The Future of Performance Management According to MIT Research

MIT Sloan Management Review partnered with McKinsey and Company for a global executive research study about how performance management is changing. Their report was just released, offering insight into the future of performance management.

They discovered that our evaluations of productivity and performance are and will continue to become “more data-driven, more flexible, more continuous, and more development oriented.” Furthermore, technology is transforming how and why we measure performance.

MIT provides a thorough research report which carries heavy implications for every business trying to attract, retain, and develop top performers. Here are some of the highlights as you prepare your business to respond to the changing nature of performance management.

 

Decline of Traditional Performance Management

MIT’s research demonstrates an overwhelming consensus among professionals that traditional methods of performance management are simply ineffective. The annual, and even quarterly, review process is becoming strikingly less indicative of actual performance. In order to keep up morale, and motivation--and thereby retention--performance has to be managed in real time.

These abounding criticisms of traditional methods are nothing new. Yet in 2018, Reflektive surveyed businesses and found that 70% of them still run annual or biannual reviews. Natalie Baumgartner of the employee engagement company Achievers laments the general sense that “performance management is broken.”

Data to Save the Day

A major, weakening proponent of traditional methods is their focus on the individual. It’s more common now for a single employee to work on multiple teams at once, and so measuring by their individual progress on specific skills is quite limiting. Additionally, there remains the danger of subjectivity when one individual is being reviewed by another individual, with many factors outside of human control that can influence a typical performance review.

So what is one to do? MIT’s research shows that as annual review models and measuring individual skills become less effective, performance management will continue to shift toward a more data-driven approach.

The bigger and more established your company is the harder the switch is likely to be. Older and larger companies may find themselves relying on outdated systems and thus inadequate data. The study points to companies like these, such as IBM and Adobe, that are restructuring the way that they measure and consider human capital. Executive summary of the research declares that the “performance management future belongs to data-rich systems” that serve to better inform managers and workers more accurately and objectively.

 

Flexible and Continuous Evaluation

The traditional feedback system caves in on itself. Performance reviews are often looking backward, evaluating the previous six months to a year. Not only is that a huge chunk of time to evaluate in one sitting, but it doesn’t reflect the constantly changing nature of real life and work.

Donna Morris, chief human resources officer and executive vice president of human resources at Adobe, describes this as a “rear view mirror approach” that doesn’t work well in a world where change happens on a rapid and real-time basis. She and many other HR executives agree that “the approach to how you look at people’s objectives needs to be more real-time and agile.”

This agility involves ditching the regular review method and instead checking in and coaching more actively and frequently. Morris explains that this is because no one’s work is fully reflected in a single skill, as “people are working in different locations, with different teams, and different modalities.” This “nimbleness” of skill sets deserves to be recognized and taken into account.

 

Developing Skills

Recognizing that performance relies on a variety of skill sets, MIT’s research report insists that the performance management of the future will be increasingly development-oriented.

Diane Gherson is the chief human resources officer and senior vice president of human resources at IBM. He has been at the company since before the complete restructuring of their performance management system. Gherson explains that “we need everyone to reinvent their skills on a consistent basis,” meaning that going forward, skills development should be an essential criterion not just for recruiting, but also performance management.

Gherson says that “you can’t hire someone because they have a particular skill.” Instead, “you have to hire someone because they have the capacity to continue to learn.” Performance management should consider this capacity and to what extent an employee is taking advantage of that capacity.

 

The Future is Now

Time and technology are moving fast, and performance review methods are finding ways to keep up. Going forward, it appears that traditional performance reviews will become more obsolete as we turn to data-based, agile, development-oriented performance management. Technology will be integral to these advancements as well, and we should take advantage of the tools that have become available to transform the way we define productivity.