Performance Management in Successful Companies: Lessons from Cutting Edge Research

Introduction

Continuing with our series of articles on HRM practices in successful companies, this article examines the performance management practices of those companies that have managed to be in the FORTUNE “100 Most Admired Places to Work in” consistently. To put it in perspective, just twenty odd companies have remained in this list throughout the last decade.

The research into the HRM practices by the leading business consultancy, BCG or Boston Consulting Group, has revealed a set of practices that are followed in these companies with respect to performance management.

The first practice is to link the bonuses and other incentives for the managers to KPIs or the Key Performance Indicators to ensure that the managers’ goals and the organizational goals are aligned together. However, these companies do not stop at this and actualize a well-constructed and balanced performance management system that motivates and develops employees. The twin aspects of such performance management systems are that they institute ac culture of meritocracy and provide incentives to foster and sustain this culture. Further, the performance management systems in these companies are fair, transparent, and reward the employees to promote such a culture.

Establish Clear Norms and Articulate Expectations

Employees need to understand what constitutes superior performance and what is unacceptable from the organizational perspective. This means that organizations have to not only not overcomplicate the performance management systems but also have to articulate what is simply below average or poor performance that leads to action from the organization. Further, the research has shown that these companies explain the reward systems to the employees in a clear and engaging manner so that the employees are aware of what performance would be rewarded and what performance would be punished. If these practices are not followed, they might lead to lack of employee cohesiveness and risk the flight of valuable talent from the organization.

Follow Global Standards Consistent throughout the Organization

The other aspect of successful performance management is that most of these organizations follow global corporate HRM practices and standards. This is done in a manner where the global policies are articulated clearly and the local units are asked to follow the same practices to have coherence and consistency throughout the organizations irrespective of which geographical location the employee is based. Further, the high performing companies employ state of the art performance management systems and put in place processes and methods that conform to global norms and standards throughout the organizations.

Reward Behavior and Promote Openness

The research has also shown that more often than not, these successful companies reward behavior and not just results, which show the commitment they have towards actualizing employee fulfillment and at the same, time inculcating high performance culture throughout the organizations. Of course, though these companies reward high performance, they are not overly procedural or bureaucratic in their approach. Apart from this, successful companies emphasize feedback, promote a culture of openness, and tend to avoid too much formality and a culture where cut throat competition kills creativity and innovativeness.