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The History of Performance Management

Performance management is definitely not a new concept. But on the whole, the way companies conduct appraisals and performance management has changed massively over the last 100 years!
Published 8 Oct 2019
5 min read
The History of Performance Management

Performance management is a set of activities that ensure the goals of a certain task are being met in an effective and efficient manner. It can focus on the performance of the business as a whole, a department, an employee, or the processes in place to manage particular tasks.

It’s definitely not a new concept. But on the whole, the way companies conduct appraisals and performance management has changed massively over the last 100 years!

So we wanted to take a look and see how this concept has developed over the years and how performance management works in the modern day for businesses across the world.

Where did performance management begin?

Now we’ve done some digging and according to Attiim, some historians believe there have been records of performance management as early as 221 AD. This is seen in how Wei Dynasty emperors used to rate their family members’ performance in everyday life.

But what’s that got to do with business? In the workplace, performance management has been in action from around the mid-1900s.

An unsung Australian hero

Now when you think of some of the biggest success stories that have come from Australian soil, your mind might automatically jump to Kylie Minogue, the Hemsworth brothers, Hugh Jackman or Steve Irwin. But there’s been an unsung hero in our history books for quite some time, well in the HR world anyway…

Several sources have indicated that performance appraisals were invented by Walter D Scott of WD Scott & Co. in Sydney as early as the 1920s. Although possibly the earliest documented use of performance appraisals, WD Scott’s system was not a widely-recognised concept, and not many people other than his own firm would have even heard of it. But some of the work he did around performance appraisals has sculpted performance management into the concept we know today. Pretty cool, right?

How did performance management develop over the years?

Mid-1950s; formal performance appraisals are much more commonly known around the world, with companies using personality-based systems for measuring employees performance.

It’s the 1960s; there’s a much greater focus on self-appraisal, and most performance appraisal systems are geared more towards looking at what an individual might be able to achieve in the future at a company as opposed to how competent their personalities appeared to be at the time of being assessed. Things are beginning to evolve!

The 1970s; there’s a lot of criticism about how appraisals are being conducted, and several cases have even been taken to court. A lot of this is down to how subjective and opinion-based most appraisal systems were, and so as the 1970s progress, companies started to include a lot more psychometrics and rating scales.

Over the next 20 years; there’s been an increase in companies focusing on employee motivation and engagement, which led to a more holistic approach to performance management and appraisals. Companies have now started measuring against brand new metrics as part of their appraisal process. Soft-skill metrics such as self-awareness, communication, teamwork, conflict reduction and the ability to handle emotions are considered.

Where does that leave us in the modern-day?

In recent years, performance management has evolved even further, with many companies pulling down the traditional hierarchy in favour of more equal working environments. This has led to an increase in performance management systems that seek multiple feedback sources when assessing an employee’s performance – this is known as 360-degree feedback.

With mobile technology giving us more flexibility, and more companies recognising the value of great company culture, we believe that the definition of what good performance is will continue to shift. People who drive an organisation will continue to have even greater input into how their peers are assessed.

Why is it important for business?

Effective performance management is essential to any and all businesses. Through both formal and informal processes, it helps your business to align employees, resources, and systems to meet strategic objectives.

As the iconic Henry Ford once said, “Coming together is a beginning; keeping together is progress; working together is success.”

Getting your whole company pulling in the same direction and having employees working to the best of their abilities will make your business’s success skyrocket.

Performance management, appraisals and assessments are just one piece of the talent management puzzle. In order to build an empowered and skilful workforce, companies need to do more than audit employee achievements.

Businesses should work towards a management cycle where judgement isn’t the sole focus, but rather ongoing support and improvement is.

So, what does this look like?

Performance management is a series of ongoing events that include the following processes and benefits:

  • Goal setting and revising. Every employee needs a clear understanding of the expectations for their role. They also need context, which includes an understanding of where they fit into the company and how they contribute to the overall success of the business. This starts with company and executive goal setting, which cascades into manager, team, and individual goal setting. Aligning your entire workforce with higher arching business goals sets clear priorities and direction, which ensures individuals can feel ownership in the business through individual objectives. At Employment Hero, we use the OKRs framework.
  • Management and coaching. Though some goals may need adjusting, other times employees may not have the skills to reach them. Appraisals can be used to identify gaps in employee skill sets.

Improved employee performance and engagement is a result of consistent feedback and coaching. It’s common to hire for potential and not experience, so providing the proper training and development programs that address performance and skill gaps is necessary.

  • Rewards and recognition. Recognition helps employees receive a balance of positive to negative feedback. A little unexpected appreciation can go a long way. It satisfies our fundamental need for praise, reinforces the right behaviours and culture and leverages social engagement. Rewards and recognition can improve employee retention and engagement, which creates ambassadors for your business and its culture.

Performance management doesn’t end once a performance appraisal is delivered. Managers should take an integrated approach to employee learning. This means creating development plans that support an employee’s goals, career interests, and potential, as well as the organisation’s business and talent needs. Evaluation is only effective when used as a tool for growth and success.

The Wrap Up

The history of performance management is long and continues to evolve as new ways of doing it emerge. One thing’s for sure, ongoing performance management will help your business produce:

  • Increased focus on driving business results. Since all goals are aligned, an employee’s day-to-day work supports the company’s mission. This promotes a year-round focus on key business results and driving profitability.
  • An empowered and engaged workforce. Companies can deepen employee engagement by creating a culture of shared accountability for career growth and development.
  • Foundational knowledge of talent. With insight into your workforce’s skills and abilities, you can ensure all employees are getting the direction, feedback, and development they need to succeed. You can identify high and low performers, and track and evaluate the effectiveness of employee development activities.

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