MIT Sloan Management Review Research Report on Performance Management's Digital Shift

The business value of traditional performance management models is collapsing. While these legacy systems still inform decision-making around compensation, promotions, terminations, and other compliance-mandated functions, they’ve become irrelevant to actually improving performance or its management. They do not measurably add value.

Instead of better clarifying expectations and building morale, the traditional annual appraisal aspect of performance management (PM) alienates talented and typical employees alike. Managers dislike it, too. Even as personal and enterprise tools and technologies have radically improved, performance management systems have not. And while the nature of work and the workplace have grown more data-driven and analytical, performance management has not kept pace. Perennial complaints — rigidity, opacity, unfairness, arbitrariness, and an inherent backward-looking bias — persist.

About the Author

Michael Schrage is a research fellow at the MIT Sloan School’s Initiative on the Digital Economy, where he does research and advisory work on how digital media transforms agency, human capital, and innovation.

David Kiron is the executive editor of MIT Sloan Management Review, which brings ideas from the world of thinkers to the executives and managers who use them.

Bryan Hancock is a partner at McKinsey & Company based in Washington, D.C. He is the global leader of McKinsey’s client service on talent.

Raffaele Breschi is an associate partner at McKinsey & Company based in Dubai, where he leads work in organization and performance improvement.

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