Reimagining Better Performance Management with AI

We're excited to launch a new series featuring insights from Anika Gakovic, our Chief People and Culture Strategist. Anika joined Phyusion to lead our MindShift offering, bringing over two decades of experience in organizational transformation, including with Memorial Sloan Kettering, JP Morgan Chase, and New York Life Insurance. Her unique expertise in combining human behavior science with change management makes her the perfect voice to explore the human side of AI adoption in the workplace.

In this first installment of her series, Anika explores how thoughtful AI integration can transform performance management from a dreaded administrative task into a valuable tool for employee growth and organizational success. Throughout this series, she'll be sharing her perspectives on various aspects of AI adoption, organizational culture, and leadership in the age of AI.

Reimagining Better Performance Management with AI

Performance management systems are intended to enhance employee productivity and growth yet ironically are associated with workplace dissatisfaction and distrust in many organizations. This stems from several issues. Poor organizational alignment leaves employees pursuing isolated goals and metrics that feel disconnected from what really matters to the company mission and strategy. Meanwhile, subjective evaluation standards turn annual performance reviews into arbitrary administrative exercises subject to biases, favoritism, and recency effects which stress people out. This is further undermined by infrequent, low-quality feedback that arrives too late to be actionable and devolves into one-way conversations rather than meaningful dialogue about improvement and learning. Finally, systems are often about documentation and control based on transactional metrics, disengaging and demotivating people rather than focusing on value creation and meaningful contributions.

The Algorithmic Opportunity to Reimagine Performance Management

"Only 13% of employees disagree an algorithm would provide fairer feedback than their manager". (2024 Gartner Employee Perspectives on the Future of Work Survey)

This statistic reveals openness to technological solutions complementing human judgment by integrating AI to enhance performance management systems. Properly designed and transparent algorithms can reduce human bias by helping orchestrate consistent standards across the organization, creating a more objective performance evaluation framework. These systems can continuously gather data across multiple performance dimensions, providing a more fact-based holistic view of employee contributions beyond the limited observations from managers and colleagues. Furthermore, algorithmic systems can deliver timely actionable insights and behavior nudges that guide employees toward improved performance and growth, rather than waiting for scheduled periodic reviews. The automation of performance tracking and initial analysis also frees managers and HR professionals to focus on high-value coaching and human engagement conversations, making more efficient use of organizational resources.

Considerations and Best Practices

Delivering the promise of AI-enhanced performance management will require thoughtful design and execution. Starting with organizational commitment, senior leaders need to consistently cascade aligned objectives and success metrics while emphasizing the importance of transparent two-way feedback. Organizations also need to establish rigorous evaluation practices, creating clear boundaries for AI data collection along with safeguards against excessive monitoring and punitive measures that can erode employee experience. A listening strategy and pulse checks can reveal employee sentiment and concerns. Human oversight remains essential in this reimagined system. Algorithms can provide insights that managers review and can override when appropriate, especially for consequential decisions such as compensation and talent mobility. It will be practical to leverage and expand existing system automations rather than adding to the technology stack, thus reducing implementation complexity and adoption fatigue.

Organizations that carefully balance AI opportunities with human judgment, ensure transparency in the systems logic, and establish appropriate privacy boundaries, will transform performance management from a dreaded task into a valuable tool for success. To get the most out of this opportunity, organizations need to invest in training their HR teams on AI possibilities and how to use the tools effectively, which will enable them to become effective advocates. Further, offering workshops across all levels of the organization will equip managers and employees alike to engage meaningfully with the new tools and processes. Setting meaningful KPIs to measure adoption success is important, as organizations need clear metrics to evaluate whether their AI-enhanced performance management system is delivering the intended outcomes and to identify areas for refinement. Finally, creating talent incentives that reward meaningful engagement will reinforce behavior change and accelerates technology adoption.

By addressing issues with traditional performance management through thoughtful AI integration, companies can create talent systems that fulfill their original promise to support employee growth while enabling organizational success in an increasingly digital world.