How do you create a high performance culture? This is a question that many businesses are asking themselves these days. And, it’s one that I know the answer to because my team and I have been through this process ourselves.
When it comes to startups, there are few things as important as a high-performance culture. A startup’s culture is the driver behind their company’s success or failure. Culture drives everything from the onboarding of new employees to how the team approaches challenges and obstacles.
Great cultures create an environment where employees feel empowered and energized, which directly impacts their work performance. It takes years to build a strong culture at a business, but it can be destroyed in a matter of months with one bad decision.
Establishing a high-performance culture is the main target in the Performance Management System. There is no mechanical way of driving performance. According to a study, poor company culture leads to a 48% chance of high employee turnover. That is 34% higher than a company that has a rich culture.
Performance Management System
The organization needs to achieve its objectives. Performance Management System (PMS) aligns an individual’s performance with the organization’s performance. Thus, both individuals and the organization can achieve their respective goals.
Performance management involves many activities. It is complex and requires supports from employees, top management, and the organization’s culture.
Someone who has always worked in a performance-driven culture will take a performance management system as the basic element of any job. On the other hand, introducing PMS in an organization results in resistance from existing employees.
Based on the objectives of PMS, we will explore how to establish a High-Performance Culture in a service-based company.
Objectives of Performance Management System
When you simply judge the performance of your subordinates that is not performance management. To manage human resources who will achieve your organization’s objectives we need to follow a goal-oriented culture of communication, transparency, feedback etc.
The main objectives of Performance Management System are:
- Setting expectations from employees which are specific, measurable, achievable, realistic, and time bound (SMART)
- Discussing on such goals to make it mutually set between the employee and supervisor
- Communicating the expectations clearly with employees
- Giving continuous feedback on how the employee is performing
- Taking continuous feedback from employees
- Aligning the interests of organization with the interests of employee and supervisor
- Motivating the employees with reward and recognition
- Measuring the actual performance
- Finding the gap between standards and expectations as well as how to cover up that gap
- Setting transparency in how the appraisal is logical
- Taking corrective actions
Impact of Culture in Performance Management System
Culture is the set of vision, mission, believes, norms, practices, policies, philosophies, etc. You can not ask anyone to follow culture, rather you need to take him/her in the process of acculturation.
There are various ways of setting objectives, measuring performance, and doing other activities of PMS. Various companies follow various types of processes. But we cannot manage performance by any process. Rather the success of PMS depends on the culture of the organization.
Example of Bad Culture
For example, assume that in a reputed software company PMS was not present earlier. The supervisors used to be super judgmental in annual salary revision, and promotion. In an annual meeting, the people managers used to discuss the performance of their subordinates openly. Other supervisors used to provide their judgment. Collectively those people managers used to set annual appraisal of each employee.
Such practice does not fulfill any of the objectives of PMS, which are described above. As a result, employees are fully disconnected from the company’s goals. The top management needs to control everything mechanically.
The main reason for such a non-functional performance management system is their lack of performance-driven culture.
High-performance Culture Example
Let us take an example from another software company, which drives performance in their culture.
When an employee joins that company, he/she gets complete documentation of policies, code of conduct, company culture, HR benefits, etc. Then the induction and orientation programs introduce the employee to the performance-driven culture.
The goals of the employee are guided by the Strategic HR management to align those with the goals of the organization. Within that guided area, the supervisor assesses the competencies of the employee and sets employee-specific goals.
The employee can share feedback in the whole process to make the goal setting meaningful, and achievable. Then HR conducts training and development to help the employee acquire the required competencies to achieve the goals.
The whole process assures the employee that everyone is working to achieve the organization’s goals. On the other hand, everyone is helping each other to make it a team effort.
The cultural events like the celebration of every success and coaching on every failure, make the motivation stronger for the employee to go the extra mile. The reward and recognition uphold the winning spirit.
The two real examples, given above anonymously, clearly show the impact of culture on the Performance Management System. As an outcome, the first company is struggling for success where the latter company is growing rapidly.
How to Establish High Performance Culture?
Management by Objective (MBO) is a method that aligns a company’s objectives with an individual’s objectives. Here the company distributes top-level objectives among divisions and departments. Then the department head distributes the objectives among his/her subordinates based on respective competencies.
Thus, the objectives are mutually connected among the employees. The success of every employee depends on teamwork as well as on performing their own responsibilities. The top management, supervisors, and HR personnel operate every activity focusing on the performance towards those objectives.
Continuous two-way feedback facilitates the agility of the organization. Regular norms and practices become an integral part of the PMS.
If a service-based company wants to establish a high-performance culture, it needs to establish Management by Objective. It will reduce the need for pushing employees to perform yet motivate them in every aspect of the company’s culture.
Performance Management Culture in South Asia
World Economy is moving to the service sector from the traditional industry sector for several decades.
In a service-based company, value addition is highly dependent on human resources compared to other types of businesses. That is why you cannot ignore the importance of a proper performance management system in a service-based company.
The corporate governance practices of south Asian countries are different from those in Europe and America. Here, the management and the investors are not separate. Family dominance creates an environment of modern corporate Kingdom. The value of quality human resources is less, in this system, compared to the value of relatives of the investors.
When the owner of a company wants to establish his/her children in the top management positions, he/she needs to make the company culture where the boss is always right. The policies are not meant for everyone. The practices facilitate exceptions as per the instructions of top management.
High-performance Culture Example in a Service-based Company
In a software company, for example, if the engineers are not motivated to perform they will log hundreds of extra hours in work without any substantial outcome. The supervisor cannot blame the efforts of the engineers. The top management cannot get the return on their investments.
We can make a difference by changing the culture of that software company. For example, a performance-driven Software Company would arrange learning sharing sessions so that anyone can share their learning on their areas of interest.
Arranging competitions on solving mathematical problems, or competition on solving business cases would enable the engineers to achieve the business objectives.
Rewards and recognition can enhance these further. Arranging events will make them more connected with the team to achieve the company’s objectives.
Establishing a high-performance culture is the best option for designing a performance management system for any service-based company. All of the processes and practices will be part of that culture to guide the employees.
The proper mindset is more important than the paper works. Employees need to own their goals and drive that every day. Thus the company can achieve its objectives and the employees can meet their career goals as well.
Management by objective (MBO) is the appropriate method of establishing such high performance culture. It enables the company to meet the objectives of the performance management system.