Remote work and the implications of continuing the process, including its potential impact on employee performance, are widely discussed. However, there is no right answer, and it is not one-size-fits-all.
The future of work includes flexibility, employee experience, agility, and the responsible use of artificial intelligence (AI)—these significant shifts impact where and how employees work. With an increase in remote work options, we have seen positive trends in work-life balance, employee empowerment, inclusivity, and an increase in diverse talent. These factors are also known to increase employee productivity and retention. According to BCG, a considerable population of employees are ready to leave their jobs if they find their flexible work arrangements unsatisfactory. Based on their survey, approximately 90% of women, caregivers, individuals identifying as LGBTQ+, and those with disabilities, deem flexible work options as crucial in determining whether they will continue or resign from their current employment.
Remote work productivity is subject to debate due to various factors that must be considered. Some suggest remote work can increase productivity due to a flexible schedule, no commute, and fewer interruptions. While many employees thrive in a remote work environment, some find it challenging due to the discipline it demands.
Remote work was on the rise even before the COVID-19 pandemic. A July 2023 report from Stanford University found that working remotely has doubled every 15 years. Then, when the pandemic occurred, although devastating, it provided a new perspective for those previously constrained, forced to relocate, or live in less favorable locations to work for a specific company and advance their career. Worldwide ERC states that around 56 million Americans moved to new residences between December 2021 to February 2023 due to COVID-19-related shutdowns and the surge in remote work and online education. With such a huge increase in their number over the past few years, this begs the question: do employees working remotely demonstrate productivity?
Taking a deeper look into the study by Standord University, researchers shared that remote work employees’ productivity differs depending on perceptions—the nature of the research and the conditions under which it was conducted. The report revealed that workers believed productivity was higher at home (approximately 7% higher), while managers perceived it lower (around 3.5% lower). Another example, according to a poll by the video presentation applications mmhmm, 43% prefer office work and 42% favor working from home for peak productivity. Moreover, 51% of employees stated that working asynchronously or having the flexibility to set their schedules contributed positively to their productivity. Perceptions aside, the Stanford analysis found a 10% to 20% reduction in productivity across various studies.
The bottom line is today’s company culture is crucial. Ensuring work-life balance and putting the employees in the driver’s seat are the best ways to retain and increase productivity because they will feel valued and empowered. In a 2022 Microsoft employee engagement survey, 92% of employees say they believe the company values flexibility and allows them to work in a way that works best for them. An even higher percentage (93%) are confident in their ability to work together as a team, regardless of location. People have different preferences—some individuals opt for a hybrid approach, while others choose either remote or in-person work exclusively.
Regardless of the work setup, company leaders and human resources (HR) or human capital management (HRM) executives should ensure that they can still make a lasting impact on employee performance. One measure involves establishing key performance indicators (KPIs) that assess innovation, program, project, and product success—the output, not the physical location. Another crucial step is developing a strategy that includes all future work options, such as in-person, hybrid, and remote choices. Employees tend to be more productive if there is a level of empowerment that allows them to decide where to do their best work.
Planning in person events makes a difference. Leaders who bring new hires and internal transfers, new to the team, on-site for several days should see an uptick in productivity post-gathering. In-person team or company-wide gatherings 1-4 times per year provide employees an opportunity to reset and socialize. Moreover, managers should bring teams together for major program and project kick-offs. When onsite in person, people being present makes a difference. Discourage using Teams or Zoom when employees are in the general vicinity. I have seen companies spew the importance of in-person just to fly employees into a specific location and have people take meetings from their desks or in a different on-site building-conference room, defeating the purpose of in-person interaction.
Having organizations foster all work options is critical and foregoes having to decide which is best. There is no right or wrong answer to this challenge; it should be considered a new way of working and requires future-forward ways of thinking, just as we do with emerging technologies.
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About the Guest Author:
Dr. Malika Viltz-Emerson is a Senior Global Human Resource Leader at Microsoft. She has over 20 years of experience in human capital management. Her mission is to identify and address the real-world challenges and opportunities for employees and the company, and design and implement optimal solutions that leverage the latest tools, technologies, and processes.
Editor’s Note: This article has been updated as of September 18, 2024.
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.
Does your organization adopt an employee or customer-centric operating methodology? For decades, the main focus of businesses in the Middle East has been on the customer, embracing mottos such as “The customer is always right” or “Customer comes first,” with the primary objective of attaining high customer satisfaction to expand market share. While this remains a universal goal, the approach to achieving it varies among companies, with some prioritizing employees over customers.
Employee performance management has gained increased attention in recent years compared to previous decades. This shift is largely a result of a changing mindset in both the private and public sectors regarding core business principles and operating methodologies. Companies have started to be more aware that what leads to customer satisfaction is a happy workforce, prompting them to focus more on managing employee performance.
Business magnate Richard Branson encapsulates this shift with his statement: “Clients do not come first. Employees come first. If you take care of your employees, they will take care of the clients.” This shows us the importance of transitioning towards a more employee-centric business model to keep employees satisfied and engaged while achieving business goals. For all these reasons, employee performance management plays a pivotal role.
To better understand what employee performance management entails, it is important to examine its sub-processes:
Employee performance planning: The planning phase is a prerequisite, establishing the groundwork for the entire process. It is imperative to clarify roles, responsibilities and competencies by having the proper job descriptions and competencies framework developed based on the market’s best practices.
Employee performance measurement: This phase teaches the creation of scorecards at the employee level, guiding the assessment of competencies and behaviors. It also delves into the advantages and disadvantages of creating a final performance index for each employee, incorporating clearly defined criteria such as objectives, KPIs, competencies, and behaviors.
Employee performance review: This phase details organizing and conducting employee performance review meetings, ensuring value for managers and employees. During meetings, managers transparently discuss employee performance, acknowledge achievements and progress, and highlight improvement areas.
Employee performance improvement(talent management): This phase emphasizes the right course of action after the performance review meeting and the enablers of performance improvement. It guides the addressing of low-, medium-, and high-performing staff members, underscoring the importance of a monitoring process to ensure the effective implementation of corrective actions.
Performance recognition: This process guides the creation of rewarding models for acknowledging high-performing individuals and teams, enabling the design of a sustainable reward system encompassing financial and non-financial rewards.
In 2023, several aspects of performance management, especially employee performance management, have evolved. This shift is a response to the so-called “post-pandemic new normal,” forcing businesses to rethink survival strategies for 2024 and beyond. Six main trends have emerged:
A noteworthy change is the evolution of the job landscape. Financial security, which once deterred employees from leaving their jobs, is no longer the sole factor. Jobs now offer employees opportunities for growth, continuous feedback, flexible working hours, remote or hybrid work options, and comprehensive benefits, enhancing their work-life balance. These trends underscore the imperative for businesses to shift towards employee-centricity to achieve strategic objectives and foster sustainable business practices with reduced turnover.
Employee performance management will witness further changes, particularly in performance review and goal-setting. The workplace will increasingly focus on personal and professional goals, transforming performance reviews from a process into project-based evaluations, enhancing the workspace and contributing to a more sustainable business.
To prepare you for the year ahead, The KPI Institute can equip you with the industry-leading tools and skills required to nurture employee performance. Sign up for the Certified Employee Performance Management Professional and Practitioner courses now and secure your slot here.
In today’s dynamic business landscape, enhancing employee performance is crucial for sustained success. To build high-performing teams, it’s important to establish the right framework and processes for performance measurement, including the selection and deployment of tools like key performance indicators (KPIs). But how can organizations successfully unlock employee potential through performance measurement?
Here is how renowned company Adobe transformed its employee performance strategies to obtain outstanding outcomes.
Case Study: Adobe
Adobe’s transformation journey is a testament to the potential of strategic performance measurement and KPIs. Adobe has faced issues with its yearly performance evaluation process. These were:
Employees were frustrated with annual performance reviews as they found the process cumbersome and bureaucratic.
The process created barriers to teamwork since the experience of being rated and stack-ranked for compensation left many employees feeling undervalued.
Adobe estimated that a total of 80,000 hours of its managers’ time was required each year to conduct all of the reviews, the equivalent of nearly 40 full-time employees working year-round.
Adobe realized that it should not wait until the end of year to share feedback. So, the company made a surprising change that improved employee engagement and transformed the company culture.
Employee-centric approach: Adobe’s departure from traditional performance reviews towards a more frequent and less formal “check-in” process demonstrates its commitment to an employee-centric approach. These regular discussions—done at least once a quarter—provide a platform for managers and employees to engage in meaningful conversations about expectations, growth, and development. This shift reflects Adobe’s recognition that empowering employees with continuous feedback and opportunities for improvement is more effective in driving performance excellence than the conventional annual review model.
Setting clear, measurable goals: The new strategy adopted by Adobe focused on providing its staff with specific, measurable goals. Employees could clearly understand what was expected of them and how their performance would be assessed because these goals were cascaded down from the organizational and departmental goals and aligned with each other. Companies that have aligned goals tend to outperform organizations that lack a direct connection between top company priorities and employees’ individual aims.
Real-time performance insights: Adobe enabled its managers to give employees real-time insight into their performance by integrating technology. Adobe launched a digitally-enabled check-in, providing all employees and managers with a web-based destination to document their goals, development, and growth. Individual goals are documented in a centralized place, reviewed regularly, and can be updated in real-time by managers and employees alike. All of this made it possible for timely feedback and course correction, ensuring employees stayed on track with their objectives and KPIs year-round.
The results of the transformation were spectacular and resonated with employees—employee attrition dropped by 30% while involuntary departures rose by 50%. This change allowed managers to give more timely and useful feedback while empowering employees to take responsibility for their own advancement. The employees thus felt engaged, valued, and aligned with the company’s goals.
What are the key takeaways from Adobe’s case? Performance measurement best practices should always include the following:
Alignment with organizational goals: A strong performance measurement approach starts by matching team objectives and individual objectives with the organization’s overarching mission. Employee performance becomes a key factor in the organization’s success when they are aware of how their work supports corporate objectives.
Keeping qualitative and quantitative metrics in balance: Effective performance measurement goes beyond simply counting numbers, as it needs a comprehensive understanding of an employee’s contributions and their influence on the expansion of the business. This is made possible by incorporating qualitative elements like engagement, collaboration, and innovation.
Continuous feedback and growth: Many businesses are using continuous feedback loops instead of the traditional annual reviews. Periodic performance reviews and regular check-ins encourage ongoing conversations between managers and employees, facilitate growth discussions, and identify areas that need improvement.
In conclusion, the modern business landscape demands a strategic approach to unlocking employee potential. Performance measurement and KPIs are not just tools but pathways to aligning individual aspirations with organizational goals, combining qualitative and quantitative insights for a thorough understanding of employee contributions, and motivating continual improvement through timely feedback. By adopting best practices and an employee-centric approach, businesses may begin on a journey that empowers their staff, inspires innovation, and drives them to sustainable success in the dynamic global marketplace.
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This article is written byMuhammad Ali Moustafa isa Business Management Consultant at The KPI Institute. He is a Certified KPI Professional (C-KPI) and Certified Performance Management Systems Audit Professional (C-PA). He has diverse professional experience in which he had the opportunity to work on advisory projects with different organizations, ranging from startups to multinationals.
What is the most crucial asset owned by an organization? In the modern business landscape, a company might possess a well-defined vision, mission, and set of value drivers, along with a carefully articulated strategy and aligned objectives throughout all levels of the organization. Nevertheless, employees may fail to adopt these values, as these are not inherently embedded in their actions due to the absence of a performance-driven culture.
Hence, the company must foster a culture that actively facilitates the execution of its strategy. This culture should empower every employee to operate in alignment with the established value drivers, behavioral norms, and competencies set forth by the organization to fulfill its mission while being consistent with overarching corporate goals.
Central to cultivating a successful performance-driven culture are leaders. They stand as key influencers, coaches, and role models. Organizations must shift their focus from having managers who assert authority to nurturing leaders who coach and guide. These leaders should serve as advocates for aligning and interpreting corporate objectives for employees at all levels. Proper training is fundamental in equipping them to effectively manage their subordinates.
To enable leaders to construct a thriving performance-driven culture, organizations can implement the following steps:
Build the desired organizational culture. Foran organization to define the fundamental characteristics of its desired culture, it must translate its mission and vision into tangible value drivers, anticipated behaviors, and needed competencies. These elements must be communicated extensively to all employees, ensuring their adoption, with an emphasis on starting this process with the leaders themselves.
Highlight a leader’s role in cultivating performance excellence. Leaders are essential in shaping the desired performance culture within an organization. They lead by example, embodying cultural values, behaviors, and skills. This sets a motivating tone for their teams and encourages others to follow suit. Effective leaders foster openness and feedback, which leads to transparency and collaboration. They recognize and reward behaviors that match the culture.
Additionally, they provide coaching and growth opportunities to empower employees. This creates an environment where everyone feels valued and engaged, forming the basis of a performance-driven culture.
Foster performance by promoting employees’ mental wellness. In creating a culture of performance, the importance of nurturing a healthy mindset and prioritizing employees’ mental well-being cannot be overstated. A positive mindset is crucial for a culture of excellence. Employee mental health directly affects engagement, productivity, and satisfaction. Providing resources like counseling, stress management, and flexible work options not only demonstrates commitment to well-being but also leads to a focused, creative, and productive workforce. A mental health-supportive culture enhances individual well-being and aligns employees with organizational values, ultimately improving performance.
Empower performance culture through data interpretation. Organizations have a wealth of data that offer insights into employee engagement, performance, and overall health. Leaders must use data analytics to guide culture development. By studying metrics like satisfaction, productivity, and alignment with values, leaders can spot improvement areas and measure initiative impacts. This data-driven approach refines strategies based on evidence, creating a flexible culture. Regular data analysis shows employees that their contributions matter, boosting transparency and commitment to growth.
Successful examples
Googleprovides a noteworthy example of a strong performance culture as exemplified by initiatives like Project Aristotle and Project Oxygen. Project Aristotle highlights team dynamics and psychological safety, fostering an environment where all members freely share ideas and take calculated risks. Meanwhile, Project Oxygen focuses on effective leadership qualities such as coaching, communication, and genuine care for team members. These initiatives underscore Google’s dedication to establishing a culture of collaboration, innovation, and leadership, creating a thriving workplace for both teams and individuals.
Another notable example is Netflix,which embodies a performance culture centered around “seeking excellence.” This entails encouraging each employee to excel and contribute to produce their best work. Netflix values individual responsibility and open feedback, creating an environment where high standards and innovation are prized. The company hires top talent and empowers them with trust and autonomy. This adherence to excellence shapes their decision-making and has contributed to Netflix’s success.
Creating the right organizational culture lays the foundation for success. Leaders drive performance excellence by setting an example and supporting their teams. Taking care of employees’ well-being adds to the positive atmosphere, and using data helps leaders make smarter choices. Combining these aspects builds a culture where everyone thrives, innovation flourishes, and organizations prosper.
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This article is written by Chadia Abou Ghazale, a seasoned banking professional with 24 years of experience and who excels in budgeting, sales performance management, data analysis, and resource planning. Beyond banking, she is a dedicated reader of self-development topics and passionate networker. Chadia believes that life’s purpose is the pursuit of knowledge. Her extensive expertise and unwavering enthusiasm are a dynamic combination, driving success in her career and enriching her life’s adventurous journey.
About the Guest Author:
