Performance Management that Puts People First | McKinsey

Talent Management

Despite years of redesigning and modifying performance management (PM), HR practitioners still report barriers to effective PM, such as inconsistent approaches and “shadow” PM practices. This new article offers insights for practitioners to consider as they strengthen the impact of their organizations’ PM. It emphasizes the need for a “fit-for-purpose” PM design focused on four areas: goal setting, performance reviews, ongoing development, and rewards. Exhibit 1 illustrates these areas and the critical design choices they entail. For example, one choice in goal setting is whether to focus on individual or team goals or both. One mentioned European online retailer intentionally focuses on team goals: goals are set for the team, feedback is provided to the team, and they conduct team performance appraisals with metrics like project completion timelines, cross-functional collaboration success, and collective milestone achievements. This design choice was determined to be right for this organization. The article presents three questions that organizations can use to assess the effectiveness of their PM efforts, such as: Are we getting the expected returns from the time invested in PM, and does it drive higher performance and capabilities? To further help practitioners evaluate their PM design choices, I am resharing the Talent Strategy Group’s 2023 Global Performance Management report, which offers several ideas.