One could say that a performance management system covers all practices a company develops to steer the performance of its employees. Traditionally this covered the process of setting objectives, monitoring performance, evaluating achievement. HR departments typically design comprehensive processes, supported by IT-tools, that support the execution and administration of all required conversations. I plead guilty to having been there and having done that.
But more and more I realize something is lacking. Engaged people do not need this to perform well. They see it as a hassle, a sorry investment of their precious time. They argue that should they focus on their objectives alone, they wouldn’t feel they were doing the right thing. Sometimes they are insulted by the inflexibility that this process is showing. Putting everyone through this process seems to have a negative impact on the very objective of such a system: enhancing engagement and performance through focus and motivation.
One might argue that even when the 20-30% of employees that are engaged do not need it, it is valid for the rest of the employees who rely on the system. But is it so that people that are less engaged or extrinsically motivated become all of a sudden more (intrinsically) motivated? I don’t think so.

What’s the problem?
We need to acknowledge the educational impact any system has. It’s incredible how fast people adapt their behavior to a system even when this means to perform sub-optimally. We all know stories about people fabricating results just to comply to whatever objective that has been formulated. Do you remember the last time that you have worked long hours in December just to be able to show your manager that you have done the job within the year? And what about the efforts that are put in finding smart objectives for people that have a more qualitative job?
Add the link to pay systems and you will be confronted with the ever so strong impact of greed, which has led to very peculiar behavior in companies like Enron, Worldcom, Parmalat, Lernout & Hauspie, Leeman Brothers, Fortis, … They probably had state-of-the-art systems in place that steered the performance of people in a certain direction. Look where this has brought them (and us). Maybe we should think about this and stop for a minute. The behavior that I have described was not intended by any Performance Management System, yet it is recognizable.
How to avoid those adverse effects?
First, The most important part of Performance is usually neglected by the architects that design a Performance Management System: the context. As long as we keep building systems that focus on the management of performance instead of on the inspirational aspect of the context of work, we will always have this.
Second, we need to acknowledge that the driver of performance is not a system, but (inner) motivation. If employees feel that their work is valuable, they will be willing to do it. Let me give an example. Has it ever crossed your mind why on earth we are paying e.g. a social media expert more than a primary school teacher ? Why are we paying people who do such an important job salaries that are lower than we pay people who have less impact on the lives of others? And why do people keep on choosing for those jobs? The answer is simple, because they see their jobs as meaningful, intrinsically rewarding. So we need to start from there and any Performance Management System needs to reinforce the autonomous motivation people have.
Third, we have to accept that people do not come to work only to perform. They come to work to earn a living, to have meaningful relationships, to develop themselves, to grow, to make a difference, … in any combination. They join your company because they think it can provide all that. And if you are able to provide all that, they are willing to contribute. So Performance Management should integrate those elements.
Fourth, and this one is tricky. Not all relevant targets are smart and easily translated in an objective that fits in to a Performance Management System. We need to keep room for qualitative objectives. The core question is how something I do contributes to the overall result of the company.
Create the context

So a Performance Management System is more than a process. It’s about creating a context in which people can perform, thrive, and be successful. It’s about creating an environment that fosters people’s motivation. If you can create this context, you can easily reduce the Performance Management System to setting collective meaningful targets and leading people towards that target. People will be engaged if they have a context that leverages them.
Do we need the traditional Performance Management System? There are many peripheral reasons to have one. One of them is to reduce the administrative burden by implementing a kind of self-service process. Another one is that a process like that guarantees that everyone is included. Another one is that the Performance Management System introduces objectivity. To me the most central part of a Performance Management System is its integration with the business strategy. All of these reasons are valid, but very few performance management systems have provided that.
SMART?
Final advice: Have a meaningful and appealing plan with objectives that are SMART : simple, meaningful, attractive, relevant and teasing supported by a lean process in a rich context. You’ll have a ball.