This is not really a new trend. Taylor placed performance measurement in focus at the end of the 1880es, and this has in most placed been replaced by performance management, a concept people have been trying to understand since the 1990es as they recognise that measurement alone is insufficient.

There are three reasons that the development in recent years is still somewhat of a paradox:

  1. No one ever wanted performance management
  2. Most people disagree on what the purpose is
  3. The watermelon effect

Employees prefer to pass

I have worked with performance in more than 15 years, and I have never once heard anyone say “I really wish we had performance management in my workplace!” To be more specific, I have never heard an employee say this. Managers, on the other hand, are often quite enthusiastic, and this is perhaps why they sometimes forget to ask their employees a very simple question before they implement performance management. “If you could get just one thing to improve your own or the company’s performance, would it be more management (control)?” No one in their right mind would say yes, so why do we pretend?

What’s it for?

Even in companies which have already implemented performance management, it just takes one simple question to stir the waters: “What is your purpose with performance management, what’s it for?” I have asked this question to hundreds of companies, and their answers always fall into one of three categories: Silence (“I have no idea”), rote repetition (“Someone made the decision for us, so we just do it”) or total confusion and answers with 15-20 partially contradictory purposes such as e.g. control, motivation, learning, budgeting and many others. One of the more special purposes I have heard was in a company, which operated in the US among other places. They documented their employees’ performance in case they were forced to dismiss the poorest performers. The real purpose was therefore not improved performance but to avoid any lawsuits.

(If you want to see where your company stands, just ask each person in your management group to write down the purpose of performance management on a post-it and place the post-its on the wall).

Another reason for the lack of improvements is the lack of coordination across functions. As if that was not bad enough, it is often the case that different types of performance management inadvertently counteract each other. An example could be when Finance-driven business performance management imposes instant improvements top-down while Operations-driven process excellence focuses strictly on eliminating root causes, which can take years before showing up on the bottom line.

Get rid of the watermelons

Finally, the third most frequent reason for a lack of improvements is an excessive focus on targets. How enticing it may be to be able to say “We reached all our targets,” this should actually be considered a symptom. Most targets are negotiated and consequently affected by the very same people who are later rewarded for their achievement. This is where the “watermelon effect” comes into the picture, with KPIs green on the surface but blood-red on the inside. Conventional targets deprive us of the opportunity to learn from facts and to converting data into performance information. If your current performance is improved compared with external benchmarks, we perform better than anyone else, regardless of what your target states. If your current performance is improved compared with external benchmarks, we perform better than anyone else, regardless of what your target states. The reverse is of course also the case, and the reverse situation can be rather painful to face. Something which targets can easily hide.

From management to leadership

However, with the right help, it is in fact possible to find your way out of the many dead ends of performance management. It also requires that you have the courage to discard the controlling management paradigm, and this should be more than feasible in Denmark, where trust and empowerment play a major role in the workplace. Performance leadership is the natural next step from performance management, but it also turns many aspects upside down. A performance leader would for example never ask how to set ambitious targets for the entire organisation but would instead focus on how the individual manager can help his or hers employees become better at their jobs (and thus at creating more value for the company). This alone eliminates the first two paradoxes from performance management. It is a joint purpose, which everyone can relate to, and which employee does not want to be good at (and recognised for) his job?

So what about those lacking performance improvements? Here, performance leadership is able to set the framework for a series of initiatives in a completely different way than performance management. By replacing control with transparency, you achieve self-regulating mechanisms, and non-value-creating processes such as budgeting can be restricted to a minimum. Just hang up a top 10 list of employees with the most expensive average hotel prices for business trips next to the coffee machine, and you will never again have to worry about the budget or related expenses.

This principle can be used in many ways and not just for choking on your coffee but also for learning from each other – which strengthens the actual purpose of becoming better at your job. Forget all about those absolute targets, and only use benchmarking or relative targets to evaluate performance. This will enable your employees to find best practices in their neighbouring departments, and the department managers will have the perfect opportunity to find out how to share these best practices with everyone to improve performance. Now, that generates improvements.

Dialogue rather than reports

Dialogue also creates learning and, via inclusion, also motivation, and a performance leader will know the value of his or hers management position. It may seem daunting to have a performance meeting with your entire team without being able to rely on the usual 50-page business review report with deviation explanations. But experience shows that inclusion, ownership and discussion create stronger buy-in than hitting people on the head with the aforementioned report. A performance leader understands the importance of regular performance meetings and dialogues with his or hers employees to ensure that everyone always understands performance and what they can do to improve it. More and more companies have realised the importance of this, and these companies have in common that they use coaches to guide their managers.

Performance leadership is also based on a foundation which integrates the company across functions. This way, you avoid having different types of performance management counteracting each other. Performance leadership recognises the importance of being able to see the improvements on the bottom line and also knows that people will achieve these results through their behaviour, not PowerPoint-based improvement catalogues. A good performance leader also understand the importance of being able to retain all improvements and is able to achieve this by systematically focusing on process improvements. The combination of these three perspectives ensures that performance improvements can be realised.

To summarise, performance leadership is thus based on values such as empowerment, transparency and learning, and if I were to make just one wish for next Christmas, it would be that more companies had the courage to try out performance leadership in practice to see the effect on their results.

Originally published in Børsen Ledelse.