Drinking Our Own Champagne: Performance Management in a Skills-Based Organization

As performance management software continues to evolve, organizations are seeking more effective approaches to develop and retain top talent. Companies with complex workforce needs are discovering that traditional annual review processes no longer meet the demands of a rapidly evolving business landscape.

Leading organizations are now building skills-based performance management approaches that emphasize continuous development and adaptive career pathing.

Industry experts Meredith Wellard, CEO & Founder of theSpark, Ifat Yaakobi, Product Experience Manager at Phenom, and Ljuba Bogdanovich, Senior Director of Global Talent Acquisition, shared how this transformation is reshaping the employee experience, reducing bias in evaluations, and creating more agile teams — all by implementing a strategic, forward-thinking approach to performance management.

Watch the entire session here, or read on for the highlights and video clips!

The Performance Review Landscape: Challenges and Opportunities

While many areas of HR have undergone substantial transformation in recent years, performance management practices have evolved at their own pace. As Wellard pointed out, "Performance management is one of those topics that has not evolved as quickly as some of the other areas of HR and human development across organizations."

Many companies still rely on annual review cycles that create a disconnect between evaluation and development. These systems often:

Focus on past performance rather than future potential
Rely heavily on manager perceptions, which can introduce bias
Use rigid "high box, low box" evaluation models
Lack meaningful connection to skill development
Happen too infrequently to drive real-time growth

The impact of traditional performance management approaches that look backward rather than forward can be significant (and not in a good way). This also highlights the need for a fundamental rethinking of how organizations evaluate and develop talent.

The Shift to Skills-Based Performance Management

Forward-thinking organizations are now moving toward skills-based performance management that emphasizes continuous development rather than periodic judgment. This approach represents a fundamental shift in how companies view and retain their talent.

"When we talk about skills-based environments and performance management shifts from traditional job descriptions to a much more dynamic type of process, something that is based on their competencies, potential, and contributions. This model emphasizes skills proficiencies, continuous learning, and adaptability. And it's modeled on things like continuous feedback and coaching, personalized development plans, and flexible career paths” explained Bogdanovich. This new model emphasizes:

Skills proficiencies rather than job descriptions
Continuous learning and adaptability
Regular feedback and coaching
Personalized development plans
Flexible career paths

A skills-based approach also changes how organizations view performance challenges. Rather than viewing employees as underperformers, companies can focus on finding better skill-role alignment.

"When we look at an employee from a skills perspective, it opens opportunities for different ways that a person can go instead of saying this person is a low performer or top performer," noted Yaakobi. This perspective is particularly valuable in today's talent market, where skilled workers are in high demand. Instead of letting go of talent that isn't thriving in a current role, organizations can reassess these individuals to positions where their skills create more value.

Data-Driven Performance Conversations: Beyond Annual Reviews

One of the most significant shifts in performance management is the move from annual review cycles to more frequent feedback loops. "There's been a push over several years to have less of this annual event-based performance model and rather move to regular discussions, to review and reset goals and readjust as the year goes on," shared Wellard.

This continuous approach allows organizations to:

Address issues in real time rather than waiting for annual reviews
Adjust goals and priorities as business needs change
Provide coaching when it's most relevant and actionable
Create a culture of ongoing development rather than periodic evaluation

Technology is enabling this shift by making performance management more data driven. "We're seeing that performance management is sometimes becoming more data-driven. So a lot of companies are collecting information about what's going on with their employees and are using this to drive performance discussions that are not yearly, but maybe monthly," explained Yaakobi.

Expanding the sources of feedback is another crucial evolution. Traditional performance reviews rely heavily on a single manager's perspective, which can introduce significant bias.

A more comprehensive approach incorporates multiple perspectives. "A 360 approach to collect information from people around me helps to solve a lot of the bias that some managers have as they assess employees," noted Yaakobi. "When we look at an employee holistically through the eyes of the manager and their peers, we get an understanding that is much better."

How AI Enhances Performance Management

Artificial intelligence is bringing new capabilities to performance management that complement traditional approaches. Here's how AI tools are enhancing the process:

Supporting Manager Preparation: AI tools can assist managers in preparing for performance conversations by organizing relevant information about employees. This includes compiling skill profiles, past achievements, and potential discussion topics. As Wellard noted, AI can "bring to the table for the leader a summary of who that person is, what their profile is, and maybe some suggestions for questions and feedback topics."
Processing Performance Feedback Data: Reviews generate substantial information that can be difficult to process manually. AI systems can analyze this information efficiently, identifying patterns and areas for development. Yaakobi explained that AI can "analyze this unstructured information and say, this employee needs to improve in these areas," translating feedback into actionable insights.
Creating Personalized Development Plans: Each employee has unique strengths, growth areas, and career aspirations. AI can process this information to generate tailored development recommendations that align individual goals with organizational needs. "AI can automate this process and make it much more valuable and personalize what we give to the employee," noted Yaakobi, enhancing the development experience for both employees and managers.
Uncovering Work Patterns: AI can analyze workplace communications and activities to provide a more complete picture of performance. As Wellard highlighted, “one of the agentic tasks that could take place is supporting managers in just preparing for a performance evaluation, in a co-pilot-type model”. This includes assessing collaboration patterns, communication effectiveness, and task completion metrics that might otherwise go unnoticed.
Recognizing Hidden Contributors: Organizations often overlook employees who make valuable contributions behind the scenes. AI tools can identify these individuals by analyzing project outcomes and collaboration networks, ensuring recognition extends beyond the most visible team members.

Implementation Insights: Building a Skills-Based Framework

Organizations looking to transition to a skills-based performance management system should consider these key strategies:

1. Increase Frequency with Lighter Touch

Rather than conducting comprehensive annual reviews, implement more frequent check-ins with a narrower focus. This approach makes performance conversations more manageable and timely. Short, targeted discussions focused on specific areas create less administrative burden while providing more relevant feedback.

2. Look Forward, Not Back

Shift the focus from evaluating past performance to developing future capabilities. As Wellard advised, "It is about saying what skills we need over the next 12 months and having the discussion with a forward perspective rather than a backwards perspective." This future-oriented approach aligns performance conversations with organizational goals and skill development.

3. Continuously Update Required Skills

In today's rapidly changing environment, skill requirements evolve quickly. Organizations should regularly reassess which skills will be valuable soon, particularly in fields experiencing rapid technological change. This process should be data driven, considering both internal needs and market trends.

4. Make Development Part of the Job

Learning should be integrated into daily work rather than treated as an extra activity. "Development is no longer that extra thing we do. It is part of work now for everyone," emphasized Wellard. Companies that view skill development as central to their business strategy rather than an optional benefit create stronger learning cultures.

5. Set Smart Goals That Can Evolve

Goals remain important, but must be adaptable. "Smart goals are critical to reviews," noted Yaakobi, "but they need to be regularly adjusted as business priorities shift." Creating mechanisms to revisit and refine goals throughout the year ensures they remain relevant despite changing conditions.

Looking Forward: Future of Performance Management

The transformation of performance management is still in its early stages for many organizations. Resistance to change is common, particularly when performance systems are tied to compensation or when labor regulations create compliance concerns.

But the benefits of a more dynamic, skills-based approach are becoming increasingly clear:

More engaged and satisfied employees
Better alignment between skills and organizational needs
Higher retention of valuable talent
More agile workforce development
Reduced bias in evaluation processes

In a workplace characterized by rapid change and innovation, performance management must evolve from a backward-looking evaluation tool to a forward-focused development accelerator.

"We are rapidly changing our skills at work right now. We are in a state where it's extreme innovation," mused Yaakobi, which helps put it all in perspective. Organizations that embrace this shift and leverage new technologies to support it will be better positioned to develop the talent they need to thrive, both now and in the future.

Download our Workforce Intelligence Guide today to learn:

✅ How to secure stakeholder buy-in for your skills-based initiatives
✅ Phenom recommended implementation strategies
✅ Change management best practices

Devi B

Devi is a content marketing writer who is passionate about crafting insightful content that informs and engages. When not writing, she enjoys watching films and listening to NFAK.