Performance management frameworks are a way to incorporate all your performance management practices within your HR operations in the most structured way possible. In this article, we discuss the five major types of performance management frameworks and how they can help an organization achieve success and growth.
Performance management is key to the success of an organization. While an increasing number of organizations are upgrading the way they measure performance and growth, more than 58% are still using archaic spreadsheets for documentation and tracking. Performance management frameworks help organizations manage performance efficiently by simultaneously analyzing various performance parameters and highlighting different pathways to improvement.
Before we learn about the different types of performance management frameworks, let’s understand why these frameworks are necessary in the first place.
A performance management framework is a structured approach to set organizational goals, chart plans, and assign targets to employees such that it becomes a systematic process to achieve said goals.
Here are five reasons why every organization should implement a good performance management framework:
Without a performance management framework, organizations tend to have static performance appraisals once a year with top-down feedback practices. This system leads to limited growth without making a real difference.
Studies like the one conducted by Inside HR suggest that 50% of employees surveyed are surprised by the feedback they receive. Of these, 87% reacted negatively to the feedback, leading to a 23% drop in employee engagement.
The absence of a performance management framework not only hampers an organization’s growth, it also lowers motivation in employees and decreases commitment, thereby bringing down the morale of the workforce, and lowering the retention rate in the long run.
The Society for Human Resource Management (SHRM), in a recent study, found that annual feedback sessions put employees on the defensive, which negatively impacts performance, even for high performers. This should encourage human resource (HR) leaders to adopt a performance management framework that will produce the best outcomes for the organization.
These are 5 of the most common performance management frameworks, along with the industries and/or companies that have benefitted from implementing them.
“Objectives and key results” (OKR) is a framework for performance management through which an organization identifies and determines both objectives and KRAs.
Objectives, as the name suggests, are the targets an organization wants the employee to achieve; the KRAs are tasks that lead to achieving said objectives.
To help you understand this better, try filling in your objectives and KRAs the blanks in the sentence below:
We will achieve (Objective) by excelling in (1. ___, 2. ___, 3. ___, 4. ___, etc.) key result areas.
The objectives are kept timebound so that they can be measured and analyzed in the upcoming feedback cycle. It is important to note that since OKRs can be ambitious, meeting them may not always be possible. OKR is a concept in performance management that originated at Intel and was subsequently adopted by other global companies such as Google, Uber, Spotify, Twitter, Airbnb LinkedIn, and Wells Fargo.
Google, for example, adopted the OKR performance framework in 1999 and has taken it to the next level by making suitable tweaks to the system to make all its functions more effective, and its workforce more skillful. Let us now look at the pros and cons of this performance management theory.
The OKR performance management framework offers a lot of benefits in addition to enabling growth:
Just as OKRs offer a lot of advantages, there are some drawbacks that HR teams need to be mindful of:
Learn more: Why OKR Is the Answer To Nailing Org Performance Post Pandemic
The MBO performance management framework tries to implement transparency, and uniformity of goals and ideals across an organization. The HR team collaborates with business leaders to define and then convey the goals and desired outcomes to employees. While implementing the framework, it is imperative that each member of the team has an in-depth understanding of their responsibilities and goals.
MBO is a framework that was developed by Peter Drucker, a management consultant, educator, and author. It has 4 critical components:
Unlike in the OKR performance management framework, where it is important to show improvement in every KRA, even if the target isn’t met; MBO requires every objective to be completed within the given time frame.
After the goals and objectives are decided upon and mapped out by management, they are conveyed to the respective teams as employee targets. When managers and their teams are in alignment about targets, it acts as a tailwind to achieving organizational goals.
Even though MBO feels like a foolproof performance management framework that will yield great results for every team, there are pros and cons.
These are some of the pros:
There are a few drawbacks to the MBO performance management framework:
HR-driven performance analytics not only helps manage performance, but also empowers employees to improve. With people analytics and employee performance metrics, every goal, and every action can be quantified and measured.
The goal behind HR-review-driven analytics is to understand historical data, predict new performance trends, and take informed actions to mold talent in a way that yields high performance. Gathering people analytics gives managers and HR teams a window into the strengths and weaknesses of employees, which, in turn, helps them channel their energies towards projects and assignments that will help them excel as a team.
The best part about the HR-analytics-driven performance framework is that it doesn’t just help record performance-related evaluations, but also helps measure human aspects like engagement and interest.
Within the framework of HR-review-driven performance management, these are the components that drive efficiency:
HR-driven performance management leverages descriptive analytics to not only offer insights into what is happening in an organization, but also what can happen. This is possible when organizations integrate performance management with HR tech to generate predictive analytics. Predictive analytics, powered by machine learning, will help ensure unprecedented growth, retention, and engagement in the workforce.
HR-review-driven performance can be adapted to a data-driven approach that works well with both OKR and MBO frameworks.
HR-review-driven performance analytics offer several advantages in the management of skills and talent at the workplace. For instance:
HR-review-driven analytics can have certain limiting effects on performance management:
Also Read: People Analytics: A Step-By-Step Guide to Using Analytics in HR
A scorecard is a document that offers a comprehensive ranking of something across various categories based on several parameters. A Balanced Scorecard is achieved when an employee delivers a balanced performance through the year, and even exceeds targets.
According to a recent study, the Balanced Scorecard links four aspects of performance metrics:
Therefore, the Balanced Scorecard combines indirect performance metrics in a single management report. This performance management theory not only helps business leaders realize how and where improvement is taking place, but it also helps them realize if the employee’s improvement in one area has made them compromise their efforts in another.
Customer-focused businesses, in particular, benefit from the Balanced Scorecard framework. Ford Motor Company and Volkswagen are just a few of the brands that have extracted the best out of their teams using this framework.
There are a lot of advantages for teams that rely on the Balanced Scorecard for their performance management needs:
There are a few cons to implementing the balanced scorecard framework, such as:
As the name suggests, this framework involves gathering and working on feedback collected from a 360-degree perspective; that is, from everybody an employee works with. 360-degree feedback is a highly effective performance management and performance appraisal framework that acts as a developmental reinforcement tool for employees. It gives peers and supervisors an opportunity to provide anonymous feedback about their coworkers and provide additional advice that might help them grow.
It offers employees rich insight into how their efforts are perceived by the people they work with and gives them an opportunity to calibrate their skillset as well as behaviors.
360-degree feedback also gives employees a chance to receive reviews from clients and/or customers, which adds to their professional growth. The key to 360-feedback is ensuring its frequency. Continuous feedback is important because organizations that engage their employees with continuous performance processes are 44% more likely to retain them.
360-degree feedback engages everyone from customers to coworkers to supervisors and stakeholders, thereby improving:
360-degree feedback involves a lot of form-filling, which can easily be automated, procured, and documented using Human Resource Management System (HRMS) software platforms like Darwinbox.
Some of the most notable advantages of implementing the 360-degree feedback framework are:
The 360-degree performance feedback framework has certain drawbacks. These include:
Further Reading: 360 Degree Feedback: A Complete Guide
The right performance management framework for an organization will instill values of growth and improvement among teams, aid the development of performance improvement strategies, and establish systems that allow organizations to accurately monitor, document, and improve performance. The key performance management frameworks such OKR, MBO, HR Review, Balanced Scorecard and 360-degree Feedback can be used in organizations across various industries and are best administered through a robust HRMS.
Find out how Darwinbox can help you effectively implement the framework that best suits your organization. Book a quick demo today.