The observation
Larry Greiner’s research on organisational growth, published in Harvard Business Review and reissued as an HBR Classic, describes an organisation’s evolution as a series of phases, each resolved by a specific set of practices that become, in the next phase, the constraint that has to be overcome. Greiner’s own framing of this is memorable: managers “experience the irony of seeing a major solution in one period become a major problem in a later period.” A performance management system — the criteria used to assess people, the cadence of review, the definitions of what good performance looks like in a given role — is exactly this kind of solution. It is designed to fit an organisation as it exists at a specific moment, and it does not automatically update itself as the organisation moves through subsequent phases.
The practical consequence is that performance management systems tend to age in a specific and predictable way: they remain formally unchanged, because changing a performance system is administratively significant and rarely urgent enough to prioritise ahead of more immediate demands, while the organisation around them keeps evolving. The system does not become wrong all at once. It becomes progressively less well matched to the organisation it is actually assessing, quietly, year by year, until the mismatch has grown large enough to produce visible symptoms — at which point it is usually diagnosed as a performance problem in the people being assessed, rather than what it more often is: a measurement problem in the system doing the assessing.
Why it happens
Two mechanisms drive this pattern, and they reinforce each other. The first is Greiner’s core finding: organisational structure and practice have to evolve through recognisable phases as an organisation grows, and each phase’s appropriate practices differ meaningfully from the last. A performance system built for a smaller, less formalised organisation — one where roles were fluid, responsibilities overlapped by necessity, and informal judgement substituted for defined criteria — is simply answering a different question than the one a larger, more structured organisation needs answered. Neither version of the system is wrong for the organisation it was built for. The mismatch appears only because the organisation moved and the system, absent a deliberate decision to move it too, stayed where it was designed.
The second mechanism is closer to organisational inertia than to any specific growth dynamic. Formal systems — performance management chief among them — carry real switching costs: redesigning criteria, retraining managers, communicating a change to an entire workforce, and living through the inevitable disruption of a transition period. These costs are visible and immediate. The cost of leaving an aging system in place is, by contrast, diffuse and gradual — a slightly worse fit here, a slightly less relevant criterion there, none of it individually significant enough to justify the disruption of a redesign. This asymmetry means an aging system tends to persist well past the point where it stopped being the best available fit, simply because no single moment ever makes the case for changing it more compellingly than the case for leaving well enough alone.
What it looks like in practice
Consider an organisation whose performance management system was designed several years ago, when the organisation was smaller and its roles were somewhat less specialised than they have since become. The system’s criteria for what constitutes strong performance in a given role were reasonable and well-matched at the time they were written. Since then, the organisation has added new specialisations, redefined several roles to be narrower and more focused than their earlier, more generalist equivalents, and introduced a layer of management that did not previously exist. The performance system, formally, has not changed.
Managers using the system increasingly find themselves interpreting or adapting its criteria informally to fit roles the criteria were never actually written to describe — a reasonable, well-intentioned workaround that nonetheless means the organisation no longer has a single, consistent standard being applied, even though the formal document suggests that it does. Employees, meanwhile, are assessed against criteria that describe, with decreasing accuracy, a version of their role that existed several reorganisations ago. None of this is usually visible from the system itself, because the system’s own documentation has not changed and therefore does not flag its own growing distance from the organisation it describes.
This pattern is easy to miss specifically because performance management systems are rarely reviewed on a schedule tied to organisational change — they are typically reviewed on a schedule tied to administrative convenience, such as an annual cycle, regardless of how much the organisation itself has actually moved in that period. An organisation that grew or restructured significantly in a given year and one that changed very little both proceed, by default, to the same annual review of their performance system, which means the system’s currency is essentially decoupled from the thing that should actually determine it.
The mismatch is often first noticed, if it is noticed at all, by people relatively new to the organisation rather than by those who have been there throughout the gradual drift. Someone who joined recently, and who is assessed against criteria written for an earlier version of a role they never actually held, has no accumulated familiarity with the system’s history to explain away the mismatch — where a longer-tenured employee or manager may have simply absorbed the informal adaptations over time without registering how far the formal system has drifted from what it describes.
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Questions worth considering
- When was this organisation’s performance management system last reviewed specifically against how much the organisation’s roles and structure have changed, as opposed to on a fixed administrative schedule?
- Are managers currently applying the formal system as written, or informally adapting it to fit roles it was not originally designed to describe?
- If a new performance system were being designed today, from scratch, for the organisation as it currently exists, how different would it look from the one currently in use?
This perspective is part of Performance.
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