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Leading Off
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When the workers in a glass factory were rewarded for the weight of the product they made, they crafted heavy glass that was too thick to see through. When the reward was changed to the quantity produced, they turned out huge sheets of glass that broke because they were too thin. Management lore is replete with such examples of how poor metrics, poor targets, and lack of standardized processes can derail performance. Now, as organizations transition to remote and hybrid work, the stakes are much higher, especially for many knowledge workers. How can leaders manage performance effectively when they can’t physically observe work hours and inputs? This week, let’s review some tactics that work—and some that don’t.
Illustration of a ladder made of arrows
Make sure your evaluations are fair—and perceived as such
Organizations have tried a variety of experiments to enhance employee performance, even dropping annual reviews and doing away with rankings based on a curve when these tools were thought to hinder rather than promote better performance. But performance improvement continues to languish. The reason? Employees don’t perceive the performance management system as fair, according to a McKinsey survey. To counter this perception, leaders must transparently link employees’ goals to business priorities, teach managers to coach effectively, and differentiate compensation for top performers. Among companies that adopted all three of these practices, 84 percent of respondents said that their organization had an effective performance management system; they were also 12 times more likely to report positive results from it than respondents from companies that hadn’t taken any of these steps. Team-based performance management is another fairness-oriented practice to consider, since it rewards teams, rather than individual contributors, for their output.
That’s the percentage of resilient organizations—high performers with agile, people-centric strategies—that increased their investment in coaching during the pandemic. Sixty percent of resilient organizations also gave more recognition to employees. By contrast, just 26 percent of nonresilient companies boosted their coaching investment, and only 24 percent provided more employee recognition. Coaching enables leaders at all levels to not only develop their teams but also cultivate their own growth mindset. Middle management roles, flattened during the COVID-19 pandemic, are making a comeback as organizations recognize their importance in coaching and performance management.
“Companies rarely promote people into leadership roles who haven’t been consistently seen and measured.”
That’s business power couple Jack and Suzy Welch, writing in a BusinessWeek column in 2007. Not so long ago, “face time”—being physically present and visible at the workplace—may have been an implicit requirement for getting ahead; one study found that employees who worked remotely got lower performance ratings, smaller raises, and fewer promotions than their colleagues who showed up at the office. (There were even subcategories of face time: it could be “passive,” meaning that you were simply seen at work during normal business hours, or “extracurricular,” which involved people noticing you arrive early, stay late, or work on weekends.) The move to remote work during the pandemic has complicated the face time calculation. Leaders need to look out for hidden biases and make special efforts to evaluate performance impartially.
A illustration of a flower and roots
“In-office interaction can be well thought out, just like an off-site,” says McKinsey’s Brooke Weddle in this podcast on reshaping culture in the hybrid workplace. “Going in for the sake of going in—I think those days are over.” Instead, leaders must orchestrate in-office interactions that are intentional, inclusive, and designed to produce specific outcomes. That involves monitoring employee sentiment as well as business-specific performance indicators. “Every executive team should be looking at a dashboard that’s a mix of performance and health and developing clear metrics that allow them to steer toward success,” Weddle says.
A photo of a tired looking person in front of a laptop
What shouldn’t you do to assess performance? Consider the number of hours worked. Like face time, overtime can be a misleading indicator and, if pushed to extremes, can cause severe mental and physical harm. One company’s internal survey revealed that employees put in workweeks of up to 120 hours. Long hours may be necessary in some industries and roles, but leaders should be aware of when to draw the line. Research shows that productivity drops sharply beyond a certain number of hours worked; in one experiment, working less made people more efficient. Focus on the quality, quantity, and timeliness of the work rather than the hours that people spend sitting at a desk.
Lead fairly.
— Edited by Rama Ramaswami, a senior editor in McKinsey’s Stamford office
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