Performance Management

Performance management at the team level - from Reinventing Organizations by Frederic Laloux.

How does performance management work in a self-managed context? In Orange Organizations, it’s the role of bosses to keep the pressure on employees and to prevent them from slacking off. Top management sets ambitious targets in the company’s yearly budgets and mid-term plans, and these targets then cascade down the organization. It’s part of a leader’s role to always challenge subordinates to do more, to do it faster, to do it cheaper.

In self-managing organizations that have no managers to keep up the pressure, what prevents teams from getting complacent? The short answer: intrinsic motivation, calibrated by peer emulation and market demands.

The better question, though, might be: what makes us think that people need to be put under pressure to perform? Research shows that when people pursue a meaningful purpose, and when they have the decision-making power and the resources to work toward that purpose, they don’t need pep talks or stretch targets.17 Unfortunately, in many traditional organizations, people work under the opposite circumstances; they don’t see much purpose in their work, and they feel restricted in their potential for self-expression by rules and bosses. No wonder they lose interest and must be pressured to give 100 percent. Imagine working as a nurse in a traditional Dutch neighborhood nursing organization: every morning, you receive a plan with 30 appointments with patients you don’t know, put together by a planner you don’t know. You are given exact time slots (10 minutes for an injection with the first patient, five minutes to change the compression stockings for the second patient, and so on). Patients are unhappy with you because you hurry them, and meanwhile you know that if you were to take more time, you’d have to explain yourself,   because the time registration system keeps track of everything you do. The work is so mindless that you would be forgiven for wanting to slack off.


are part of a team that is known and respected in the neighborhood. You have made your own plan for the day. You will see 10 patients with whom you’ve developed a relationship. You know their life stories and medical histories. You might have met their children and neighbors and helped arrange a network to encourage your patients to regain more autonomy. You cheer when you see them making progress, and you stand by their side when they reach the end of their days.

People working in these conditions, Buurtzorg has found, don’t need a boss to motivate them. More often than not, it’s the other way around―nurses are so deeply engaged in their work that they must remind each other to set boundaries and not to let work overrun their private lives. More generally, experience shows that self- governing teams in pursuit of a meaningful purpose don’t need prodding from above. If people stop working with enthusiasm and productivity drops, it is generally the symptom of a problem that needs addressing―for example, relational problems in the team or roles that need to be reallocated. Resolve the problem and spirits are restored.

People don’t need pressure from above, but they still need to get a sense of whether they are doing well. Teal Organizations measure indicators like team results, productivity, and profit, just like other organizations―except that they mostly tend to do so at the level of teams or process steps, and they don’t bother to measure individual performance (contrary to Orange Organizations that believe in individual incentives and therefore need individual metrics). The data is made public for all to see, creating emulation, a healthy form of peer pressure. When teams perform similar tasks―like the nursing teams at Buurtzorg or the automotive teams at FAVI―results are easy to com- pare. In a glance, a team in Buurtzorg can know if it is at the bottom or the top of the league in terms of, say, productivity. Teams at the bottom are motivated to improve out of pride; they don’t need a boss to discuss how they could improve.

In traditional organizations, many people would consider such total transparency about results to be brutal. All depends on how information is handled. In Orange Organizations, bad results prompt fears (and good results provoke envy or suspicion). Who gets to see what data is a very touchy subject. In Teal Organizations, people know that information will not be used against them. No one needs to be protected from the facts, good or bad.

What about organizations where teams don’t do comparable work? At Morning Star, teams engaged in “tomato sorting,” “steam generation,” or “packaging” don’t share metrics that would help them compare themselves. To help teams nonetheless get feedback on their performance, the company has come up with an interesting practice: every year in January, teams present a self-evaluation to a group of colleagues, which comprises Chris Rufer (the founder and president) and anyone else who cares to join. They are expected to talk candidly about what went well and what didn’t, how effectively they used company resources, and what they plan to do in the next year. It’s not a superficial effort; each presentation lasts for a few hours, and teams can expect challenging, sometimes grilling questions from their colleagues. In the course of a month, all teams make presentations; teams that haven’t performed well have received much input from their peers and know they have homework to do.18 Morning Star’s budget and invest- ment cycle also offers another opportunity for peer review. Every year, each team presents its investment plans to a panel of peers for advice. Teams that are not performing well are likely to be challenged as to whether spending money is really the best way to fix their problems.

Individual performance management

In Teal Organizations, performance and outcomes are discussed foremost at the team level: Are we collectively doing a good job contributing to the organization’s purpose? Most people nevertheless still look for feedback about their individual performance. Psychologists have come across an interesting phenomenon: a person put in a sensory-deprivation room (a so-called anechoic chamber, a room designed to dampen all sound and block out light) after only a short amount of time reports experiencing visual hallucinations, paranoia, and a depressed mood.19

Put simply, without outside stimulus, we go mad. I believe something very similar happens when we are deprived of feedback related to our work. Our egos may be wary of feedback, but we are relational beings that thrive on honest feedback. I’ve seen organizations where no feed- back is ever exchanged “go mad” because of it. People judge others behind their backs, only to wonder nervously what others might be saying when they have their backs turned. In places like these, every word, every silence, every raised eyebrow, is scrutinized for unspoken judgments.

Teal Organizations are high on trust and low on fears. Feedback in such environments feels less threatening, and most organizations in this research are places where colleagues exchange feedback frequently. In some of them, new recruits are trained in Marshall Rosenberg’s Nonviolent Communication and in effective ways to give feedback. Of course, the advice process is a formidable feedback mechanism built right into the fabric of daily life in these organizations.

Because feedback is exchanged so freely, some organiza- tions―FAVI, for instance―don’t hold any formal appraisal discussions. But colleagues in most organizations in this research still see value in taking the time, once a year, to reflect on their performance at work. Of based systems:

•      At Morning Star, people receive feedback at the end of every year from each of the persons they have committed to in their CLOU.

•       At AES, Dennis Bakke installed a beautiful practice of team appraisal with his closest peers. They got together once a year, often over dinner in one of their homes to make for a relaxed, informal setting. Every person in turn shared his or her self- evaluation. Other team members commented, questioned, or encouraged each other to reach a deeper understanding of their potential and performance.

•       At Buurtzorg, the rules of the game (see page 70) simply stipulate that every year, each team is to hold individual appraisals within the team, based on a competency model that the team has designed. Each team decides what format it will use for their discussions. A team I spent time with decided to exchange feedback in subgroups of three colleagues. Everyone prepares a self-evaluation as well as feedback for the other two colleagues in the trio, so people can measure their self-perception against their colleague’s perceptions.

Traditional performance evaluations can be dispiriting affairs. Often we don’t recognize ourselves in the feedback because our boss only has a narrow view of our work (or sometimes because he tells us everything is all right, just to get the uncomfortable moment over with). With more input from more peers, we get a more meaningful reflection of our contribution. There is another reason why so many appraisal conversations feel lifeless: they tend to be very narrow discussions, sticking to some preformatted evaluation grid, neglecting to inquire into broader questions of the person’s selfhood―their hopes, dreams, fears, yearnings, and sense of purpose in life. We will discuss in chapter 2.5 how a few simple questions can turn appraisal conversations into moments of joyful and soulful introspection (see page 183).


“What happens when someone does a lousy job, when someone needs to be fired?” is a question people often ask when they hear about self-management. If there is no boss, can low performers just hang on forever? What if someone is a pain and makes the workplace hell for others? Will he just be allowed to stay on? Self-managing organizations of course face such situations occasionally and have put processes in place to deal with them, processes that don’t rely on a hierarchy but on peer-based mechanisms.

Before we go into these processes, though, let’s start by saying that in practice, these cases prove to be surprisingly rare. In traditional workplaces where a job is a box in an organization chart, there is little flexibility: you are either a good fit for the job or you are not (in reality of course, you are probably a bit of both), and so you should either be allowed to stay in the job or asked to move on. In self-managing organizations, people can more easily customize a job for themselves at which they excel. A person with “performance issues” might shed one or several roles in which she fails to deliver and take up other roles that better match her skills, interests, and talents.

But some people just don’t fit in, or they perform below what their colleagues expect of them. In a traditional organization, a boss or the HR department can decide to give them a bad review and to dismiss them for low performance, rather like a teacher has power to decide a child’s future in the school. And so it’s perhaps not surprising that people being dis- missed react like children being told they failed to make it to the next grade―they feel like a failure, treated unfairly; they blame circumstances and nurture resentment. In this research, I encountered an interesting phenomenon: in self-managing organizations, it seems that almost universally, people choose to leave before they are dismissed. Only in the rarest cases is the company saying, “That’s enough.” How come? The dynamics of self-management give people natural clues that they might not be in the right place. At Sun Hydraulics, an engineer might notice that somehow little work comes his way―few colleagues spontaneously ask him to join their projects or solicit him for advice. At Buurtzorg, a nurse will feel in her interactions with colleagues that she doesn’t fit the team, or that self- management doesn’t suit her after all. There are currently 250 nurses joining Buurtzorg every month and 25 that leave each month, once they have been there for a while and realize it wasn’t meant to be. Almost always, the departure happens by mutual consent, on a friendly basis.

This does not change the fact that on a personal level, the process can be painful. The self-managing   context nevertheless helps people realize that no one is to blame; they are perhaps simply not meant for this particular work. How we react to an event such as a dismissal depends on our perspective on life. Remember: in a Conformist-Amber worldview, lifelong employment is the norm. A dismissal is therefore a deeply distressing event, a forced expulsion from an identity-giving community. In Achievement-Orange,   it is often experienced as a traumatic blow to the sense of self-worth, and in Pluralistic-Green as a betrayal by the group. In Teal, we can hold the event more consciously: a door closes, perhaps painfully at first, in order for another door to open down the line that might bring us closer to our path in life. We can see it as an invitation to reflect on the real nature of our strengths and talents and discover what other work might better suit us. We learn, grow, and move on.

What about forced dismissals? Though rare, they do happen―for instance, when someone breaches the company values. In the absence of dominator hierarchy, the process is peer-based. At Buurtzorg, when one person has lost the trust of the team, the team tries to find a mutually agreeable solution. If that doesn’t work out, the group calls in its regional coach or an external facilitator


In retrospect, I can see in my own life how the job I lost helped me find work I needed to do … how losses that felt irredeemable forced me to discern meanings I needed to know.

Parker Palmer

to mediate. In almost all cases, the presence of a mediator brings resolution. In some cases, the person and the team decide on some mutual commitments and give it another go. In others, after some deliberation, the person comes to see that trust is irrevocably broken and understands it is time to leave. If no agreement can be found, as a last chance to try to settle the matter, the team members can ask Jos de Blok, the founder, to mediate; in the rare cases where even that fails, they can ask him to put an end to the person’s contract (legally, he is the only one who can do so).

At Morning Star, the process is almost identical, except that it is initiated by an individual rather than a team (at Morning Star, people aren’t embedded as deeply in teams). Morning Star views a dismissal as the final step in a conflict and therefore uses its conflict resolution mechanism to deal with the situation. The process starts when one person asks another to leave the organization. Suppose that someone finds that a colleague has fundamentally breached a company value (perhaps the person made an important decision without requesting advice from colleagues) or that a colleague is failing time after time to live up to his commitments, despite a number of previous attempts to improve the situation. She can initiate a conflict resolution process, asking her colleague to resign. The four-stage process kicks in:

•      In a first phase, they have to sit together and try to sort it out. In the discussion, the person asked to leave can suggest ways to restore trust. Or perhaps he will come to see that he has irrevocably lost the trust of his colleagues and that he is better off looking for work elsewhere.

•       If they can’t agree on an outcome, another colleague is called in as mediator.

•       If necessary, in a third step, a panel of colleagues is asked to mediate.

•      As a last resort, Chris Rufer, the founder and president, is asked to join the panel.

People asked to mediate or sit on a panel take their role very seriously. Morning Star’s principle of not using force against anyone is at stake. They are not a jury, passing a verdict on a colleague. Their role is to explore every possible way to restore trust in the relationship. The process can take a long time if needed. Only when the person who has been asked to leave sees that colleagues genuinely tried to find a solu- tion, and that none could be found, will he come to accept that resigna- tion is the reasonable outcome. Therein lies the power and legitimacy of the process.

How often do people leave Morning Star after such a process? No one knows. Because Morning Star views this as a private conflict between two persons, everyone is under the understanding of full confidentiality (as is always the case with the conflict resolution mechanism), and no one keeps statistics. But the process clearly does get used in practice: some of the more senior colleagues I’ve spoken to told me that they have been part of a handful of panels over the years. Having been part of such panels, they are keen advocates of the method. The discussions in the panel are never easy, they report, but they do help people reach fair and reasonable outcomes.

Despite the American myth, I cannot be or do whatever I desire. … Our created natures make us like organisms in an ecosystem: there are some roles and relationships in which we thrive and others in which we wither and die.

Parker Palmer

See the whole article here in PDF Excerpt from Reinventing Organizations, Accountability