For a More Agile Enterprise, Start by Redesigning Your Performance Management Process

According to Korn Ferry’s 2018 report on the “World’s Most Admired Companies” (WMACs), agility is the top priority of today’s leading businesses, with 95 percent of WMACs saying it is a “critical” or “very important” focus.

“Agility” refers to how companies successfully deal with the constant changes of 21st century business by becoming more adaptable and innovative. Instead of a traditional hierarchical, top-down, siloed structure, agile organizations are made up of flexible cross-functional teams responsible for determining how to best achieve key business outcomes.

In this fast-moving, flexible environment, the role of HR as the curator and developer of talent gains added importance. While many CEOs and COOs want their organization to be more agile, they too often focus on the process — the scrums, sprints, and stand-ups of the software development method that started it all. But HR knows that, at its core, agility comes from your people.

Agile Organizations Are Organisms, Not Machines

McKinsey likens the difference between old company structures and modern agile organizations to that of a machine versus an organism. In the past, businesses sought out machine-like stability and predictability by creating rigid command-and-control structures. Goals and strategies established at the top filtered down through bureaucratic layers of management until they reached the discrete department charged with delivering the expected outcome.

As the pace of change across all business increased, these paradigms were thrown off by new, unpredictable inputs like disruptive technologies, changing customer needs, new competitors, and the ongoing war over talent. Stability is no longer the key to sustained success. Instead, organizations must be more like living organisms, constantly adapting to their environments and evolving new habits, behaviors, and traits to survive and thrive.

Agile organizations are completely dependent on the ability of their people to perceive, react to, and adapt to changes in the environment in order to continually improve performance. Forward-thinking HR leaders recognize their organizations’ performance management processes fuel the continuous motivation and engagement of their workers in this regard.

With that in mind, here are five key ways to evolve your performance management program to effectively support enterprise agility:

1. Give Employees a Purpose

Agile organizations require both individuals and cross-functional teams to innovate and act proactively, without waiting to be told what to do. To avoid anarchy, organizations must have a purpose that is clearly communicated to every employee and helps guide day-to-day decision-making. McKinsey refers to this purpose as an organization’s “North Star.”  Yet according to a recent survey, only one-third of managers believe every employee at their organization has “a clear understanding of the company’s mission and vision.”

It’s not enough to simply talk about a brightly shining star in the sky. Each employee on the ground also needs a personal connection to this higher purpose. Individual and team goals should be directly and transparently linked to the broader strategies and purpose of the business. It is only when a shared sense of purpose and overall transparency exist that networks of teams can seamlessly form, disband, and reform as needed and in alignment with an overarching mission.

In today’s business environment, an organization’s top priorities may rapidly shift to address changing customer needs, new technologies, or competitive threats. Your performance management process must give your organization the ability to review and update its top priorities every quarter and, if needed, quickly realign the entire workforce around new objectives.

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2. Help Managers Become Better Leaders

Paradoxically, a less hierarchical organization demands higher-quality people managers. In an agile business, managers are not simply a link in the chain, passing information down from the decision-makers at the top. Instead, they are the ultimate providers of purpose, developers of talent, and facilitators of agility. The problem is the expectations, experience, and training of too many managers are stuck in the past.

Research  from Betterworks found fewer than one-third of HR leaders believe their managers know how to coach and develop their team members. While most managers want to improve their coaching skills, only 35 percent feel HR extends the support they would need to do so.

In an agile organization, managers must understand their primary role to be motivating and developing employees. For this reason, your performance management technology needs to guide managers through the crucial coaching conversations they need to have regularly with team members. Without such support, managers who feel uncomfortable about having career development conversations will not prioritize these discussions, and overall performance will suffer as a result.

3. Get Cross-Functional Feedback

The hallmark of a successful agile organization is the act of cross-functional teams coming together to work on specific challenges. Deloitte’s “2019 Global Human Capital Trends”  report found 31 percent of workers now do almost all their work as part of cross-functional teams. This means more and more individual employees are often working without the day-to-day involvement of their direct managers.

To ensure performance evaluations are perceived as fair, managers responsible for evaluating performance and developing talent must be able to incorporate the goals and feedback from these cross-functional teams into each individual’s assessment. Managers need visibility into the goals of the team as well as the team’s progress toward achieving those goals. They also need to be able to solicit feedback from cross-functional team members about the individual’s work product and collaboration behaviors.

This visibility into the work of the cross-functional team ensures managers are able to incorporate each individual’s full organizational impact into both their continuous coaching and their discussions around compensation and succession planning.

4. Power Internal Mobility With Workforce Insights

Assembling a crack cross-functional team isn’t easy. Managers are not always best positioned to determine who is right for a specific project. They don’t know much about the strengths and suitabilities of people outside their direct reports, and they can be overly influenced by their own departmental needs.

Forty-nine percent of respondents to Deloitte’s “2019 Global Human Capital Trends” survey said they lacked processes to identify and move employees within an organization. Furthermore, 57 percent of respondents said it would be easier to find a new job with another organization than it would be to find a new job within their own organization.

Improving internal mobility can have a positive impact on retention. According to Josh Bersin, talented employees often leave their employers if they feel they have stopped learning and growing in their careers. Conversely, when employees can see how their personal career goals can be met within the organization through internal mobility, they are much less likely to leave.

HR’s position within the organization allows it to understand both the business’s needs for cross-functional team staffing and the skill set and performance of every individual in the workforce. With insights from a performance management program that aligns organizational goals with individual performance insights, HR is better able to support much-needed internal mobility.

5. Manage Performance Continuously

Insights are only as good as the data behind them. If a business is still doing an end-of-year annual review process, it is relying on month-old insights to make talent decisions. That’s the polar opposite of agile. All the talent-related tasks that make agile companies successful — goal setting and alignment; training and development; feedback from leaders, managers, and peers — need to be done continuously. That way, both the employees and the business are always growing and improving.

A complete continuous performance management approach comprises goal setting and alignment with the organization’s purpose, as well as guiding people managers through crucial conversations with employees around progress, performance feedback, and career development. To add value to the workforce and to the business, the process needs to be lightweight; it should fit seamlessly within existing workflows. This ensures HR and the business always have up-to-date insights into the workforce.

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According to Korn Ferry’s 2018 WMAC report, 70 percent of WMACs have a “well-developed talent strategy that is aligned with business priorities.” Similarly, Deloitte’s “2017 Human Capital Trends” report found 90 percent of organizations that redesigned their performance management processes saw improvements in engagement. As Gallup notes, teams with high engagement are 21 percent more profitable and have 20 percent higher sales than their less engaged rivals.

Focusing on talent development and supporting efforts to become a more agile organization may not get your business on next year’s WMAC list, but it will give your business a competitive edge today and ensure it can adapt to tomorrow’s challenges.

Deborah Holstein is chief marketing officer at Betterworks.