How do I implement performance-based management in remote work?

Performance-based management (PBM) is often seen as more critical for companies with teams of remote workers. Learn how to apply it in this article.

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Remoter
5 minutes read

TL;DR

⚖Clarifying job responsibilities and expectations.

🏈Enhancing individual and group productivity.

👥Developing employee capabilities to their fullest extent through effective feedback and coaching.

🎯Driving behavior to align with the organization’s core values, goals and strategy.

🧰Providing a basis for making operational human capital decisions.

🗣Improving communication between employees and managers.

Making sure that your employees are at their peak performance is the obsession of nearly every manager and business owner. It’s one of the main reasons why remote work may not be appropriate for some owners, especially if they feel a need to monitor employees in person on a daily basis. A traditional “Management by walking around” approach is not going to work when you have a global workforce scattered across many time zones.

For this and many other reasons, performance based management (PBM) is often seen as more critical for companies with teams or remote workers.

Many of the same constraints that come with aspects of building a team for remote work apply to performance-based management, however. In order to understand these, it is best to start at the very beginning with the reasons why performance-based management is critical for all businesses, particularly fast-moving startups.

What is performance-based management?

It’s best to start with a dictionary-like definition:

Performance‐based management is a systematic approach to performance improvement through an ongoing process of establishing strategic performance objectives, measuring performance, collecting, analyzing, reviewing, and reporting performance data, and using that data to drive improvement.

What are the elements of PBM?

A comprehensive analysis and summary of performance based management were assembled by Elaine D. Pulakos of the Society for Human Resources Management in 2004. It defines PBM in terms of outcomes, which is only fitting. These projected outcomes include:

  • Clarifying job responsibilities and expectations.
  • Enhancing individual and group productivity.
  • Developing employee capabilities to their fullest extent through effective feedback
  • and coaching.
  • Driving behavior to align with the organization’s core values, goals and strategy.
  • Providing a basis for making operational human capital decisions (e.g., pay).
  • Improving communication between employees and managers.

One of the key differences between remote work and on-site presence is the need for effective, direct communication that builds a global workforce into a team. Several of these desired outcomes for PBM is very much aligned with the needs of a global workforce, but can be more difficult.

That is why PBM should be developed even before you begin the hiring process, and the performance goals clearly stated even before the first contract is signed.

How important is performance-based management?

According to a 2016 Harvard Business Review analysis found that 88% of Fortune 500 companies were implementing PBR. In many cases, clear direct incentives were built into the pay system and traditional employee appraisals are being dropped entirely. This analysis encouraged this practice in favor of a fully PBR system for three critical reasons:

  • The need to develop skills,
  • The need for agility, and
  • Development of teamwork.

The last point is one of the most important for remote workers. When they are rewarded as a team, they function more as a team from the start. If you have hired self-starting, entrepreneurial team members they will respond to PBR easily. What you reward you will have more of, and rewarding as a team increases teamwork.

How should the beam Be rewarded?

There are two key strategies for performance-based rewards – on the clock, and project based.

Rewards that are on the clock are the traditional performance reward, often given out annually. They can be based on company, team, or individual performance. They can be a good way to build incentives for employee pay that match the company’s goals. The problem, however, comes when employees rely on them and start to see the “annual bonus” as part of their regular pay, making them less effective.

Project-based rewards are more likely to be paid out when a project of subpart of the company goal is completed. In 2017 Deloitte found that this was an emerging trend in PBM systems and found to be very effective. In addition, personalized rewards, especially those given more sporadically in recognition of particularly special performance, were found to be the most motivating.

Generally speaking, employees are found to be motivated by cash and the praise of their team members. But as found by Deloitte, the most effective rewards were spontaneous and personal. A mix of both systems can be a powerful incentive system that aligns the goals of the team members with the goals of the company while recognizing individual performance in a way which is fun and interesting.

What’s the bottom line?

Performance-based management is even more essential in a global workforce because, like all market forces, it is a way of communicating what is valuable. It is important to be sure that what you measure is indeed what you want more of because that is the message that you are sending your team with PBM.

Such a system needs to be set up in advance so that it can be explained to your team even before they make the decision to join you. This helps to define your corporate culture as one based on performance and helps to recruit top talent which is entrepreneurial by nature.

Communication and personal development are much more difficult with remote work, however, so this is an aspect of PBM that you need to be aware of. Compensation transparency, for example, often highlights areas where potential growth by learning new skills can be lucrative. All of your team members do require a check-in from time to time to be sure that they have what they need, and personal development will necessarily be a part of that.

In all cases, however, PBM can be an effective tool for managing a global workforce. You set up the right incentives, recruit the right team, and let it go from there. It is a process that requires a lot of thought up front, which can be challenging for start-ups which need to be agile.

Incentives, however, are very different from the product and can be changed with changing needs. What needs to be considered is the process by which performance is rewarded and how that is communicated.