was the need to re-establish growth quickly and to achieve their next-step targets.
If we look internationally, there is a growing consensus within leading organizations that the traditional approach to performance management does not work anymore. It often focusses too much on looking into the past to evaluate a level of performance. In that case then we are not truly managing performance towards successfully achieving the goals for the future.
What creates a high performance culture?
There is a huge amount of literature and research on what creates a winning team and a performance driven culture, but there are three key themes repeated across all the findings:
- The ability to Align
This encompasses ‘setting the direction’ across the organization by ensuring clarity on the vision, strategy and getting everyone bought into it. On top, alignment by defining clear targets and measurements is key. It seems obvious but it is surprising how often organizations struggle to link individual objectives with a clear link to the targets that each team is accountable for. Consequently, we miss the true value of everyone having a clear alignment between what they are working on and the bigger picture objective.
- The ability to Execute
The organization is able to ‘getting things done’, when there is role clarity and direct accountability, when standards of excellence are used and talented teams with the relevant capabilities and necessary tools are in place. If we combine this with decisiveness, discipline and a culture of reward & consequence management, they will do well in execution.
- The ability to Renew
The years I worked for Nike, they used that fantastic baseline ‘There is no finish line’. In a constantly changing world that should be indeed the spirit of a high performance culture. Despite celebrating success, it encourages team members to look externally to the market for the inspiration that drives them to improve continuously and to innovate faster than their competitors.
Underpinning all this is the role of leadership. Performance-driven leaders are able to set and communicate the direction. In case that is not clear, they get it clear. They develop a talented and engaged team, take accountability for the execution and lead the business forward. Performance driven leaders are constantly sensing & assessing the ‘external’ & ‘internal’ world, are decisive when they need to act, stretch people’s strengths and are reflective and self-aware.
It is as much about feed forward as it is about feedback.
Three practices for successful performance management
The key to realizing positive business outcomes from performance management is to establish a system that employees and managers perceive as fair. To ensure that perception, managers should master three critical practices, as a 2017 McKinsey survey highlights.
1. Linking performance goals to business priorities Seems obvious, however reality shows that employees often miss that clear link. If employees see that link clearly, the research outcomes do not only correlate with a higher level of perceived fairness but also helps companies achieve their strategic goals. Where ‘employees’ goals are linked to business priorities, 46 % of the respondents report effective performance management, compared with 16 % at companies that don’t follow this practice.
2. Manager coaching : The survey indicates a direct relationship between effective managers and the effectiveness of a company’s performance-management system. When managers effectively coach and develop their employees – a practice that less than 30 % of all respondents report -, a majority of respondents say their organizations’ performance is better than that of competitors. On specific coaching methods, the results suggest that ongoing development conversations between managers and employees also support better outcomes. Ongoing coaching and feedback conversations have a positive impact on individual performance.
3. Differentiating compensation : The third practice is ensuring a meaningful differentiation of compensation among low, midlevel and high performers. As is known effective performance management is more likely when organizations separate their compensation conversations from formal evaluations.
The previous three practices seem to have the most impact on whether employees say their companies’ performance-management systems are considered to be fair. And of all the organizational practices, perceived fairness correlates most closely with positive business outcomes!
Building a high performance culture is about focusing on what matters most: good business performance, based on a clear direction and framework for the people and driven by leaders who prefer having frequent performance dialogues instead of the once in a year performance appraisal.