Performance management is broken. Most organizations slap together a rating system, throw in some annual reviews, and call it a day. Then they wonder why employee engagement is in the tank and why their teams are just going through the motions.
Here’s the brutal truth: most performance management systems (PMS) are built to track activity, not drive impact. They focus on control rather than motivation. They create compliance, not ownership. And in doing so, they crush innovation and disengage top talent.
Let’s fix that.
A Performance System That Works
If you want real performance, you need a system designed around motivation, accountability, and ownership. The right PMS should:
Clarify the Mission – Align every employee’s goals with the organization’s core objectives.
Balance Intrinsic and Extrinsic Motivation – Drive both purpose and performance-based incentives.
Prioritize Accountability, Not Micromanagement – Focus on outcomes, not bureaucratic checkboxes.
Make Feedback Frequent and Actionable – Stop waiting for annual reviews.
Ensure Fairness and Trust – Eliminate bias and make rewards equitable.
Here’s how we do it:
Step 1: Define the Mission and Tie Goals to It
People can’t perform if they don’t know what success looks like. The first step is strategic clarity, what are we building, and why does it matter? Every leader, every manager, and every employee needs to see how their work contributes to that mission.
The Fix:
Set three wildly important goals (WIGs) per employee, no more. Clarity beats complexity.
Ensure all goals are SMART (Specific, Measurable, Achievable, Relevant, Time-bound).
Make employees co-create their goals. Buy-in increases commitment. Alos, participation helps ensure that goals are reasonable, that results and measures are seen as credible and accurate.
Step 2: Build Motivation Into the System
Motivation isn’t one-size-fits-all. Some people are driven by mastery and autonomy (intrinsic motivation). Others respond to recognition and rewards (extrinsic motivation). The best performance systems leverage both.
The Fix:
Make Work Meaningful: Show employees how their efforts impact the company, customers, and team.
Design a Fair Incentive System: Eliminate bias in hiring, promotions, and rewards by implementing structured, transparent evaluation criteria.
Peer Reviews with a Purpose: Feedback from colleagues increases accountability, but it must be well-structured to avoid politics and bias.
Compensation That Drives Behavior: If you are small startup, you may not be able to pay the highest salaries. You do have equity and options to leverage for future potential wealth creation for your employees. If you work for a large organization, offer up to salary bonuses and RSU stock compensation based on performance.
Step 3: Create Real-Time Feedback Loops
The annual review process can somtimes feel like a relic of the past. If you only talk about performance once a year, you’ve already lost. Feedback should be continuous, constructive, and tied to clear expectations.
The Fix:
Weekly 1:1s: Leaders should be meeting weekly with individuals on their team to understand their issue, bottlenecks, and celebrate successes.
Quarterly Performance Check-ins: A conversation about where they currently stand when it comes to their performance. Not a formality, but necessary.
Public Scoreboards: Show progress on department and company goals so employees see the impact of their work in real-time.
Recognition That Matters: Highlight top performers in a leadership- published newsletter, reinforcing a culture of achievement.
Step 4: Invest in Growth and Development
If your company doesn’t invest in employees, why should they invest in you? People need opportunities to grow, or they’ll leave for someone who offers them.
The Fix:
Annual Education Stipend – Provide training budgets based on tenure to encourage long-term commitment. Reward team members that level up their skillsets.
Career Development Goals – Separate from performance goals, these focus on skill-building and career progression.
Quarterly Team-Building Events – Not forced fun. Purposeful interactions that strengthen team bonds and collaboration.
Ownership Drives Performance
Accountability isn’t about control, it’s about ownership. The best employees don’t need micromanagement; they need clarity, support, and the right incentives. A great PMS builds trust, aligns motivation, and fosters a culture where people want to win.
Want to know if your performance system is working? Ask yourself this:
Do employees understand how their work drives company success?
Are they motivated by both purpose and performance incentives?
Does the system encourage ownership rather than compliance?
Is feedback frequent, actionable, and trusted?
If not, it’s time for a change.
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