" The purpose of coaching is to close the gap between potential and performance." - Keith Webb.

As part of my Masters in Business Psychology, I’ve been exploring performance management. On the surface, it sounds simple, set goals, measure progress, reward results. But the deeper I’ve gone, the more I’ve realised that traditional performance management systems are not only outdated, they’re often harmful to both employees and organisations.

And I’ve seen this first-hand.

In my 10 years as a workplace wellness consultant, I witnessed how constant pressure, lack of timely feedback, and rigid systems led to stress, burnout, and disengagement. Annual appraisals and ranking systems don’t motivate people they create anxiety, competition, and a culture of fear.

Why Traditional Performance Management Falls Short

Formal systems offer structure and accountability, and yes, they can help with compliance. But in practice, they’re slow, rigid, and disconnected from the reality of modern workplaces.

Employees don’t want to wait 12 months to know how they’re doing. They don’t want to be compared to their colleagues on a bell curve. And they certainly don’t want to feel like their value is reduced to a score.

These systems neglect one of the most critical aspects of today’s workplaces: psychosocial safety.

The Role of Psychosocial Safety

Psychosocial safety means people feel safe to speak up, take risks, and admit mistakes without fear of punishment or humiliation. It’s not a “nice-to-have” in Australia, it’s now a legal requirement under Work Health and Safety legislation to address psychosocial risks at work.

When performance management relies on rigid ratings and once-a-year feedback, it often does the opposite of creating safety. It fuels stress, triggers defensive behaviour, and discourages innovation. Over time, this erodes wellbeing and drives disengagement costing organisations talent, productivity, and growth.

Why Coaching Works Better

This is where coaching changes everything. Coaching-based performance support is about conversation, connection, and growth. Instead of “managing” performance, leaders partner with employees to help them succeed.

Here’s why it works:

• Timely: Feedback happens in the moment, when it matters most.

• Supportive: Leaders check in not only on work but also on wellbeing.

• Safe: Coaching creates trust, making it easier for employees to share challenges.

• Development-focused: Instead of dwelling on the past, the focus is on future growth.

From my own consulting work, I’ve seen workplaces transform when they shift from rigid reviews to continuous coaching. Staff report feeling more engaged, more supported, and less stressed. And leaders often tell me that these conversations build stronger relationships and healthier team cultures.

How Organisations Can Shift

If you’re still relying on formal annual reviews, here are some practical ways to start moving toward a coaching approach:

• Replace annual reviews with regular coaching check-ins.

• Train leaders in coaching and feedback skills, so they feel confident having meaningful conversations.

• Embed wellbeing into performance conversations, talk about workload, stress levels, and recovery, not just KPIs.

• Set flexible goals that can adapt as circumstances change.

• Leverage technology to capture real-time feedback, especially for hybrid and remote teams.

Performance management should never be about ticking boxes, it should be about helping people thrive.

The truth is, people do their best work when they feel safe, supported, and valued. A coaching-based approach to performance management builds psychological and psychosocial safety, encourages innovation, and strengthens resilience.

And for organisations, the benefits are clear: engaged employees, stronger retention, and sustainable success.

The future of performance management isn’t about ratings or rankings, it’s about relationships.