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REINVENTING Performance management, TOGETHER

Welcome to the HR Congress HR Strategy Working Group!

Performance management is at the very heart of the organization, serving as THE vital connection between people and the overarching purpose of the business. However, let's face it – it mostly sucks!

Acknowledging its (too) many shortcomings, there is a growing consensus that a revolution in performance management is necessary and urgent. Following many stimulating discussions at the HR Horizons Summit 2023, we have decided to rally a coalition of the willing to dismantle outdated practices and champion innovative solutions that truly contribute to organizational flourishing.

Our collective effort is fuelled by a shared commitment to more equitable, humane, and inspirational workplaces. Join us in this transformative endeavor as we strive to shape a future where performance management becomes a genuine catalyst for growth, development, and the collective prosperity and well-being of all!

A Necessary Transformation

Traditional performance management practices in organizations have long been plagued by significant challenges and frequent failures:

  • Performance management often reinforces a myopic fixation on short-term profits and a limited perspective of individuals as mere cogs in the machine.
  • Traditional performance management systems tend to foster a culture of fear and competition rather than collaboration, creativity and systemic flourishing.
  • A heavy reliance on quantitative and financial metrics leads to a narrow focus on easily measurable outcomes, neglecting the importance of qualitative aspects, systemic, ecological and social impact and individual development.
  • The emphasis on annual or biannual reviews often results in a retrospective and static evaluation, failing to capture the dynamic nature of employees' contributions.
  • In spite of good intentions, many innovative practices fail to acknowledge available evidence and research, perpetuating existing shortcomings
  • The time-consuming and bureaucratic nature of traditional performance appraisals contributes not only to costs, but also to disengagement and dissatisfaction among employees, and the collective squandering of human potential. 

What's our objective?

Our mission is to cultivate flourishing businesses by catalyzing a positive transformation in global performance management practices. To achieve this, we aim to bring together cutting-edge innovative practices with profound insights from the best of academic research, while fostering new perspectives through hands-on experimentation.

In the initial phase of our project, our specific objectives are:

  • Co-develop a preliminary proposal for a "Performance Management Manifesto" that will undergo finalization and formal agreement at the HR Congress in May 2024.
  • Disseminate the manifesto across HR and business leaders, as well as professional associations, to generate widespread support and awareness for our project.
  • Identify and enlist pilot organizations actively engaged in experimenting with novel performance management practices, forming a collaborative network to drive meaningful change.

Who is it for?

This project is designed for forward-thinking organizations and individuals who recognize the imperative need for a positive revolution in performance management. Whether you're an HR professional, business leader, consultant, coach or part of a professional association, if you are passionate about fostering workplace flourishing, this initiative is for you! For more detailed information about collaboration opportunities, please see Project section below.


Interested in joining the group?! Just send us an email at info@leadershipsociety.world!


UPCOMING SESSIONS & archive

Project and Topical Collaboration Sessions

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Project Meetings

Our monthly collaboration sessions, scheduled every first Friday of the month (with an alternative slot on Thursday afternoon for convenient time zone choices), provide an opportunity for engagement. Next sessions are planned on:

  • Friday 1st March 11-13 CET (Thursday 29th February 17-19 CET)
  • Friday 5th April 11-13 CET (Thursday 4th April 17-19 CET)
  • Friday 3rd May 11-13 CET (Thursday 2nd May 17-19 CET)


Open Topical Sessions

We are also planning a series of monthly open sessions to discuss specific performance management goals and practices in more detail. These will be announced soon:

  • Target Setting
  • Pay and Reward
  • Feedback and Coaching
  • Learning & Development


Knowledge Shares

Reflections on Performance Management: Lessons From The HR Trenches by Mark McAleer

Join us for an an exciting 60-minute workshop with Mark McAleer as he shares his most powerful insights from 20+ years in corporate HR roles and over 15 years in in HR consulting, across 8 sectors!

We embark on a revealing journey through the HR trenches to dissect the intricacies of performance management. Get ready for the gritty realities and hard-earned insights from the frontline of HR operations: from the challenges of objective setting to the pitfalls of assessments and feedback, from the practicalities of succession to innovations in L&D or pay! Brace yourself for an illuminating exploration of HR wisdom, including and beyond 9-box matrices, PiPs and PDPs! In summary, Mark emphasizes that performance management remains critical for organizational success. Yet, he concludes, "businesses often have exactly the performance management they deserve," which should be enough to make executives pay more than lip service to its urgent transformation.

Mark McAleer stands as a beacon of progressive thought in leadership development and business transformation, boasting a wealth of expertise in HR and talent management on a global scale. With a distinguished executive career traversing diverse sectors like ICT, telco, oil & gas, FMCG, marketing, and finance, Mark currently serves as the Organization Solutions Director at BDO. Additionally, he is Visiting Lecturer on the MBA program at Hult Business School.

FROM DATA TO WISDOM - Navigating the Risks and Rewards of AI in Performance Management! by simon schafheitle

Join us for an an insightful 60-minute discussion with Simon Schafheitle as we delve into the promises and perils of Data and AI in HR!

In our discussion, we first examine the broader challenges of performance management highlighted in recent academic research. Then, we deep dive into the technological advancements in AI and automation, uncovering the significant risks organizations encounter today, such as surveillance and algorithmic bias, and the potential rise in workload and stress. However, amidst these challenges, we also explore the exciting opportunities technology offers - from data-driven insights to personalized development or greater freedom from mundane and repetitive work.Simon offers us a plethora of concrete examples from real-world applications and companies and prompts us to consider how we can responsibly harness innovation to empower employees and propel organizational success. Digital gains, according to Simon, require analog wisdom.

Simon Schafheitle is Assistant Professor for Human Resource Management and Artificial Intelligence at the University of Twente, specializing in the impact of technology on organizational control and human trust relationships in digital work settings. He earned his PhD from the University of St. Gallen in 2020, focusing on 21st-century workplace architecture and trust dynamics. Simon has received prestigious awards for his innovative research and practical contributions to the field.

From “Managing Performance” to “Unleashing Potential”: Lessons from the Vanguard! by Michele Zanini

In this session, we explore innovative strategies for enhancing employee performance, including dynamic feedback systems, adaptable goal-setting methods, peer recognition programs, alternative performance review approaches, data analytics integration, and the influence of organizational design.

Throughout the discussion, Michele highlights a series stimulating examples from many highly innovative organisations, including Buurtzorg, SpaceX, Haier, Gore, Nucor, Ingersoll Rand, Oktogonen and others.

[ABOUT MICHELE ZANINI]
Michele is a co-author of the Wall Street Journal Bestseller "Humanocracy," advocating for bold, entrepreneurial organizations that prioritize creativity and initiative over top-down power structures. With a background as a senior consultant at McKinsey & Company, he has extensive experience in large-scale transformation initiatives and research on emerging management practices. He is also a prolific writer for publications like the Harvard Business Review and a sought-after speaker at conferences worldwide.

THE PERFORMANCE PAY DILEMMA: Tackling Compensation Challenges! by Stefanie Hornung

This presentation explores the definition of pay and the connection between performance and compensation, highlighting the goals of performance pay, compensation components, and the ubiquitous nature of performance. It emphasizes the concept of holistic pay, which extends beyond monetary rewards to include impact and development opportunities. The presentation also addresses central compensation dilemmas faced by companies.

Moving on to "New Pay", it contrasts traditional pay structures with new approaches across seven dimensions, illustrated through examples. Finally, it discusses the dilemmas encountered on the New Pay journey and proposes a compass for addressing them, along with common challenges for all compensation approaches.

[ABOUT STEFANIE HORNUNG]
Stefanie Hornung is an influential freelance journalist renowned for her expertise in new management practices. She has deep insights into HR and is particularly recognized for her expertise in pay structures, having co-founded the New Pay Network and the New Pay Collective. She is a former key member of Europe's largest trade fair for HR management and has authored multiple books on compensation, contributing significantly to discussions on innovative pay models.

F**k The FUTURE OF WORK: Our Tragic Failure To Uphold [Our Own] Humanity by Antoinette Weibel and Otti Vogt 

In a world where the average person spends over 100,000 hours working, where more than 80% of adults deeply identify with their job roles, and where employment still far too often creates significant unhappiness, the imperative is clear—we must ensure that work becomes a positive force for as many people as possible.

And we firmly believe that this requires leadership. Leaders, across the board, need to not only deepen their understanding of what constitutes good work and actively contribute to its realization, but they must also scrutinize their own role within organisational systems, and assess their own capacity for transformative change, both personally and institutionally.

Seizing the opportunity of the recent global HR Congress, we turned the spotlight on a pivotal group of leaders – those in HR. Why HR? Because, more than any other leaders, we believe HR leaders should be the custodians of good work. After all, HR is all about people, isn’t it? But, here’s the twist: when Antoinette and I delved into the data, to be perfectly honest, we didn’t really see it. Thus, we decided to kick off the Congress with a gentle provocation: we suggest the future of work is looking increasingly bleak, because leaders – particularly those in HR – find themselves increasingly stuck.

Please find more information and recordings from the HR Congress Horizons World Summit 2023 here: https://horizon.hr-congress.com/. A big thanks to organisers, speakers and participants for all the superb conversations! 

Please visit the Global Society for Good Leadership LinkedIn page and hr.leadershipsociety.world for more details, references and further materials.

Performance Management INNOVATION by Jon Ingham

What is new in performance management? Performance management has undergone a remarkable transformation in recent decades, with innovative organizations leading the way in redefining its principles and practices.

  • One notable shift has been the move away from traditional, rigid performance appraisals towards more continuous and agile feedback systems. Forward-thinking companies recognize the importance of ongoing communication and development, fostering a culture of regular performance discussions rather than annual evaluations.
  • Innovative approaches also emphasize human-centric strategies. Organizations are increasingly focusing on individual growth, aligning personal development goals with broader organizational objectives. This shift from a top-down to a collaborative approach empowers employees, fostering a sense of ownership and engagement in their performance journey.
  • Another noteworthy aspect is the increasing emphasis on social and team-oriented practices. Rather than solely focusing on individual achievements, there is a growing recognition that many goals are achieved through teamwork and collaboration. As a result, performance management practices are adapting to incorporate team-based metrics and evaluations, encouraging a sense of camaraderie and mutual accountability and fostering a positive team culture where individuals are not only accountable for their own performance but also contribute to the success of the team as a whole.
  • Additionally, technology plays a pivotal role in this evolution. The advent of data analytics and AI-driven tools allows for more objective and real-time performance assessments. These tools not only streamline the process but also provide actionable insights for continuous improvement and make it easier for employees to engage.
In essence, Jon argues that innovation in performance management is characterized by agility, a strong emphasis on human development, more social inclusion and innovative technology. His insightful revision highlights both the progress made and areas that still require attention. In conclusion, Jon endorses a move towards "flourishing" as a new paradigm for a renewal of performance management.

Beyond the Hype: Exploring the Persistent Failures in Performance Management by Antoinette Weibel

Antoinette's insights shed light on a critical question: Is Performance Management innovation truly working? Despite the transformative changes highlighted by Jon Ingham, a comprehensive review of academic research by Antoinette reveals a significant gap between innovative practices and tangible improvements.

  • Goal Setting: Even with the introduction of OKRs, goal-setting remains highly prescriptive, often hindering rather than enhancing performance.
  • Performance Feedback: Contrary to expectations, performance feedback fails to create a substantial impact on actual performance
  • Ranking and Ratings: While intended to enhance performance, practices like ranking and ratings, have negative effects and contribute to "sorting" behaviours especially in the long-term
  • Transparency: Excessive transparency, though intended to promote accountability, often leads to gaming behavior, undermining the genuine improvement of performance.
  • Performance Evaluation: Despite ongoing innovations, performance evaluation consistently fails to delivering results, prompting a need for reevaluation.
  • Meritocracy: Antoinette challenges the notion of meritocracy, emphasizing that small biases are perpetuated and amplified, preventing the realization of true merit-based systems.
  • Pay for Performance: The link between pay and performance remains tenuous. Pay for performance often reduces both intrinsic motivation and actual performance, while generating high hidden costs.
  • CEO Pay: Antoinette suggests that outrageously high compensation for CEOs may explain the persistence of performance-contingent pay, while much research demonstrates its ineffectiveness.

In summary, Antoinette underscores the crucial disconnect between innovative performance management practices and their real-world impact. Her call for closer collaboration between practitioners and academics emphasizes the need for a more nuanced, evidence-based approach to truly drive positive change in performance management.

Session Notes

The Sustainability Lie: Why Responsibility Comes First

Kick Off Call: Session Summary & Actions

Dear all, please find a brief summary of the outcomes and decisions from both kick-off calls below. Any feedback, additions/amendments of further ideas and suggestions are very welcome!


be the change!

Join the Performance Management Revolution!

Our Project

The project unfolds across three distinctive phases:

  • In phase 1, the emphasis is on research and development to craft an innovative performance management manifesto for presentation and agreement at the HR World Congress in Porto in May 2024.
  • Following this, phase 2 involves the ongoing refinement of the manifesto through collaborative efforts with pilot companies. Updates and findings are to be shared at the HR Horizons Conference in November.
  • Phase 3 extends the project's scope to encompass broader implementation and support of the methodology throughout the 2025 performance management cycle.
Currently, the project is only committed to phase 1. 

Key Deliverables

  1. Performance Management Manifesto (Value proposition & principles)
  2. Piloting programme with interested forward-thinking companies
  3. Novel performance management toolkit & good/bad practice catalogue
  4. Training materials & support for Continuous implementation
  5. Promotional campaign
  6. Alliance of early adopters & partners

Phase 1 Activities

  • Research & Development: Conduct in-depth research on alternative performance management models, develop a new methodology, and refine it based on continuous feedback.
  • Piloting Programme: Identify and collaborate with organizations willing to participate in pilot programs to test the effectiveness of the redefined performance management approach. Develop case studies and lessons learned 
  • HR Congress HR Strategy track: Facilitate introduction and collaborative refinement of the manifesto draft within the "HR Strategy" conference track. Ultimate goal is to produce a communiqué that will be endorsed by all congress participants at the end of the summit


Project Collaborators

Image Description
Antoinette Weibel
Professor for HRM and Organisation

University of St. Gallen
Otti Vogt
Former Chief Transformation Officer

Good Leadership Society
Mihaly Nagy
Founder

The HR Congress
Jon Ingham
Director

Strategic HR Academy
Michele Zanini
Co-founder, MLab. Co-author, Humanocracy

Management Lab
Isabel Scarlett Neitzel
Manager People & Culture

Porsche Consulting
Bastian Becker
Global HR Director

Trivium Packaging
Stefanie Hornung
Journalist & Author on New Management

New Pay Collective
Mark McAleer
Organisation Solutions Director

BDO
Joan Lurie
coach : consultant : organisational ecologist

Orgonomics
Perry Timms
Founder and Chief Energy Officer

People & Transformational HR Ltd
Tobias Nehls
Head of Global Mobility Management

Siemens
Wilma Straatman
Director of People & Development

Oikocredit
Simon Nash
Director

Insight Group
Jeni Brown
Founder

Rubix3 Consulting
Sebastian Bueno
People & Culture

Vizzuality
Pavel Charny
Managing Partner

Ortalex
Rufat Jahangir
Managing Director

Adizes Institute
Meike Wiemann
Lecturer, Project Manager & Postdoctoral Research Fellow

University of St. Gallen
Shalva Dzidziguri
Conference Producer

The HR Congress
Marc Pfyffer
Managing Partner

Pfyffer Partner
Rebecca Tillery
Researcher

University of St. Gallen
Wolfgang Spitzenberger
Wolfgang Spitzenberger
Head of Human Resources

Raiffeisenlandesbank Oberösterreich

Join The Project

Can you join our growing coalition?

Absolutely yes! We invite all individuals with substantial expertise in HR, performance management, and/or organizational development to be part of this transformative journey. If on top of that you possess an innovative mindset, a collaborative approach, and a willingness to explore new ideas, you are most welcome to join our project team and be a driving force in reshaping the future of performance management!

For all interested individuals and further information: please just send us a note at info@leadershipsociety.world

Do you want to join us at the HR Congress?

Further information:  https://worldsummit.hr-congress.com 

Promotion code for members of the community: goodorganisations-20%

“There is no power for change greater than a community discovering what it cares about.”

Meg Wheatley



Transformation approach

Introduction to the project

What is Performance Management?

Performance management is a systematic and continuous process that involves planning, monitoring, developing, reviewing, evaluating and rewarding the performance of individuals or teams within an organization. It aims to optimize individual and team performance, align behaviours with strategic goals, enable professional development, and thus contribute to the overall success of the organization.

Key practices of performance management typically include 

  • Setting “smart” objectives
  • Providing regular feedback
  • Appraising performance against established criteria
  • Identifying areas for improvement and development
  • Recognizing and rewarding achievements (or managing the consequences of underperformance)
However, many additional HR practices, such as recruitment and selection, learning & development, employee engagement and recognition, HR analytics, payroll, OD, D&I directly or indirectly support performance management. 

Approaching Performance Management Transformation

How To Transform Performance Management?

A Working Hypothesis

Our hypothesis is that the functionality of performance management within an organization is intricately tied to a prevailing "action logic," a framework about how the "world works" shaped by the fundamental beliefs of founders or leaders. This encompasses three key dimensions: a) the values associated with the concept of "performance"; b) a set of beliefs regarding how organizational performance interconnects with individual behaviors; and c) an understanding of the ways in which individual behavior can be effectively influenced.

On this basis, we are pursuing a dual approach to performance management reform: Firstly, we are critically examining contemporary practices to assess their effectiveness within the "traditional" logic, drawing insights from academic research. Secondly, we are deliberately revising the conventional logic and developing new tools and processes that resonate with a novel approach centered around organizational flourishing. This parallel approach enables us to propose innovative solutions that both align with a redefined organizational logic while also addressing existing shortcomings and lessons learned from established practices.

Traditional Performance Management

Traditional performance management often relies on some variant of "pigeon training": a combination of a utilitarian performance definition, emphasizing profit maximization and financial returns, and an engineering approach to performance optimization:

  • It is assumed that performance can be accurately forecasted, attributed and measured, that all required activities and outcomes can be predefined, and that causes of individual performance are easily determinable (and manipulable). Total performance is treated simply as the aggregate of individual and unit achievements.
  • On that basis, financial targets are decomposed and cascaded to organizational units, teams and roles, guided by the annual budgeting cycle. Then, “cybernetic” controls are established through governance cycles, both at organizational and individual/unit level. 
  • Individual behaviours are assumed to be rational and selfish. Performance results from a linear combination of factors, such as personal ability, motivation and opportunity. Hence, at the individual level, performance can be optimised by: a) ensuring a match between individual competencies and role requirements, b) alignment of individual and corporate purpose. Motivation can be stimulated through carrots and sticks, i.e. extrinsic rewards and punishments. On that basis, appropriate incentives are established.

Performance Management Innovation

As Jon Ingham explains in his insightful lecture (see session archive), performance management has undergone a remarkable transformation in recent decades, with many innovative organizations leading the way in reshaping its principles and practices. Notably, Jon highlights a continuous trend towards heightened agility, a strong focus on human development, increased social inclusion, and the integration of innovative technologies. However, despite such progress, inconsistencies across companies and important shortcomings persist. As Antoinette Weibel reveals in her comprehensive revision of academic research, there is a significant gap between both traditional and innovative practices and tangible real-world improvements, across almost all relevant activities. 

From Performance Management to Foster Flourishing

A Quest For genuine Transformation

While traditional performance management has already faced considerable critique, in our view much of it does not change the prevailing "action logic". As a result, many innovative practices ultimately serve as "lipstick on a pig": they legitimise and perpetuate a morally unsustainable paradigm.

  • Ethically, a predominantly utilitarian definition of performance as profit maximisation mostly goes unquestioned. The broader CSR movement has sometimes challenged a merely instrumental purpose, but without much success. Our focus on "flourishing" will demand a more substantive review of what we mean by performance, for whom, and how it can be measured.
  • From an ontological standpoint, performance continues to be viewed as a property of individuals or teams, rather than an emergent organisational property shaped by more intricate mechanisms both within the company, as well as in the broader market and ecosystem. Our revision requires a more holistic approach, including organisational design and governance, in order to determine what it means to "cultivate" flourishing within a social system.

Focus on Systemic Flourishing

Coming soon



resources

Academic Resources

While this article is predominantly about CSR, the exact same argument applies to "new work" and popular "alternatives to performance management" where proponents argue for more autonomy or meritocracy, but fail to examine the relevance of a hegemonic capitalist discourse or challenge the foundational "logic" of the existing economic system. Read on:

To explain the frequent failures of current CSR practices and to explore the possibilities of remedying them, I examine the close relationship between CSR, the persistent expansion of capitalism, and the pressure that capitalism puts on companies to legitimize their business operations. My analysis shows that the failure of CSR to serve as a corrective to the problematic effects of capitalism is, in fact, an inevitable consequence of the problematic dynamics of the capitalist system. On this basis, I suggest that capitalism limits the possibilities of making CSR more effective, argue for change on the systemic level of capitalism, and explore the ways in which CSR research can contribute to this political endeavor.

This is a nice overview of the state of the art albeit a bit behind practice (it took them surely 3 years to get in published) - it is a good complement to Jons' resource.

This article reviews the history of performance management (PM), beginning with performance evaluation. We discuss various strategies that have been used to enable accurate ratings as well as cognitive processes and contextual factors that have been shown to significantly impact ratings. We raise questions about the concept of true performance and whether raters can be enabled and motivated to make accurate ratings. We progress to discussing more structured and comprehensive PM processes that typically involve cascading goals, goal setting, competency modeling, evaluation of behavior and results, and implementation. These systems have proven to be tedious and low-value, resulting in unprecedented, wide-spread experimentation with innovative practices to move companies away from heavy PM processes to simpler, cost-effective strategies that actually drive performance. These have ranged from abandoning ratings to implementing innovations in goal-setting, real-time feedback, coaching, and PM behavior change. Directions for future research and practice are discussed.

This is a rather brave article as the authors had to fight very rigid doorkeepers of the dominant paradigm. There is more follow-up research on this by all three authors and a cheeky short article from Meike and myself side here: https://www.corporate-rebels.com/blog/dark-side-of-okrs-and-why-we-should-care

Goal setting is one of the most replicated and influential paradigms in the management literature. Hundreds of studies conducted in numerous countries and contexts have consistently demonstrated that setting specific, challenging goals can powerfully drive behavior and boost performance. Advocates of goal setting have had a substantial impact on research, management education, and management practice. In this article, we argue that the beneficial effects of goal setting have been overstated and that systematic harm caused by goal setting has been largely ignored. We identify specific side effects associated with goal setting, including a narrow focus that neglects nongoal areas, distorted risk preferences, a rise in unethical behavior, inhibited learning, corrosion of organizational culture, and reduced intrinsic motivation. Rather than dispensing goal setting as a benign, over-the-counter treatment for motivation, managers and scholars need to conceptualize goal setting as a prescription-strength medication that requires careful dosing, consideration of harmful side effects, and close supervision. We offer a warning label to accompany the practice of setting goals.

In my speech I shortly allude to the transparency paradox - but that article is a hard read. Here is another one of Ethan Bernstein which also brings technology on top into the discussion.

Observation is key to management scholarship and practice. Yet a holistic view of its role in management has been elusive, in part due to shifting terminology. The current popularity of the term “transparency” provides the occasion for a thorough review, which finds (a) a shift in the object of observation from organizational outcomes to the detailed individual activities within them; (b) a shift from people observing the technology to technology observing people; and (c) a split in the field, with managers viewing observation almost entirely from the observer’s perspective, leaving the perspective of the observed to the realm of scholarly methodology courses and philosophical debates on privacy. I suggest how the literature on transparency and related literatures might be improved with research designed in light of these trends.

There is a similar article by Kluger/De Nisi in Journal of Applied Psychology but this one just makes for a much better read:

A wide range of systems for evaluating performance have been used in organisations, ranging from traditional annual performance appraisals to performance management systems built around informal, real-time evaluations, and these systems almost always fail. Rather than continuing to make cosmetic adjustments to this system, organisations should consider dropping the practice of regularly evaluating the performance of each of their employees, focusing rather on the small subset of situations in which evaluations of performance and performance feedback are actually useful. Four barriers to successful performance evaluation are reviewed: (a) the distribution of performance, (b) the continuing failure to devise reliable and valid methods for obtaining judgments about performance, (c) the limited utility of performance feedback to employees, and (d) the limited utility of performance evaluations to organisations. In this paper, I propose ways of managing performance without relying on regular performance evaluation, refocusing managers' activities from performance management to performance leadership.

Please consult also the articles on our team drive - many are behind a pay wall. I have chosen this one as it arguably depicts the biggest problem with high powered incentives. Read on:

The design of incentive systems is a central issue in the economics of organization. This paper argues that very often the ideal incentive systems to use within firms will involve low-powered incentives. Five particular circumstances leading to weak incentives being optimal are examined.

As Richard Posner (Reference Posner2010) demonstrates, a major issue in the economics of organization is the design of compensation and incentive systems. Footnote 1 Much of Posner's discussion focuses on CEO compensation, but the issue arises at all levels of the organization. Recent years have seen numerous calls to strengthen incentives within organizations, ‘bringing the market inside the firm’. The supposed advantages are that people will work harder and smarter if they are rewarded for results. As an economist, I do believe that people respond to incentives. Nevertheless, strong incentives are often a very bad idea, especially within organizations. In fact, strong, misguided incentives have played a fundamental role in bringing about the global economic crisis we are now experiencing. The problem is that people respond just as strongly to badly designed incentives as they do to well-structured ones. And when those badly designed incentives are strong, they can lead to really egregious forms of behavior, and the results then can be horrendous.

Practitioner Resources

As I noted in my session, for me, the need for HR to be both strategic and people-centric (see my newsletter on multi-sided HR) is the most important paradox we face. This leads on to the need to both create organisation capability, and develop culture, which was the focus of my own session, and which I'll be reviewing in my newsletter early in 2024 (subscribe to learn more about this then). So it was interesting to also listen to a panel discussing the transformation of performance management which was on after me, touching on the needs to navigate paradox (eg managing both individual and team performance), and to support both culture and capability. However, what most struck me was that... https://lnkd.in/eVh97cZ6

In a world where the average person spends over 100,000 hours working, where more than 80% of adults deeply identify with their job roles, and where employment creates significant unhappiness, the imperative is clear—we must ensure that work becomes a positive force for as many people as possible.

I've been thinking about whether, if there is a growing opportunity to shift from a top-down, measurement based, compliance focused system of performance management towards a bottom-up, human and commitment focused approach that I've called performance leadership, then whether it is time to start downplaying many organisations' emphasis on SMART (specific, measurable, achievable, relevant and timebound - or variations of this).

Selected essays from our blog

PERFORMANCE MANAGEMENT
IS PERFORMANCE MANAGEMENT IDEOLOGICAL?

Is your approach to performance management more aligned with liberal innovation, conservative stability, socialist equality, libertarian autonomy, authoritarian control, or perhaps environmental sustainability?
(3 min read)

THE DISMAL SCIENCE
How Economic Science Lost Its Heart and Soul (…and What We Can Do About It)
Imagine a society where people interact with trust, solidarity and fraternity. Where welfare is not measured in terms of GDP, but lived in terms of public happiness. Where the economy is virtuous and markets aim at shared prosperity through mutual exchange and generous reciprocity. Where organisations are, first and foremost, positive agents of societal change — creating communities, not commodities. And where work is centred on the integral development of each person, not solely on products…
(9 min read)
THE GREAT DIS-EMBEDDEDNESS
Remembering Polanyi: Where Are We On Our "Great Transformation"?

Is “Business Ethics” an oxymoron? No. Commercial performance and ethics are by no means incommensurable —but they ask fundamentally different questions. Ethics is about choosing whither to go — how to grow, and why. Performance is about progressing towards a chosen destination in the most efficient way possible, adapting to obstacles and opportunities along the road.

ETHICS IN BUSINESS
The Sustainability Lie: Why Responsibility Comes First

Isn’t it funny that sustainability is on everybody’s lips these days, but environmental and societal degradation are occurring at unprecedented levels? And ain’t it curious that the planet is burning, but few people in (solar-powered!) corporate or political headquarters are sweating?
(6 min read)

Curious to read more about our ongoing inquiry? A good place to start is our blog with all recent leadership articles and posts.