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

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

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⚖Clarifying job responsibilities and expectations.

🏈Enhancing individual and group productivity.

👥Developing employee capabilities to their full 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 people, especially if they feel a need to monitor employees in person everyday. 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 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. In order to understand this, it is best to start at the very beginning. Here are 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 was assembled by Elaine D. Pulakos of the Society for Human Resources Management in 2004. It defines PBM in terms of outcomes, which 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 to achieve.

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 are performance-based rewards?

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

  • Need to develop skills
  • Need for agility
  • 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 hired self-starting, entrepreneurial team members they will respond to PBR easily, and rewarding as a team increases teamwork.

How should the team be rewarded?

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

Rewards that are on the clock are traditional performance rewards, often given out annually. They can be based on company, team, or individual performance. It 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 a part of the company goal is completed. In 2017 Deloitte found that this was an emerging and very effective trend. In addition, personalized rewards, especially those given sporadically in recognition of particularly special performance, were found to be the most motivating.

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

What’s the bottom line?

Performance-based management is truly essential in a global workforce because 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.

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

Be aware that communication and personal development are much more difficult with remote work. 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 they have what they need, and personal development will likely be a part of that.

In all cases, 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 that need to be agile.

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