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This year as well, the trend toward agile-based continuous performance management — and the effort companies are pouring into it — continued. Because it is grounded in irreversible shifts in the business environment — rising uncertainty,
shorter product and service cycles, and the arrival of new generations — this direction is likely to continue going forward.
The practices that align well with the philosophy of continuous performance management — real-time feedback, 360-degree diagnostics, and absolute evaluation — have already been adopted by many companies, or are currently being refined.
Despite all this effort, 81% of HR leaders still have doubts about whether performance management change is actually delivering the effects they expect.
Let's look at the changes that have been unfolding lately and explore what would bring us closer to the essence of performance management.
According to Google Trends, searches for the keyword "OKR" have risen roughly 11-fold over the past decade. Interest in OKRs as a management tool for competing in an agile environment looks likely to continue. Over the past several years, companies have responded to OKRs in roughly two ways.
Either they hold a vague belief that simply adopting OKRs will lift their performance, or they feel a groundless anxiety that OKRs cannot possibly work when MBO isn't even working for them.
Most of this stems from misunderstanding MBO and OKRs as entirely different systems. In reality, their essence is the same: both are management systems based on objectives. As research on OKRs has deepened over time — particularly around the distinctive differences from MBO (the focus on how and through what path to achieve them, the bottom-up approach, and so on) — and as the systems and tools needed to run OKRs smoothly have matured, more companies are now successfully putting OKRs in place.
When it comes to how companies adopt OKRs, IT and startups tend to embrace the system as-is, drawing on their flexibility. Beyond those sectors, it is common to see partial modifications to fit the company's character. Company H runs MBO for sales roles — where goals and outcomes are relatively fixed and clear — while using OKRs for other functions. Company A uses OKRs as a baseline but puts even more emphasis on a bottom-up approach, replacing the individual-level Objective concept with Tasks.
Group S lets its subsidiaries freely choose between MBO and OKRs depending on the nature of their business.
This year, the performance management session at SHRM (Society for Human Resource Management) was themed "Rethinking the Annual Review."
The core message: what actually gets employees engaged and producing results is continuous feedback.
Continuous performance management — where mutual communication and feedback are the core — occupies a distinctive niche even in the explosively growing HR Tech space.
Adjusting a goal inside the system, requesting a check-in with the manager, sending real-time feedback to a colleague on a shared project — these acts themselves immediately embody the ideological goal of continuous performance management. This field is one where policy and technology evolve and blend together,
and where running the policy at all is effectively impossible without the technology. For companies adopting continuous performance management, or struggling to run it well,
building a solution that faithfully implements its core philosophy may well be the best option HR teams can pursue.
Recently emerging AI technologies like generative AI (GenAI) have opened up a new level of possibility in HR. IBM's AI goes as far as recommending promotion decisions as part of the evaluation process — synthesizing data like past ratings, skills held, training completed, and tenure, then having the manager cross-check the recommendation. That said, given the current stage of technology, AI's role in performance management is likely to remain focused more on "assisting" human first-pass judgment than on "replacing" it at a comparable level.
· Summarizing performance data scattered across formal and informal sources, and generating complete feedback drafts
· Analyzing communication and collaboration patterns
· Assisting with the creation of performance goals based on preset criteria
· Suggesting tailored learning based on performance reviews and career preferences
Using technology is not just a matter of convenience. By drawing on data collected in real time throughout the year, we can avoid errors like recency bias — and the time leaders save can be redirected into face-to-face meetings or coaching with their people.
The focus of performance management reflects the reality of company performance. According to the Korea Development Institute (KDI), this year's economic growth is expected to land at a modest 1.4%.
Business outlooks for key industries — including semiconductors — are also being revised downward one after another. As companies face choices about where to focus and where to cut back, attention is increasingly turning to top talent and low performers.
A recent Statistics Korea survey found that spending on children's private education rose even as household income fell — and in a similar spirit, top talent is the biggest insurance policy a company has for weathering a crisis. Microsoft's evaluation system, centered on the concept of "Impact" on the company, ultimately amounts to saying it will give greater recognition to the small number of people who carry competitive value. In most companies, who the top talent is constitutes an open secret, which means top-talent management ultimately comes down to how those people are treated.
Because the initiative around whether to stay or leave typically lies with top talent, treatment tends to focus on providing clearly differentiated benefits.
Company N extends long-term incentive pay — usually reserved for executives — to top talent as well. IBM pays a direct premium simply for holding hot skills. McKinsey proposes intentionally limiting the number of projects and the range of collaborative relationships top talent takes on, so they don't carry excessive workloads or feel penalized in reverse.
Lately, companies are paying closer attention to the negative influence low performers have on the whole organization, and are building formal management structures or responding more actively to actual separations. The "justifiable cause" for termination, as accumulated through case law, comes down in simplified form to (1) a fair performance evaluation and (2) the implementation of performance improvement actions with no sign of improvement. Ironically, policy improvements like absolute evaluation and 360-degree diagnostics — adopted alongside continuous performance management — are in many cases satisfying the fairness requirement for evaluation. That is exactly why recent attention is focused on building Performance Improvement Program (PIP) systems.
In a recent dispute at semiconductor Company S, the court recognized the legitimacy of a PIP when the program was not structured with termination as its direct purpose, was designed as a methodology for raising performance levels, and applied fair criteria for selecting and exempting participants.
Within the broader flow of continuous performance management, individual HR policies and workforce operations need to be refined to stay faithful to the ideological direction and the essence of the approach.
People often mistake performance management for "evaluation." They treat the goal of performance management as precisely distinguishing the subtle differences in performance that feed into a rating. The result is usually a mechanical link between performance and rating that looks sophisticated but, in practice, is unnecessarily complex. The essence of performance management is creating better performance, and we should not forget that. Evaluation uses the results of performance management as one input, but evaluation itself is a domain of holistic judgment — which means it needs to be simple, while still leaving room for discretion.
According to McKinsey, the number-one priority for companies currently revising their systems is simplified ratings, followed by simplifying the formal performance review process. At many Korean companies, the first-level evaluator now only assigns a three-tier rating — an approach that reduces evaluator burden while also keeping employee dissatisfaction lower, and it is gradually spreading.
In HR operations, the tighter the link to rewards, the more distortion tends to show up. Unfair evaluations and unreasonable promotions usually start from a practice of deciding the reward first and then slotting the justifying conditions into place after the fact. Continuous performance management, with its ongoing and well-managed process, carries within it the power to head off unexpected results in advance — but even so, the temptation to exercise discretion with rewards in mind is still hard to shake.
In practice, what most effectively gets people to set ambitious goals and be willing to fail boldly in a continuous performance management process may not be a distant-sounding appeal to ideology and values, but a simple promise: "This won't directly affect your rewards." It cannot be denied that performance and evaluation are key indicators for proving an employee's objective value in compensation terms, but diversifying the factors and mechanisms that drive compensation can help people stay focused on the essence of performance management without being distracted by other concerns.
Approaches worth considering include making market value and job value jointly central to rewards, or having a separate committee decide compensation grades.
Defining a company's ultimate performance is the job of its leadership, but carrying out the day-to-day activities of performance management falls to individual employees.
To involve employees as active subjects in creating performance, performance management itself has to be centered on a bottom-up approach.
In a work environment where hybrid work is now the norm, the room for traditional top-down performance management — which leans on the supervisor — has been significantly narrowed.
HR must build structures that support each individual employee as they create performance, playing the role of enabler. Through periodic training on performance management, leadership development for middle managers, and the accumulation and analysis of performance data, HR can raise the overall credibility of performance management and create a positive environment in which employees can stably focus on producing results.