You’ve heard the phrase “culture eats strategy for breakfast” (Peter Drucker)? Well, get it right, and performance management gives culture a brilliantly balanced diet your business thrives on. The trick is making sure the performance management process you use affects company culture positively.

To make that happen, you need to take a critical look at your current process. Let’s start with the headlines, then dig into the detail:

  • Ad hoc or annual performance management is ineffective. It causes more harm than good to your organisation.
  • Performance management needs to center on enabling team and individual achievement and growth, not on exiting poor performers.
  • Continuous performance management with frequent feedback and recognition, a clear vision, and regular check-ins, offers the best platform for building a great company culture.

Why traditional performance management has a negative affect on company culture

The difficulty with annual performance reviews is just that – they happen once or twice per year. In between, there are large gaps of silence. You set goals and then often ignore them, because they’re either unrealistic (so why bother trying) or completely separate from day-to-day priorities (so there’s no time to focus on them anyway).

The result? Culture struggles when people see performance management processes as a waste of time. They want to tick the box to (hopefully) get a decent rating and a related pay rise. Either that, or employees become quiet quitters as they feel undervalued and start to coast, or worse, disengage entirely.

In the meantime, you have people who aren’t focused on business success. And they certainly aren’t doing everything they can to smash performance and drive innovation. So, overall, poor performance management damages your company culture, by:

  • Allowing individuals to manipulate outcomes, because the gap between setting and reviewing the goal is so long. They can blag results without specific evidence of achievement.
  • Letting coasters take credit for other people’s work, leading to distrust and frustration across departments and teams.
  • Viewing performance management negatively, as it centers on big achievements (or failures) and disregards most other milestones along the way.

Instead, companies should aim for a performance management strategy that enhances company culture.

Shifting the focus of performance management

Changing performance management from infrequent box-ticking to regular updates between managers and individuals makes a huge difference to culture.

Traditional annual reviews encourage secrecy. Employees don’t want to keep managers up to date, and longer lead times let them believe they can “make up ground” as deadlines slip. Annual appraisals encourage disengagement. Employees set goals with little, or no, link to company priorities. They become irrelevant within weeks, and then sit there, redundant, until the mid-year review.

So, what’s the alternative? What’s the way to change your company culture? Make performance management more than a process. You need it to focus on regular communication, where sharing regular updates are the norm, and feedback is frequent. Performance management needs to form part of day-to-day activities, and move the company culture toward openness. It isn’t an ‘extra’ task people need to fit in.

Get it right, and individuals can update progress and flag any concerns while there’s still time to achieve their objectives. And managers seek positive ways to support individuals, both professionally and personally. Using performance management positively builds stronger connections across the business, and secrecy wanes as people start pulling together.

Three steps to help performance management positively affect company culture

Your ultimate goal is to move your business to continuous performance management, but that might be a stretch initially. So, look at where you are now and take these three steps to shift your organisation in the right direction:

1. Start with recognition and feedback

One of the biggest flaws of annual performance management is the delay. You don’t tell people they’re doing a great job until their achievement is long forgotten. And feedback’s given when it’s far too late. Instead, make recognition and feedback immediate. Shout about successes and give support to remove blockers so individuals can change course and still hit their objectives.

2. Set a clear vision

Get everyone bought in to where you’re going. Use performance management to create a stronger culture. Ensure everyone knows where they’re going and how they contribute to that picture. Then get everyone pulling in the same direction with Objectives and Key Results (OKRs) that focus on achieving those priorities. Finally, make timely changes to OKRs as and when business priorities need to adjust.

3. Introduce regular check-ins

Get people in the habit of giving regular updates. Weekly might be too much, if your start point is twice a year. But help employees share their progress, whether monthly or bi-weekly. Encourage managers to spot issues and proactively offer support. And identify anyone at risk of disengaging through their lack of interaction and disinterest in the new way.

Making a shift in your performance management approach is never going to change culture overnight. You’ll need to make regular changes to keep it going. So get more help and download our complete handbook so you can embrace continuous performance management and all the benefits it brings.