man in a hat with a briefcase
Employees need autonomy to set their own development objectives with support from managers who can help align them with business goals. PHOTO: Olu Eletu

Employers around the world are caught up in a performance management revolution.

Organizations’ collective move toward flat management structures, team-based projects and geographically distributed workforces has rendered traditional performance management practices obsolete.

As HR leaders contemplate their next move, one thing is clear: vanity improvements to existing employee development processes aren’t enough to meet the needs of today’s (and tomorrow’s) employees. HR has to instigate a major overhaul. To truly reinvent performance management, it helps to think like economists.

Social Capital: Currency for Performance Management

Economists often promote “social capital” — the bonds, shared principles and knowledge between people or groups that facilitate trust and create value.

In business leaders’ hands, the concept of social capital can help organizations create a performance management approach that reinforces an employee-first culture and improves bottom-line results.

Social capital emphasizes the value of natural connections between people, whether they’re neighbors, industry peers or coworkers — a mark that many organizations’ performance management protocol miss.

For years, performance management has been a top-down process, one typically imposed by HR departments onto managers and their employees.

As a result, the practice has become more of a formality – a box to check – rather than a critical enabler of employees’ growth and improvement.

Flipping Performance Management Script

But by harnessing a social capital-driven philosophy, employers can flip the script. Here are three ways to reimagine performance management with social capital in mind:

1. Encourage More Authentic Manager-Employee Relationships

Annual or biannual coaching sessions driven by standardized forms do little to foster genuine trust and support between managers and their teams. Employee performance evolves in real-time, and demands a more responsive process. To cash in on the power of social capital, employers should equip employees with the time and tools to have continuous coaching conversations. And rather than running through canned talking points based on an employee’s rank or title, coaching feedback needs to be tailored to the individual – their career aspirations, developmental needs and challenges.

2. Champion Peer-Driven Feedback

Employees crave performance feedback more than ever. Millennials in particular, who represent the largest generation in the US workforce, feel on-the-job feedback should be given very frequently. But additional performance input doesn’t only have to flow down from supervisors and upper management. Horizontal feedback from peers across the organization can be just as beneficial to an employee’s growth. Crowdsourcing feedback from colleagues provides managers with a more balanced, accurate picture of their employees’ competencies and areas for improvement. In turn, this facilitates more productive coaching conversations, stronger performance and better business results.

3. Pursue Smarter Goal Setting

Organizations can’t create (or benefit from) social capital if managers and HR dictate performance goals. Instead, employees need autonomy to set their own development objectives – and the support of managers who can help shape them to align with overarching business goals. Contrary to common practice, employee goals shouldn’t live in a vacuum. Making certain goals transparent throughout a company creates an atmosphere of accountability and incites camaraderie since everyone’s working toward shared objectives.

Economics is about much more than facts, figures and formulas. By bringing social capital thinking into the workplace, HR leaders can transform performance management into a practice that benefits their most important asset: their people.