The main difference between performance management and performance culture is one focuses on profit and the other on purpose. Although organizations do need both, many only care about performance management due to overlooking or not knowing about performance culture. Successful business leaders understand that in 2022, it is not enough to focus on profit as the main driver of success or the key benchmark. Your people are your organization's greatest asset.
In this article, we will explore the three main differences between performance management and performance culture and why putting more of an emphasis on driving a performance culture will propel your organization to new levels.
Performance management is defined as "Performance management involves measuring, reporting and managing progress – from the individuals who work for a company, right up to the organization as a whole – with the aim of improving performance." by Bernard Marr and Co.
Alternatively, performance culture is defined by Forbes as "Essentially a high-performance culture or growth mindset promotes an environment where employees are focused on incremental improvement — to be the best they can be in the situation they are in, with the resources at their disposal."
3 Reasons Why Performance Management is not Performance Culture
- Performance management lacks purpose whereas purpose is at the heart of performance culture.
- Performance management focuses on short-term, immediate success whereas performance culture focuses on longevity.
- Performance management has a performance emphasis whereas performance culture has a cultural emphasis.
Performance Culture vs. Performance Management
Purpose is at the heart of performance culture.
Connecting personal values to work is a game changer. When focused on performance management over performance culture, employees can often lose sight of the big picture and their role in what the organization is trying to achieve. People want to be a part of something. McKinsey research found that "people who say they are “living their purpose” at work are 4x more likely to report higher engagement levels than those who say they aren’t." There is nothing more motivating than feeling connected to a greater purpose. No performance assessment can outweigh the intrinsic motivation felt when your work impacts a common organizational goal. In fact, Gallup research states that "just a 10% improvement in employees' connection with the mission or purpose of their organization leads to an 8.1% decrease in turnover and a 4.4% increase in profitability". Purpose has power. At Limeade, we kick off every company meeting by talking about "why we are here". This has nothing to do with performance management and everything to do with culture. Reviewing our company values on a regular basis helps everyone at the organization to find where they fit in the overall vision.
A performance culture focuses on longevity.
Only focusing on performance management is a short-term mindset and can lead to burnout. Performance culture considers the employee as a whole person and takes into consideration their well-being. Personal OKRs and individual performance metrics are not all it takes to inspire employees to perform at their best consistently. It is the responsibility of managers to help employees see their purpose in the organization through recognition, coaching, and performance feedback. According to an article by Fast Company, "Companies are today under constant pressure to reduce expenses, cut staff, and live quarter to quarter. This may drive short-term profits, but it’s killing high performance". If you're only focusing on the short-term and neglecting employee needs (like well-being) to get there, your performance will suffer in the long run.
Performance culture has a cultural emphasis.
Your culture is your secret sauce to success. Companies with strong cultures achieve up to three-times higher total returns to shareholders than companies without them. The hard part is, you can't just implement rules to build a strong culture with highly engaged employees. It takes time to build a performance culture. Focusing on improving employee engagement, limiting burnout, and listening to employees' needs overall is a great place to start.
How To Start Building a Performance Culture
- Benchmark - determine how you will measure your success in building a performance culture. Measuring employee engagement is a good example here.
- Assess - Use survey and feedback tools to gauge where you sit currently and set goals for where you want to be.
- Implement - Equip your managers with tools to build strong relationships with employees and employees with the tools to flourish and recognize each other for a job well done.
Performance management is more concerned with the data rather than culture. It's a product-driven initiative, not one focused on the development of the company and the people in all areas. Try not to think of performance management as an empty box where you can check off each item in a given list without actually integrating any of these new ideas into your business. Your work will only show results if you focus on creating a true culture shift. Performance management has its place but performance culture is where you'll see a noticeable impact.
Almost all organizations practice performance management but few organizations succeed in building a true performance culture. Set yourself apart in your industry by building a stronger culture today.