Tl;dr: agile performance management means grabbing the whole performance management toolkit that we know (performance reviews, grades, rankings, and goals – everything done on an yearly cycle) and adapting it to a faster-paced world, where priorities shift fast, and people want real-time, ongoing feedback.
The evolution of Performance Management
It all started with the fathers of management: Taylor, Ford, and the sorts, who began treating business like a science. How so? They figured they could measure output, and then formulate hypotheses as to how they could improve output. Back then that meant productivity, as measured by output per employee. These guys figured out optimum work schedules, break times, and lightning arrangements for factories. They also started streamlining production, adding specialization to the factory floor. These practices all brought incredible, tangible improvements.
In the 50s, a fellow named Peter Drucker, who’s believed to be the greatest management guru that ever lived, figured out that giving managers some goals could be a great thing. Now, not only they had to improve their numbers, as Taylor and Ford had suggested, but also to aim at specific target outcomes from time to time.
Drucker called this framework Management by Objectives, or MBO, a concept introduced in his seminal book The Practice of Management. Around that same time, companies began to tinker with assessments and reviews, that became what we know today as competence-based reviews. Some functions weren’t as adaptable to goals as others, and for those, predictive behaviours and competences we’re assessed in people, as a proxy for performance.
Today, practically every modern Fortune 500 company practices some sort of goal setting and performance review. It’s proven to bring better results than not having them . Some companies do it all once a year; some companies set them twice a year. A number of them tie variable compensation to reaching your goals, and another number of them perform some sort of performance review based on these goals and results. But that’s all changing. And it’s changing fast.
In short, cycles are getting squeezed to quarters, or even months. As you can infer from Jeff Immelt’s speech, GE is a big proponent of this shift: the company has abolished the yearly performance review cycle in favor of more frequent check-ins, coupled with crowdsourced ongoing feedback between coworkers. Goals, on the same way, are now reset monthly during these check-ins, to accommodate for the frequent tectonic shifts it faces in its markets.
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