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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 28 Aug 2022
Updated 5 Feb 2024
5min read
The History of Performance Management

Find out how performance management has been conducted over the last 100 years and why it’s necessary for businesses to maintain an organized, efficient workforce.

Where did the performance management system begin?

Now we’ve done some digging, and according to some historians, it is believed there have been records of a performance management system 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 since 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 formal 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 appraisal systems 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 employee’s performance.

It’s the 1960s; there’s a much greater focus on self-appraisal, and most performance appraisal systems are geared more toward 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 the appraisal process was 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 progressed, 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 are performance management systems important for business?

Effective performance management is essential to any and all businesses. Through both formal and informal management 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 reviews, 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.

What does a good performance management process look like?

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

1. 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 the company and executive goal setting, which cascades into the 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.

2. Management and coaching

Though some goals may need adjusting, other times employees may not have the skills to reach them. Performance appraisals can be used to identify gaps in employee skill sets.

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

Read more: How to create mentorship programs in the workplace

3. 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.

4. Ongoing performance planning

Performance management doesn’t end once a performance appraisal is delivered. Managers should take an integrated approach to employee learning.

This means creating employee coaching 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 modern-day performance management solution

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.

Did you know Employment Hero has its own performance management system that streamlines measuring performance with automated performance reports?

Reach out to our business specialists today to find out more!

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A manager’s guide to performance reviews

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A manager’s guide to performance reviews
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