Of all talent management processes, performance management is arguably the most important to get right. And, arguably, it’s also the most difficult to do well. The potential upside for getting it right is significant; the potential downside of doing it poorly is even greater. When done poorly, performance management not only hurts business performance, it can destroy morale and create a toxic environment. 

Unfortunately, few organizations do it well. There are many surveys and research studies that indicate that performance management is almost universally despised by employees and managers alike. There are many reasons, and just about all of them can be traced back to violations of the brain’s threat and reward networks: 

• Performance management is too often driven by compliance and places HR in the role of performance management police. Compliance does not promote meaningful conversations—it reduces them to a task to be checked off a list. Compliance may activate the brain’s threat network.

• Setting goals is problematic. Goals are typically specific and inflexible, but business conditions are fluid and require a certain amount of agility. Assessment on outdated goals violates the employee’s sense of fairness, again activating threat networks.

• Performance appraisals are normally linked directly to compensation, and this leads to dysfunctional management behavior. Managers often begin with a target compensation in mind and “back into” the performance rating. Linking performance to compensation makes it virtually impossible to remove threat from appraisals.

• Performance ratings are rarely accurate (as evidenced by many research studies) and can’t possibly capture the value of an employee’s contribution in a single rating. This creates tremendous opportunities for avoidance behavior and makes it nearly impossible for employees to focus on and be open to meaningful feedback.

• Performance management should align the efforts of the workforce and create a sense of urgency to generate results for the business. But most managers lack the skills required to coach employees so they gain understanding and insight of their goals. They are unable to generate a sense of urgency without introducing threat.

• Managers often lack a performance vocabulary. You can’t have a meaningful conversation about performance without a comprehensive vocabulary to describe performance. It’s ineffectual to speak in general terms, such as saying, “Good job.” Without a precise, behaviorally anchored vocabulary, managers will avoid performance conversations, and the uncertainty creates a threat for employees.

• There are fundamental differences between performance coaching conversations and development coaching conversations. Managers typically find it easier to have development conversations, which are forward-looking and not likely to introduce threat. Managers find it much more difficult (threatening) to do performance coaching, to have conversations that look backward and discuss what was delivered, how it was delivered, and the impact the deliverables had for the team.

• The effectiveness of performance management processes is almost always assessed with quantitative metrics, which tend to support the notion of compliance and checking boxes rather than drive meaningful, helpful conversations. 

Recommendations

Here are five recommendations to improve the performance management process:

#1: Establish guiding principles for performance management in your organization that leverage the brain’s perception of rewards and threats. Engage a cross section of leaders to develop the guiding principles. Here are some examples: 

• Responsible managers own the process and exercise discretion to promote autonomy. 

• We only adopt performance management practices that promote meaningful, helpful conversations—those that maximize rewards and minimize threats. 

• Feedback and assessment are done for the employee’s benefit, to help them be successful rather than to punish and introduce threats. 

• We hold goals loosely but intention tightly to remove uncertainty and promote fairness. 

#2: Educate managers on the basics of brain-based rewards and threats. Give them practice in facilitating nonthreatening performance-coaching conversations.

#3: Create a sense of urgency by focusing on opportunities and framing them within the team and organization. Reinforce team identity by creating shared opportunities and rewards. 

#4: It’s better to focus on winning than avoiding loss, but you can address legitimate threats best by framing them as coming from outside the organization and being shared by the entire team. Optimal performance is likely to be achieved when employees have a sense of playing on a team that’s in the hunt for a championship. 

#5: Collaborate with employees in goal setting to the extent allowed by the context and employee’s capability. Present information and use questions to lead employees to insights that help them create goals that are aligned with business strategy and appropriately aggressive. Promote autonomy and fairness by engaging employees in goal setting and providing flexibility to deal with changing business conditions. 

When we begin to see performance management as a productive conversation, rather than a dreaded task, everyone will benefit. But this can only happen through an organization-wide shift, one that leverages the brain’s sense of rewards and threats.