Still living in the 90's? Performance Management Needs a Rethink. Again.

Still Living In The 90's

by Angela Lane and Sergey Gorbatov

Performance has long been one of the central levers of talent management. Most organizations still rely on a familiar formula: set goals at the start of the year, review progress along the way, and evaluate performance at the end of the year.

That model made sense in a stable world.

It makes less sense now.

AI is reshaping work. Business priorities are shifting faster, roles are evolving in real time, and teams are being reconfigured more often. Skills are becoming obsolete more quickly, while new ones emerge at pace. In this environment, performance management is no longer just an HR process; it should be a system that helps the organization adapt.

We have a method for thinking about talent management that we call "More. Better. Now." If you want "more" talent, you are in the arbitrage business: assess the quality of performance and consistently upgrade talent through every new hire, evaluation, and feedback session, and, when needed, through the thoughtful management of poor performers. Performance management stands out as one of the levers of the talent system most exposed by our changing world. In this landscape, some talent practices will need refinement, and performance management may be due for a complete overhaul.

The assumptions at the heart of performance management are less true today than when they were introduced in the 1950s.

First, organizations need more adaptability.

Traditional performance management assumes that goals can be set with reasonable clarity at the beginning of a cycle and remain relatively stable over time. But in a volatile environment, that assumption breaks down. Priorities move. Strategy shifts. Market conditions change. AI alters workflows and sometimes the work itself. Annual goals quickly become stale.

The future potential lies in a performance management approach that generates flexibility rather than bureaucracy. Goals still matter, but they need to be more fluid, revisitable, and closely connected to real business conditions. Instead of being fixed, goals should resemble broad commitments—clear enough to guide effort but flexible enough to evolve. If you operate in a fast-changing, ambiguous context, SMART goals won't necessarily cut it, and even OKRs may be too rigid for environments where experimentation and iteration are the order of the day.

Second, organizations need better feedback.

One of the most underappreciated weaknesses in many performance systems is the quality of the feedback they produce. Too often, feedback is primarily corrective, overly formal, and overly tied to moments of evaluation. It tells people what is wrong, but not always what is working. It judges, but does not always develop.

That is a problem in any environment. In today’s environment, it is a bigger one.

When people are learning continuously, navigating ambiguity, and adapting to new tools, feedback needs to coach. It needs to build confidence as well as capability. It must reinforce strengths and progress while coaching toward improvement through learning in the flow of work. While maintaining standards, managers should help people understand what value looks like and allow them to experiment with how to create it.

Third, organizations need to adapt, fast.

The speed dimension may be the most obvious challenge to traditional performance management. Annual cycles are simply too slow for a world that movefasts this quickly. By the time a formal review arrives, the goals may have changed, the team may have changed, and the context may have changed. A once-a-year appraisal cannot carry the weight of continuous change.

Some organizations are already operating with faster review cycles. A survey of 344 US employers found that about 18% conduct formal performance reviews twice a year and 8% quarterly; a smaller share use monthly or weekly appraisals. Performance management must operate at a tempo that matches the business. That means shorter cycles, more frequent check-ins, faster recalibration, and regular conversations about contribution and growth. In other words, performance management must become as dynamic as the work itself.

So what should talent leaders do?

For many years, we were the first to criticize HR's ongoing redesign of performance management when it was based on fashion rather than fact. But today, the facts have changed. We should stop treating performance management as an established process and ask ourselves a strategic design question: if the world of work now demands more adaptability, better feedback, and faster cycles, how would you design performance management from scratch?

We need to evolve. We need to rethink one of the most established parts of talent management with fresh eyes. Are we willing to do so?

Through a More Better Now lens, the answer is clear. Performance management needs to become more fluid, better at developing people, and faster in rhythm.

The world has changed. This system needs to catch up.

Disclaimer: Opinions are our own and not those of affiliated organizations.