LagomWorks Research Series: May 2020
Preparing for the ‘New’: Performance Management in ‘Distributed Organizations’
A Gartner, Inc. survey of 317 CFOs and Finance leaders (March 2020) revealed that 74% of them would move at least 5% of their previously on-site workforce permanently to remote positions post-COVID 19. While Google and Facebook have allowed their employees to work from home (WFH) till the end of this year, Twitter has gone a step ahead offering it as a permanent option to its workforce. With increasing number of organizations on the verge of embracing WFH as an intrinsic pillar of organizational functioning, the rate of transformation is set to accelerate and lead to permanent shifts in the way organizations think, feel, act and communicate.
A distributed organization entails people across different locations working together to achieve the objectives of the organization. It allows autonomy and local leadership to pursue common goals, while being governed by a central organization which focuses on defining the frame of reference and overall strategy. The central norms act as a reference point for the groups or individuals to finalize and manage their actions. At all points of time, the local groups are in touch with the central organization and frequently connect with each other in planned spaces, physical or virtual.
The component units / teams apply consensus protocols to agree on the universal values and governance structure, but operate independently in their own unique ways. For them, autonomy means getting to make their own decisions and being trusted to do so. It also involves trusting others to make decisions for others too. In an agile organization, it is accepted that these teams themselves go through an evolutionary journey and keep changing their shape and size, with a core nucleus structure in place. Their connections might not be restricted to the formal organization, but extend beyond to encompass need based partnerships and contribution to the society/policy decisions.
The key to managing ‘distributed’ organizations is to acknowledge that it is the individual and team of individuals, which holds the power to drive performance, innovation and next level growth. Organization wide systems, policies and processes need to be designed to enable and empower these ‘micro-systems’ to perform and grow optimally.
Changing Performance Dynamics
The current COVID-19 has made us realize that managing people is one of the most difficult elements of remote working, not in the least because everyone will respond differently to the cultural shift and challenges of the home-working environment. As we deep-dive into changing performance dynamics, it would be important to remember that everything is built on the foundation of a strong communication system. Traditional wisdom says that it is prudent to err on the ‘excessive’ side, rather than adopt a lackadaisical approach to communication, especially when conditions at work are changing rapidly.
‘Trust’ as the backbone
Distributed organizations need the strong glue of trust to perform. Trust is knowing someone's good intentions and knowing that those intentions will dictate their actions. As such, trust is what enables us to act as if others will cooperate without having to verify it they actually will cooperate. It is there to ensure the most basic level of cooperation required for the organization to function.
‘Self-organization’ as the way of functioning
Distributed organizations are regulated primarily by the distributed local interactions of their members and the feedback loops created out of this. Even without direct interaction, teams emerge out of distributed interactions and coordination emerges without being imposed.
Feedback is the cornerstone of effective functioning of a distributed organization. It determines the standing of an individual vis-a-vis others who are part of the system. The reputation is built through the actions that an individual takes and how those actions contribute to the organization objectives. The individuals, who build a great reputation, emerge as leaders and play a larger role in determining the future of the organization. As other members start following these leaders and emulating them, the incentive to contribute to overall organization goals increases and alignment is created.
Changing role of Senior Leadership
As leaders emerge across the organization, senior leaders spend significant time mirroring back the results of collective efforts to validate the worth of individual contributions, leadership, and to show the impact of the network, which are essential practices for maintaining morale and motivation. Gartner, in a 2018 report, had highlighted the evolving role of leaders, which deserves a close look at this critical inflexion point:
“Corporate strategy will maintain a critical role in growth strategy development, but the role will shift from facilitation of individual opportunities to one more focused on network coordination. Strategy can identify growth opportunities that fall between silos, as well as opportunities for business units to collaborate on similar growth opportunities. This will involve strategy setting up mechanisms to create transparency throughout the organization, creating forums for businesses to collaborate and providing training to develop the hard and soft skills necessary for collaboration. Strategy will help the business identify low-value or lagging projects to shut down to free up resources for more transformational, cross-cutting growth opportunities.”
‘Human Centered’ Performance Philosophy and Process
The growing prevalence of the ‘distributed organization’ has made leaders across the world revisit their executive agenda and refresh their performance management philosophy/ process to energize the teams by setting a clear direction, especially in the times of uncertainty. Leaders need to foster an outcome-driven culture that empowers and holds teams accountable for getting things done, while encouraging open, honest, and productive communication.This is critical, especially when employees still complain about implicit biasness and lack of objective evaluation. Managers still see performance management as a bureaucratic, tick-in-the-box exercise. This ‘eye-of-the-beholder’ aspect is important to consider while looking at novel approaches to performance management, perhaps the most critical process for an individual.
It is apt to mention here that the success of any system does not lie in the beauty of its design, but effectiveness of its implementation. For successful implementation, empathy is going to be a crucial tool, offering a way to deep-dive into motivations, challenges, needs and aspirations of individuals. For e.g. an organization, where ‘principles of equality’ are engrained in the individual and collective consciousness, is unlikely to encourage wide performance differentials in its performance management strategy. In such a scenario, driving transparency and meritocracy becomes an uphill task even for internal leaders.
Empathy outcomes significantly impact the cultural nuances and performance philosophy/ strategy in an organization. Once these outcomes have been outlined, debated and factored for, the critical factors for any performance management process to succeed in ‘distributed’ organizations would be:
- Clear linkage of employees’ goals to business and personal priorities; inherent flexibility in goal-setting, achievement-tracking and feedback cycles.
- Superior performance coaching skills in managers to help them nurture the individuals/teams for whom they are the nucleus.
- Differentiated, personalized rewards for individuals taking on leadership responsibilities within their operating context and driving alignment.
All the above essentials will need to be driven through a simple, easy to implement system to maximize adoption and impact at an individual / team level.
Business leaders need to acknowledge and respect that remote working has its own dynamics, which include employees caring for their children when schools are shut and worrying about their aged parents. By creating a sense of psychological safety for their teams, being inclusive in decision making, and offering perspective in challenging moments, leaders can stay close to what is going on, and help their teams solve problems effectively. It is important that all organization systems, especially the performance management system, aid this journey.