The role of performance management in talent programs

William J. Rothwell, Ph.D., SPHR, Honorary Member CPLP

The term “performance management” has more than one meaning. For some, it means the annual performance appraisal of employees; for others, it’s the process of planning, monitoring, and evaluating annual results; and for yet others, it’s an advanced feedback system that provides real-time feedback to employees directly from customers or those serviced by the employees, regarding how well they meet customer needs. And how does this relate to talent management?

For most leaders in organizations today, the first meaning (related to annual appraisals) is gradually giving way to the second meaning (related to planning, monitoring, and evaluation of results). The third meaning is gradually emerging.

What role does performance management play in talent management? What new directions are worth considering regarding the role that the performance management process has to fulfill?

The role of performance management in talent management

Let’s remember that for many people, but not all, talent management is a systematic process of attracting, developing, and retaining the best employees. The key word in this definition is “best.” This raises questions: best according to whose opinion, best based on what criteria?

In the broadest sense, organizational leaders often consider the best employees to be those who are productive in their current positions and have the potential to advance to higher positions with greater responsibility. While this is not the only way to perceive the best employees, nor the only way to define talent, it is one of the approaches widely used by organizations.

Assessment of current performance

To assess whether people are performing well in their current positions, it is necessary to have some system for measuring ongoing performance. This is the primary task of a performance management system. Performance management can also serve other functions, such as justifying salary increases, identifying training needs, motivating top performers, appropriately directing employees achieving average or poor results, and so on.

The fact is that most performance management systems are far from perfect. In reality, they are often a subject of complaints from operational managers. Managers sometimes consider performance management a waste of time because they believe they already know how employees behave and consider it pointless to write down their thoughts or spend time communicating those thoughts to employees.

What does performance management system look like in organizations?

In most organizations, employees and managers typically meet at the beginning of the assessment cycle, usually at the start of the year, to establish goals for the employee to achieve and review the behaviors expected by the organization. Business objectives, often referred to as Key Performance Indicators (KPIs), are communicated to the employee based on the organization’s strategy. Behaviors stem from the competency model for the employee’s position in the organizational structure and are identified by examining what makes employees so effective.

Throughout the year, the employee and manager meet periodically to review individual results compared to established goals and behaviors. Meetings may be routine if everything is going well. If there are issues, such as the employee not meeting goals, not adhering to the competency model, or the organization’s strategy changing for some reason, it may be necessary to reassess goals.

At the end of the year, the employee’s results and behaviors are compared to the goals set at the beginning. This way, each person performs work in line with the organization’s strategic plan.

Integrity and talent management

In talent management, maintaining integrity is extremely important. Only individuals who perform well in their roles should be considered as potential candidates for advancement or promotion. On the other hand, because higher positions in the organizational structure differ qualitatively from work performed at other levels of the organizational structure, success at one level is not an absolute guarantee of success at higher levels. Therefore, performance management is essential for planning, monitoring, and assessing talent. However, this is not the only necessary aspect. Assessing an individual’s potential for advancement is essential if the organization aims to objectively evaluate a person’s potential for advancement.

New approaches and directions in performance management

Despite performance management systems having existed for a long time in most organizations, efforts have been made in recent years to improve them.

Recent initiatives have focused on adding new categories for consideration. In addition to results (Key Performance Indicators, KPIs) and behaviors (competency measures), some organizations examine how well employees adapt to behaviors related to the organization’s values system or how well each employee conforms to behaviors associated with the company’s ethical code.

Increasing attention is being paid to values (understood as what is important to the organization) and ethics (what is right and wrong, and the continuum between them). Ethics gained particular significance after the financial crisis in the USA in 2008. There is a widespread belief that unethical (and sometimes criminal) behavior should be avoided, and it is particularly important for future leaders of organizations to have the highest moral standards.

The Ideal Leader

Americans (and others) expect their leaders to be superior to average people in every way.

In other organizations, experiments with real-time feedback systems are being conducted, aiming to provide employees with better quality and quantity of information directly from customers about how their work is perceived. Often, one of the goals is to eliminate the direct supervisor from the feedback loop for the simple reason that the customer’s opinion is of paramount importance. Even though an employee may satisfy their boss, it does not necessarily mean they are satisfying customers. For this purpose, organizations conduct real-time surveys among customers to capture their perception of an employee’s performance at the moment of contact.

Summary

Performance management will always play an important role in talent management. However, the way this role is played may change in the future. Expect a greater emphasis on values, ethics, and real-time feedback systems.