Performance Management 4.0
How Design Thinking creates people-centered Performance Improvement
“Right now, your company has 21st century technology, mid-20th century management processes, all built atop 19th century management principles.“
Gary Hamel – The future of Management
Traditional management approaches such as divisionalization, brand management, pay for performance and performance management itself, were created on the Industrial or Execution Era when organizations were mainly local and value was created from mass production, efficiency and scale.
As knowledge accumulated, the focus moved to managing and retaining expertise.
The Expertise Era was an evolution from the previous era. Specialization, focus on efficiency, quality control and knowledge accumulation evolved into verticalization, processes improvement, conformance to specification and knowledge management.
The impact of these traditional approaches are seen today on the culture of traditional organizations – Information Silos, Low Collaboration & Internal competition, One-size-fits-all , people categorization among others.
Most of current management practices were created around the Industrial and Expertise eras:
MBO – 1954Six
Sigma – 1980
Waterfall development 1970
reengineering – 1990,
Iso certification – 1947
SWOT analysis – 1960
Myers Briggs types – 1918
DISC profile -circa 1950
Innovation brought by technology transformed the way we work the expectations customers and employees have and how organizations compete.
Digital Transformation, Social Media, Cloud, AI, Enhanced Reality, IoT, Technology Convergence, Skills obsolesce, Agile ways of working created a new mindset, a drive for experience, speed and agility, innovation.
Some consequences are:
- Knowledge became a commodity,
- Market leadership is instable and based on added value and not products differentiation,
- New entries disrupting traditional (look at Airbnb world leader accommodation provider, does not own one single hotel or apartment; Skype biggest phone services provider does not own one single telco infrastructure ).
This new mindset changes also the skills necessary to succeed – agile ways of working, effective cross-functional teams, future orientation, customer centricity value and knowledge creation and sharing are the skills that represent the competitive advantage of our VUCA world.
Management practices that delivered their promises on the Industrial and Expertise era, will not help organizations today to develop the competitive advantage to address challenges and capture new opportunities.
Performance Management is a strategic tool to build a competitive advantage driving the transformation of skills, mindset and behaviors to address change, new challenges and capture new opportunities.
An effective Performance Management tool must be aligned to your organization’s business cycles, be flexible and agile to accommodate reprioritization and shifts of focus, allow teams to fast mobilize and effectively work cross-functionally. It has to be Customer centric and be driven by improving the customer experience, recognizing and rewarding value and knowledge creation.
It should not only ‘manage’ performance, it must improve it.
Traditional Performance Management
Annual Cycles – Set & evaluate goals
Directly link to compensation & promotion
Reward achievement mostly
Managers not in the driving seat
Employees don’t feel is a development or growth tool
Traditional performance management has been linked to high levels of attrition, poor productivity, and collaboration issues.
Its management principles hinders agility, adaptability and increase risk and waste :
- It measures outputs of approved goals instead of Outcomes that solve business problems and creating value to customers.
- Goals setting follows a culture that is top-down and command-and-control – strategic thinking happens in the top layers of the organization, defining the company goals, a fixed plan that is then cascading to the organization (waterfall approach)
- Strategy has annual static plans for all areas even those that have different business cycles.
- Top-down, command-control management and hierarchical, bureaucratic organizations.
- Annual static planning and goals setting, details all steps of a project in advance not considering changes in market conditions and strategy happening during the year.
- Focused on what employees have done the past year and don’t look to the future or prepare them to evolving challenges.
Several companies have revamped their Performance Management.
They realized the traditional Performance Management approach was hindering them to build the skills necessary to win in the Experience Era.
Some examples come from IBM, GE, Accenture, Adobe and Cigna.
To address the challenges such as business model disruption from new technology, need to reduce costs fast, declining revenues, customers’ business challenges, ambitious business growth goals they look at their Performance Management to drive the agility, innovation and value creation they needed.
Each of them had come out with an unique and customized solution however they all have something in common:
Using Design Thinking to develop the new tool
- Aim for a people-centered Performance Management
- Active participation from their employees.
- Challenge assumptions and be driven by internal customers feedback ( manager and employees)
- Iterative approach of prototype, experiment, learn and iterate.
- Hands-on problem solving
Focusing on speed, flexibility and agility
- Allow fast reprioritization based on customers needs & wants
- Few or none documentation
- Mobile-friendly apps
- Feedback – focus development vs assessment only
- Build new skills to respond the future challenges
Separate PM from compensation and promotions improving managers accountability on the process.
New Performance Management
Employee engagement + 20%
Improved motivation, performance, development and collaboration
Less competitive work environment
Created teamwork and a feedback culture
Pilot achieved 5x productivity in 12months
Why Design Thinking?
Design thinking is a problem-solving approach that develops a deep understanding of people to then design a solution tailored to them. I
t is said to be a “human-centered” approach as it based on Empathy and proximity to the people you are designing the solution to.
It has a hands-on and customer focused approach, counts on extreme collaboration to deliver solutions through a prototyping and iteration process.
Make People Love Things by Making Things People Love
Deeply understanding People See the world through their glasses. Deliver a solution tailored to them that will improve their experience.
The flow is much more about doing than thinking – usually first you define the users needs and insights – their Point of View (POV) – issues, preferences, challenges, unmet needs, their goals and how they want to feel when they achieve these goals.
The next step is to generate ideas, then prototype, test & feedback with users and iterate in a continuously learning process till the solution matches users needs and goals.
Design Thinking is a great approach when you are dealing with problems and solutions initially unknown. Or when dealing with solutions that need to be creative, intuitive and might have an emotional impact in customers. Or even when your first priority is to improve the Customer Experience – the way people feel when using the solution.
When revamping Performance Management, design Thinking builds unique solutions that could not be found just replicating market best-practices – it delivers solutions tailored to the uniqueness of your organization. Get in touch to discuss how Design Thinking can help you evolve your Performance Management practices.
Get in touch to discuss how Design Thinking can help you evolve your Performance Management practices.
Alba Tais Pereira
+39 334 1125 654