From ‘Meh’ to Magic: How to Make Performance Management Work for Everyone

Show me a company with a performance management (PM) approach that leaders value and find effective—and where employees also find it easy, fun, and rewarding. Anyone?

This isn't due to a lack of effort or innovation; many companies have tried to improve their PM systems, till now, regretfully, with lackluster results. Transforming PM is challenging for several reasons, but there are also factors that explain why some organizations have been more successful than others.

Our 2021 research determined that traditional approaches to performance management often do not improve future performance, but a culture of consistent feedback does. The good news is that you do not need a magic wand to build a feedback culture and get more value from your performance management—you have to go about it in the right way.

We have found these four elements put in place by successful companies:

• Clarify the purpose of your PM process and align it to deliver on that purpose
• Focus your PM process on enhancing employee experiences
• Avoid the “Do More” or “Perform Better” mentality 
• Be intentional about the behaviors and culture you need from your PM

Defining Your Performance Management’s Purpose

A well-defined purpose is key for any successful PM process. Without it, organizations may struggle to understand what they need from their performance management system, leading to poorly designed solutions. Korn Ferry’s research suggests that being clear about the purpose of PM can unlock significant value. For example, shifting a workforce from "moderately" to "highly purpose-driven" can raise EBITDA by 12% to 16%.

To define the purpose of your performance management, start by asking key questions: What value is it meant to deliver, and what unique role does it play that other processes cannot? Consider where the most critical value is created in your organization and how PM can support that, as well as how you will measure its effectiveness. If it is unclear what would be missed without your PM process, it may need to be redesigned to deliver greater value—always keeping a clear, shared purpose at the center.

Focus Your PM on Enhancing Employee Experiences

Traditional PM systems often do not engage employees because they lack a design focus on employee experiences. By refocusing on employee experience, organizations can improve retention, engagement, and customer satisfaction. Research shows that the quality of interactions between employees and their leaders, particularly in setting expectations, providing feedback, supporting growth, and rewarding performance, has a profound impact on employee experiences. Conversations in those areas can be a great place to start improvements.

If your PM process is not delivering the value you need, it may be worthwhile to first consider whether you have defined what employee experience you need to attract, engage, and keep the right talent. When you have that, aligning your PM to deliver it becomes much easier.

Avoid the “Do More” or “Perform Better” Mentality

Current PM approaches often push employees to constantly increase their efforts, leading to burnout and poor performance. In the United States alone, this issue costs approximately $300 billion (about $920 per person in the US) annually in health costs and lost revenue. While many companies have implemented initiatives to address burnout, these efforts often fall short. Instead of just demanding more, a more effective solution lies in rethinking performance management to focus on building capacity.

Managing capacity involves aligning tasks with what your team can realistically handle and creating a psychologically safe environment for open discussions about workload. Like how coaches assess their players’ fitness, mental load, and readiness, leaders must evaluate their teams’ capacity, align workloads realistically, and create an environment where employees feel safe discussing their limits. By doing so, leaders can improve performance while avoiding burnout.

Be Intentional About the Behaviors and Culture You Need from Your PM 

Building a performance culture starts with understanding the behaviors you want to see and whether your current PM system supports them. Korn Ferry's partner, CultureScope has uncovered instances where systems rewarded behaviors even when these behaviors conflicted with the target culture. These misalignments highlight the need to critically assess and align performance management practices with cultural goals.

To address this, companies should analyze the behaviors their PM systems promote and redesign them to support the desired culture. This process involves challenging deeply held beliefs about PM, such as the necessity of performance ratings, and relying on data to guide decisions.

Turning Chaos into Clarity

Building a performance culture may seem complex, but it comes down to doing the right things in the right order. It is less about redesigning processes or retraining people and more about how you approach building the culture you envision. This isn’t an overnight fix—some of the most successful PM transformations have taken years and are still ongoing. But success comes faster when you take the right steps, leading you one step closer to unlocking the best of your people and processes.

To learn how Korn Ferry helps companies transform their approaches to performance management, read about our Talent Management capabilities.