“An organization’s ability to learn and translate that learning into action rapidly is the ultimate competitive advantage.” This insight from General Electric (GE) Chairman and CEO Jack Welch captures a fundamental truth in today’s fast-paced business environment—where a strong performance culture rooted in continuous improvement can drive innovation and adaptability. Several studies consistently show the tremendous benefits of such a culture across various areas of business, from performance to innovation, and trends further validate this.
Personalized development plans are the result of performance culture, empowering employees to grow within inclusive, diverse, and tech-enabled ecosystems. Leading firms are also leveraging hybrid learning models tailored to individual and organizational needs, making education an integrated, adaptive journey crucial to business agility and innovation.
Meanwhile, employees in high-performing organizations are encouraged to adapt and reinvent themselves by fostering an attitude of constant learning. Through the development of a growth mindset, curiosity, and an openness to failure and experimentation, experiment-and-learn environments promote personal development and progress. An example of this culture is Google’s 20 percent time policy, which encourages staff members to dedicate time to their own ideas. This approach contributed to the creation of innovations such as Gmail and Google Maps, among others.
Similarly, Microsoft CEO Satya Nadella’s transformation of company culture in 2014 from competitive to learning-focused further illustrates the impact of this approach. By encouraging continuous learning, fostering a growth mindset, and empowering cross-functional teams through initiatives like Microsoft Learn and Hackathons, Nadella’s leadership has led to a resurgence in both innovation and profitability.
While these trends reveal ideas that can help build a performance culture, the biggest challenge is determining what such a culture actually looks like and how to sustain it, rather than having it be just a one-off initiative. To gain clarity, an organization should rethink its approach to performance culture and continuously improve it to make sure that the right people, behaviors, and systems are in place.
According to the Global Performance Audit Unit (GPA Unit)—a division of The KPI Institute specializing in strategy and performance management system (PMS) maturity assessments—what makes developing a high-performance culture tricky is that it extends beyond strategy and performance management systems. The GPA Unit states that, “With no actual framework to lay down its fundamentals, the performance culture is a holistic impersonation of the strategy and performance management system. While more than many organizations associate a high-performance culture with the proper working environment, there is much more to the concept than a friendly office, random perks, and casual benefits.”
A performance culture is characterized by solid employee engagement, continuous learning and development, an aligned performance management system, inclusive environment and workforce diversity, effective leadership and relationship management, sustainable work-life balance, and a commitment to the principles of governance, responsibility, and high accountability.
In addition, the GPA Unit emphasizes that people analytics and data-driven strategies have been providing useful insights into the core components required to transform culture from a collection of superficial perks to a more strategic aspect of an organization.
Measuring culture with KPIs – KPI results can help identify strengths and weaknesses in the existing organizational culture and facilitate decision-making to drive improvement.
Actively using culture surveys – Simple yet meaningful culture surveys can collect employee sentiment and feedback, becoming the perfect internal assessment tool.
Building on talent data and HR analytics – People analytics equips leadership with insight on talent recruitment and development, employee performance, and retention.
Relying on the performance management system to strengthen alignment – A structured and coherent performance management system will ensure that the performance culture is aligned with the strategic mission and values of the organization while maintaining focus, agility, communication, collaboration, and well-being.
This approach suggests that a performance culture does not mold employees who are simply focused on performing tasks but are also growing in ways that support the organization’s long-term strategic goals.
Assessing Performance Culture Maturity
How can an organization determine whether its performance culture is sufficient and sustainable enough to achieve continuous improvement? The GPA Unit recommends the use of the Performance Culture Maturity Model Framework v1.0 to ensure a systematic, scalable approach to building and evaluating organizational and individual competencies. Using this system also allows organizations to identify its culture’s strengths and weaknesses and nurtures the right cultural elements.
The expected behavior of this framework focuses on establishing a cycle of continuous learning, measurable development milestones, and strategic alignment of skills with core business objectives. One of the framework’s key dimensions exemplifying this is Education and Knowledge. By integrating this dimension, organizations move through stages of maturity from ad hoc learning efforts to an optimized, fully integrated culture of performance.
As organizations mature, best practices such as continuous feedback loops, knowledge-sharing platforms, and leadership-driven learning initiatives become embedded in their DNA. For example, as organizations progress, the expected behavior transitions from static skill development programs to dynamic, adaptive learning ecosystems that respond to industry demands. This shift encourages employees to engage in cross-functional knowledge-sharing initiatives, develop expertise aligned with market needs, and accelerate personal and organizational growth.
The other dimensions of the framework are Integrated Performance Capability, Communication and Leadership Support, Creativity and Education, Education & Knowledge, Benefits & Recognition, and Happiness & Well-Being.
The journey toward a mature performance culture isn’t a quick fix—it’s a continuous evolution fueled by a commitment to learning and an openness to change. When employees are empowered to develop their skills and contribute their insights, they become not just participants but catalysts of transformation.
The execution of a strategy hinges upon proper performance evaluation. Predicting future internal and external conditions, tracking performance compared to goals, and making wise decisions all depend on an understanding of and identification with management strategy.Thus, companies that employ strategic decision-making have to review and improve their performance measurement practices to guarantee the effectiveness of their policies.
In the Middle East and North Africa (MENA) region—an area defined by diverse landscapes, cultures, and economies—performance measurement practices have evolved considerably. The region has undergone significant transformations in recent years, driven by economic diversification, geopolitical developments, and rapid technological advancements. These dynamics have aggravated the need for effective strategic performance measurements that are both adaptable and able to produce quantifiable results in fast-changing surroundings.
According to theState of Strategy Management Practice Report2024 published by the KPI Institute (TKI), insights from over 90 organizations across MENA reveal trends and strategies for building smarter performance measurement systems. This annual report includes data, expert insights, and advice from leaders in top organizations, offering a comprehensive overview of current best practices in the region.
Companies in the MENA region have adopted more flexible methodologies like OKRs alongside tried-and-tested frameworks like the balanced scorecard (BSC). The BSC is still rather popular, but the adoption of OKRs jumped to 34% in 2024 from 20% in 2023. This change represents an increasing demand for adaptability and short-term goal-setting, which helps businesses solve current problems while maintaining alignment with long-term objectives. Hybrid systems were developed by about26% of firms in 2024, indicating a trend toward more flexible performance evaluation practices.
The fact that 57% of companies were already using key performance indicators (KPIs) in 2024 to evaluate staff performance shows a trend toward metrics that focus on the workers. A balanced emphasis on operational efficiency and strategic results is shown by how companies in the MENA region follow practices such as operational and process monitoring (51%), followed closely by corporate performance evaluation (48%).
However, it is also worth noting that the report found that the capability to select relevant KPIs has dropped from 3.4 in 2023 to 3.2 in 2024 (on a scale of 1 to 5), showing a declining ability to find metrics that are linked with strategic objectives. Furthermore, a 5% reduction in KPI relevance to a modest level of 3.1 indicates a widening gap between KPIs and actual organizational performance.
Challenges and Recommendations in Performance Measurement
The report highlights that selecting and aligning KPIs remains the top challenge for organizations. The process is further complicated by the fact that only 28% of organizations in the MENA region utilize dedicated KPI management tools, resulting in inconsistent data collection and sluggish decision-making.
If MENA businesses are to rise above these challenges, TKI recommends using business transformation KPIs to allow companies to enhance performance evaluation considerably. These KPIs track more general organizational changes, including behavioral changes, return on investment (ROI), and staff acceptance rates, rather than conventional measurements, providing a better view of the course of transformation projects. Tracking the percentage of employees actively involved in scheduled adjustments, for instance, helps one understand the workforce’s commitment to the strategic goal.
Another important transformation KPI is performance management maturity. By assessing how well the organization alters its performance management systems over time, this metric provides a baseline for ongoing improvement and illustrates a holistic picture of the business’s transformation route. Such a KPI can be generated as an index through a comprehensive performance audit.
Many companies realize that performance evaluation mostly depends on identifying one statistic to guide decisions. True success in measurement, however, depends onstructure and clarity, which are needed to support decisions that reflect the company’s strategic goals at all levels.
Recognizing the unique challenges in the MENA region, the GPA Unit—a division of TKI that specializes in strategy and performance audits—has developed a comprehensive toolkit dubbed Performance Measurement Maturity Model Framework V1.0, which is designed to address essential areas of performance measurement. This framework empowers organizations to tackle common KPI challenges, providing a structured pathway toward maturity in KPI management. By focusing on core areas—KPI selection, documentation, target setting, data gathering and visualization, and robust governance—this framework guides organizations from basic practices to a mature, data-driven approach.
In the last few years, The KPI Institute (TKI) has supported several organizations with the implementation of a hybrid performance management system (PMS), namely a hybrid between a KPI-based framework and OKRs. This is especially useful for entities that want to benefit from a more agile approach to performance management while still retaining part of the control offered by a more stable framework, such as the Balanced Scorecard (BSC). A hybrid methodology was also seen as an option by organizations that were already using a PMS but were not willing to undergo a complete framework change.
The majority of clients that chose this solution as opposed to solely deploying OKRs were already working with a BSC and had prior knowledge of KPIs and the field of performance in general but felt the need to update their framework and incorporate the latest developments from the field into their practices.
Most of our clients that implemented a hybrid solution were facing challenges, mostly at the operational and individual levels. Due to a fast-changing environment, their operations had to learn to adjust with a higher frequency; therefore, a system that encourages such changes and operates within a shorter timeframe became more desirable.
At the individual level, the increasing percentage of millennials and Gen-Z in the workplace made it a necessity to deploy a value-based PMS that not only relies on committed results and business as usual but takes into account employees’ ambitions as well as actively includes them in the setting process of all objectives and results.
Solution
The solution we proposed and the integration of the two systems are usually highly dependent on the specific needs of the client as well as their organizational structure, external stakeholders—especially in the case of governmental entities—or environmental requirements.
The usual stages of a hybrid PMS deployment are as follows, but these are subject to change depending on each project’s specifics:
Needs analysis
Design and documentation of the hybrid PMS at all levels
Education of all stakeholders on the hybrid PMS
Implementation
Reinforcement through communication campaigns or review meetings, among others
A project as described above for a medium-sized organization of around 100-150 employees—if the individual level is included in the project—can take up to one year.
Key Success Factors
The key success factors of implementing any hybrid system are, first and foremost, its compatibility with the organization’s scenario, followed by top management sponsorship, and employees’ openness to learning and operating with two philosophies merged into one.
The hybrid solution that we recommend is easier to use and more versatile; therefore, it can work for most organizations. It is compatible with the BSC on the corporate level, where stability and committed, longer-term objectives are needed, followed by OKRs on the operational levels, where agility is mostly needed. However, this must be customized depending on the organization’s needs and aims.
Alignment
Ensuring alignment between different organizational levels while using a hybrid PMS relies almost exclusively on effective communication between the representatives of those levels. This ensures that by the time the lower level needs to set their performance components, they fully understand what needs to be achieved at the higher level and what their contribution looks like, equipping them for the alignment process.
Response
In most cases, employees are slightly reluctant to accept a hybrid system during the first phase, especially since it is, by default, more complicated than working with only one framework. However, after intensive training and discussions, most of our clients’ employees embraced the idea of a hybrid system and can see the benefits it brings them, such as people-centricity, flexibility, and measuring their value-add or the simple fact that they can be involved and listened to when setting the system’s components.
About the Guest Expert: Alina Miertoiu is a Senior Management Consultant at The KPI Institute. She facilitates on-site and off-site consultancy on OKRs and BSC frameworks in various industries and conducts training courses on OKRs, KPIs, Performance Management, and Benchmarking. She is a PhD candidate in the field of OKRs and Performance Management at Babes-Bolyai University.
Editor’s Note: This was originally published in Performance Magazine Issue No. 28, 2024 – Employee Performance Edition.
And the worst part is, workers are somehow becoming more exhausted and burnt out. This challenge is exacerbated by the fact that in the era of constant change, most workers do not fully understand what is expected of them. In today’s fast-paced and complex work environment, the concept of a “top performer” has become increasingly elusive, leaving many individuals feeling overwhelmed in trying to understand and achieve this seemingly impossible goal.
Improving employee performance management practices alone would not solve the global issues surrounding mental health and productivity nor the widening skill gap. What it can do, however, is bring clarity and structure to the chaotic workplace landscape, offering a framework for understanding and addressing some of these challenges.
Here are a few best practices to ensure that such appraisal systems are balanced, encouraging, and—ultimately—successful.
Balance Competing Priorities
Businesses must balance competing priorities in order to succeed, that’s a given. In order to ensure the consistency and fairness of evaluations when business priorities are translated into key performance indicators (KPIs) for employees, leaders need to make sure that they know where their priorities lie and what they’re willing to compromise on. These decisions and trade-offs will ensure that proper weight is allocated to KPIs and employee goals.
Here are some common organizational trade-offs businesses face that—if not clarified—might result in flawed employee performance management practices.
Predictability vs Responsiveness: Organizations must balance the need for stability and adherence to established plans with the demand for adaptability and quick reactions to changing circumstances.
Task Focus vs Relationship Focus: Organizations must decide whether to prioritize efficiency, productivity, and achieving specific tasks or emphasize the cultivation of strong interpersonal connections and collaborative relationships with stakeholders and team members.
Performance vs Potential: Organizations must decide whether to evaluate employees based on their current performance or their potential for growth and development. Focusing on performance can help identify top performers and reward them accordingly, but it may also overlook employees who have the potential to excel with additional training and support.
Autonomy vs Control: Organizations must balance the need to give employees autonomy and independence with the importance of maintaining control and oversight. Allowing employees to make decisions and take ownership of their work can increase motivation and job satisfaction, but it may also lead to inconsistency and a lack of standardization and maybe even inadequate first deliverables during the learning curve.
Figure 1 illustrates how the trade-offs can be monitored and measured using the appropriate KPIs.
Figure 1. Objectives and KPIs for Common Organizational Trade-Offs
When measuring employee performance, we typically look at metrics such as the quantity, quality, and timeliness of work. However, we often invest too much effort in avoiding subjectivity during evaluation, which might lead to employees feeling like they are just “numbers” and that the diversity of personalities and individual strengths do not matter as everyone is evaluated based on the same numerical standards. Moreover, organizations should not forget that there is so much more to people than their achievements. Embracing subjectivity in a balanced way will lead to a more relationship- and communication-based performance evaluation without neglecting objective performance metrics.
The KPI Institute recommends complementing quantifiable KPIs by assigning competencies and desired behaviors to objectives. Defining specific competencies for each role involves considering both internal factors (e.g. job descriptions and discussions with employees in those positions) and external factors (e.g. competency catalogs). Meanwhile, desired behaviors are shaped internally by the company’s vision and organizational values and externally by the socio-cultural context, demographics, and examples provided by professional associations or publications in the field.
Figure 2 shows how a goal can be measured through objective metrics (Individual KPI) with subjective components (Desired Behavior).
Figure 2. Objective Metrics With Subjective Components
Offer Stability and Consistency
Frequent changes to expectations and evaluation criteria lead to ambiguous definitions of top performance, sowing confusion and frustration among employees who struggle to discern what is genuinely valued and rewarded. Consequently, performance reviews may become inauthentic or—worse—employees may lose trust in the evaluation process, undermining its credibility. Employees thrive in an environment where they understand expectations and can rely on stable guidelines for evaluation.
Thus, it is critical to adhere to an employee performance management system (EPMS) that is supported by all the necessary tools, processes, training, and monitoring and review procedures. This approach benefits both managers and employees as it ensures clarity in performance evaluation, from setting inclusive performance standards to linking the results to talent management, which also involves providing employees with development opportunities. Consistency in these practices fosters a sense of security and trust among employees and a culture of continuous growth and employee engagement.
Employee performance management need not be perfect. Instead, organizations must aspire to align it harmoniously with the company’s values. Through a holistic approach to employee performance management, organizations will be more capable of balancing the needs of the business with the realities of life.
For more articles on employee performance management, click here.
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About the Author
Bori Péntek, a management consultant specializing in organizational development and human resource management, uses an approach that merges strategic planning and performance management at the organizational level with responsible HR strategies. With diverse experience in recruitment, HR, and operations management across sectors like sustainable construction, research, and instructional design, Bori is passionate about fostering employee well-being through conscious leadership and internal corporate social responsibility.
Editor’s Note: This article was originally published in the print edition of Performance Magazine Issue No. 28, 2024 – Employee Performance Edition.
How effective is the pay-for-performance scheme in the public sector? Most civil servants working in public administrations worldwide before the 1980s had a salary system built upon seniority and length of service. The basis for career advancement did not look into the performance of the position holder.
During the 1990s, the tendency to change the payment systems was born, and the direction sought was to look into individual performance but only for senior public service officials and middle managers. What fueled the change was the need to fill in the gap between the salaries of managers in public service and those who served in the private sector so they could attract and retain private sector managers in public administration. Moreover, the focus was essentially on improving the motivation and accountability of civil servants.
However, in most European countries, there was little introduction to performance-related pay for non-managerial positions in civil service. The conclusion drawn by the European Public Administration Network was that the staff’s motivation could have improved. Given that only those achieving outstanding performance were entitled to a bonus–perhaps due to the efficiency of government spending, the employees found the schemes de-motivating. This caused jealousy and led them to blame the appraisal system.
Rigid pay systems began to be called into question to thrust into light the public value system and be able to compete with the private sector. By the 2000s, a significant number of civil servants were covered by various flexible payment arrangements. In other words, seniority was replaced by non-bureaucratic criteria such as job content, qualifications, competencies, and individual performance.
A controversial function under Human Resources Management is the individual staff performance appraisal with a pay-for-performance (PFP) scheme, which became popular among practitioners and academics in the New Public Management (NPM) wave. The public sector was responsive to change and complemented career-based pay with PFP models to reach soaring levels of attractiveness. Then, the NPM trend was established. There are two perspectives in analyzing the effect of monetary rewards or the efficient use of assets on the public sector.
The Standard Economic View is grounded on the notion that performance is positively related to effort, so outstanding performance should be rewarded. According to Victor Harold Vroom’s Expectancy Theory, there are three major elements of employee motivation. First is expectancy — an employee is motivated due to thinking that effort leads to “acceptable performance.” Second is instrumentality — meaning the “performance will be rewarded.” Lastly, the valence — “the value of the rewards is highly positive.”
Vroom saw the connection of these elements in motivating employees and provided guidelines on employee effort-to-performance expectancy, performance-to-reward expectancy, and valences of reward, which leaders will play an essential role in implementing.
Effort-to-performance expectancy – Leaders should provide all the training and support for their employees to be effective at work and be open to employees’ suggestions about innovative ways of getting their job done. Moreover, leaders should set expectations while helping employees achieve certain performance levels.
Performance-to-reward expectancy – This is where PFP will emerge. Leaders should establish with their employees that good performance will be rewarded. With this, the process of the reward mechanism should be strengthened. Performance should be accurately measured, and reward will be based on the result.
Valences of rewards – Rewards given to the employees should be diverse, with some preferred promotion, salary increase, or vacation leave credits. Leaders should make an effort to increase the expected value of rewards associated with their performance expectations.
The advantage of this approach is that weak performers are identified through financial incentives, and their performance is assessed through KPIs and targets, resulting in increased productivity and efficiency levels.
Image source: freepik
The Cognitive Psychology View takes heed of the two kinds of motivation: intrinsic and extrinsic. The first type of motivation looks for joy, satisfaction, and a sense of duty in the activity, rather than the external pressures or rewards, such as money or promotions and benefits, which the second type does.
Understanding workplace motivation is a critical component of achieving a dynamic work environment that enriches and fulfills employees. Based on Rajesh Singh’s study, “The Impact of Intrinsic and Extrinsic Motivators on Employee Engagement in Information Organizations,” managers must understand that intrinsic factors play a more significant role in motivating employees and investing more in building a culture of respect, appreciation, honesty, and individual freedom when reshaping their management approaches in tapping their employees’ emotion.
Literature, such as “Crowding Out Intrinsic Motivation in the Public Sector” written by Yannis Georgellis, Elisabetta Iossa, and Vurain Tabvuma, showsthat public servants tend to be more intrinsically motivated than private sector employees. That is why the motivation of public employees might decrease when extrinsic rewards are introduced.
Pay-for-Performance Schemes in Public Administration
According to a report issued in 2020 by the European Commission called “Pay-for-Performance in the civil service of the EU,” the monetary rewards are emphasized through a variety of economic forms that depend on several factors:
* Whether the performance of individuals is tracked
Individual performance can be approached in different ways. Traditionally, performance was scored on a scale based on a set of criteria and indicators, thus, leading to a differentiation of public servants into multiple performance categories. The modern way to register it is through regular performance appraisals in which employees ought to meet objectives’ targets within a certain timeframe. Crossing from output measures towards performance appraisals made the process more enchanting for the public system employees as they felt that they are part of a less rigid rating system that was qualitatively addicted. Some examples in this area are Estonia, Greece, and France, which gave up on explicit numerical rankings. Whereas Denmark and Finland have decentralized the decision regarding the rating system used to the organizational level.
According to a European Public Administration Network (EUPAN) survey (Staronova, 2017), only two countries reported using a quota system, Malta and Latvia. However, the purpose of it is to use it as a guideline only and not a strict requirement. Germany uses quotas only for the top performers in order to better differentiate them per category.
Part of the modern trend of performance instruments may be encountered in the self-assessment, together with the performance interviews. The methods are established through intrinsic motivators, like professional development opportunities or quality connections.
* The size and forms of payment (base pay, one-time bonuses, or a combination of the two)
Most of the time, the typical merit scheme links individual performance to annual salary raises. The computation is either as a percentage of base pay (3-10%) or a variable merit increment. Another form of it is granting a lump sum bonus. Some countries, such as Slovakia and Lithuania, offer a “pay promotion” that is tied to performance appraisal and a career promotion that assumes a change in rank.
Modern pay systems abandon the automatic pay progression and embrace the flexible PFP regimes under which annual evaluations and regular check-ins build the civil servant’s profile for a higher chance towards career advancement or bonus payment. According to the EUPAN 2017 survey, Portugal is an example of salary progression, as a public employee with an excellent performance score stays in the queue, alongside other high-performing candidates waiting for the managerial decision to give employees a bonus. Meanwhile, if other colleagues of a public employee that await in line accumulated an increased number of points since the last change of pay, they are entitled to the bonus.
Pursuant to “Pay-for-Performance in the civil service of the EU” developed by the European Commission, most Central European countries punish poor performers by decreasing their salaries or withdrawing the financial rewards. Others, like Malta and Belgium, chose to reflect the punishments on career progression by freezing it or even introducing the possibility of being downgraded.
Modern Performance Management Trends
More and more EU countries started to adopt PFP schemes in the public systems as they scrapped its controversial reputation and took heed of overall motivation, communication, and relations within the administration. Several key trends made it easier for financial schemes to be integrated into the organizational managerial culture:
Feedback and continuous discussion – Regular check-ins on results and competencies development represent a key trend within employee performance management. Mixing monetary incentives with non-monetary ones increases the changes in individuals’ motivation to reach new peaks. Annual appraisals performed in isolation are not the key to objectives achievement or performance of any kind. However, combined with ongoing feedback or performance interviews between superiors and civil servants creates common meaning and prepares them for the yearly evaluation. In the Swedish public administration, employees discuss goals and work-related issues with the manager, and they are aware of how payment is set and how they can increase their share.
Self-assessment – In order to involve and obtain civil servants’ input, they are required to perform self-evaluations. Shared insights of civil servants on how the job can be carried out effectively bring a valuable contribution to how they perceive appraisals, requirements, and opportunities for professional development. In Slovakia, this factor is introduced as a voluntary tool, while in Italy, the method is used for both supervisors and senior civil servants. In Portugal, self-assessment is compulsory to be carried out.
Competency-based approach – This takes into consideration technical skills and behavior patterns that put an apprentice on how individuals do their jobs. Moreover, the focus is on how civil servants contribute to the overall administration’s mission. According to a EUPAN survey (Staronova, 2017), in the past decade, the number of countries that adopted competency frameworks doubled. Supervisors believe that the policy contributes to the public sector’s performance by a vertical alignment of people’s competencies to the mission and vision.
Considering the current labor market challenges, pay-for-performance schemes need to be strategically planned to look into both the cost-effectiveness related to employment and the outcomes that support public employment services. The rule that undergoes tight budgets is to do more with less, thus implementing cost-effectiveness measures might provide comparative information on the labor market cost. Performance management should be linked to high-quality HR practices, in which individual, team effort, ongoing coaching, targeted training, and recognition are well-settled. Moreover, the human resources practices available in the public sector have a demonstration effect across the entire local market.Performance management should be tailored to influence civil servants to meet local needs rather than to achieve set targets at any cost.
