What’s wrong with performance management?

I don’t want to look at performance management in its narrow sense – as part of an appraisal system. I want to look at the whole thing of measuring people’s performance – and what is wrong with it.

A performance appraisal in a modern organisation is linked to results. It is linked almost exclusively to outcomes. “How did you do?” “How does your quarter look?” “Where did you get to?”

If you achieve your target, good for you. If you exceed your target by 20 percent, you’re a hero. That’s your worth, regardless of whether you cannibalised your next quarter’s sales – or your integrity.

We know what this practice can lead to.

It can lead to auditors colluding with management in order to impress the analyst community or investors on a road show.

It can lead to a group of people fooling not only others, but themselves too, into believing they’ve achieved something really worthwhile.

At its worst, it leads to corporate scandals.

How different the world would be.

People need to perform, make no mistake. They need to work hard. And their efforts need to be appraised – you cannot run a business without an income statement or a profit.

But where does the profit come from? When everything is geared to output, we overlook something valuable: people’s input.

Therein lies a huge problem.

If you measure only someone’s output, you are not valuing the integrity of their efforts – or what they are learning.

A simple example: one of your teams has turned in a performance that falls short of what your business anticipated. The results are disappointing. Do you have a system in place to find out – honestly and authentically – what the team has learnt from the experience? Do you encourage them to express what they would do differently next quarter? Do you give your business the chance to incorporate the real-life experience into your strategy?

Do you even have the time?

If you don’t have the conversation, you are hobbling your company.

I’m calling for something that is more.

When it comes to performance appraisals, I believe you need to formalise a mechanism to help your people be honest about what they’ve learnt and what they would do differently.

You need to appraise, not only their results, but who they really are and what of themselves they are investing in your business.

What’s more, I believe the quality and integrity of that conversation is how they should be rewarded.

You need ‘loose time.’

To make the most of people’s inherent desire for loyalty and commitment, they need to feel acknowledged. Properly acknowledged. Their real contribution – of themselves – must be seen and valued.

That way, you appraise the true value of a person – and the future value that you will create together.

That’s not easy. You need time together. You need time to listen to each other’s experiences. That time was more abundant before the information age – before we became always connected and always on.

‘Loose time’ is what you need to create a culture of honesty and authenticity – and of learning.

When someone is acknowledged for showing courage or for going the extra mile – in other words, for when they’ve invested of who they truly are – it is very different to the acknowledgement for hitting an arbitrary target and being named ‘Employee of the Month.’

If your business treats the two as the same, you are being foolishly expedient. They are completely and utterly different.

Adam Smith, the great Scottish economist and philosopher, captures this wittily.

“There is an affinity between vanity and a love of true glory – as both these passions aim at acquiring esteem and approbation. But they are different in this: that the one – being true glory – is just, reasonable and equitable passion. While the other is unjust, absurd and ridiculous.”

HR cannot reduce the human experience to a number or to a phrase. Expecting that is unjust, absurd and ridiculous.

Yes, let’s count what can be counted. Let’s do performance management. But let’s complement it with a judicious acknowledgement of each person’s unique contribution to your business’s capital, reputation and culture.