Mar 14, 2017 | Holly Burkett, Ph.D., SPHR, HRCI Guest Blogger
The Evolution of Performance Management
There’s a growing wave of discontent with traditional performance management practices. The future of these tools to evaluate and motivate employee performance seems questionable. Still, companies spend 80,000 to 150,000 hours each year capturing objectives, cascading goals down through middle managers to individuals and facilitating annual reviews. Yet, a 2015 Deloitte survey with HR leaders found that 58 percent describe their performance management process as an ineffective use of time.
The consequences of ineffective performance management processes are significant. Besides wasting time and resources, decisions about talent development priorities suffer if performance information is unavailable or difficult to access. Inconsistent evaluation criteria and reward structures result in lower productivity, reduced engagement and higher attrition. Morale suffers when there is no differentiation in performance ratings, development opportunities or compensation between high and low performers. Finally, legal issues can occur without proper documentation related to performance.
On the other hand, when effectively aligned and implemented, performance management offers a range of benefits for employees, managers, senior leaders and companies. For example, organizations with effective performance management processes are more likely to report strong employee and business results.
Effective performance management processes also allow managers and leaders to optimize individual and team productivity by:
- Aligning employees’ day-to-day job tasks with strategic business objectives.
- Providing accountability around performance expectations.
- Tracking individual performance to support compensation and career planning decisions.
To increase effectiveness, companies ― from global giants to small startups ― are slowly moving away from traditional performance management. They are giving processes a complete makeover.
Consider these examples:
- GE replaced its annual formal review process with a personalized and timely approach aimed to reflect the speed, flexibility and collaborative spirit that drives the GE culture forward. The new approach emphasizes frequent conversations, coaching and continuous development. Leveraging advances in mobile technology, GE enabled the process with a simple app to log priorities, capture conversation notes and share feedback.
- ConAgra is testing a new ratings-free performance review process, which replaces a rated review with a series of conversations designed to engage managers with the projects employees are working on and how they are achieving their goals. In this way, managers become more like coaches than judges.
- NY Life Insurance Company created Real Talk learning programs as a way for managers and employees to engage meaningfully on performance management. Since program implementation in 2012, managers and employees have begun to set fewer but more strategic goals. Additionally, performance management favorability has increased 11 percent on employee satisfaction surveys.
The Use of Peer Feedback
Many organizations have found value in peer-based performance management. For example, Ceridian, a Minneapolis-based human resources software provider, developed Conversations, a system that allows feedback to be solicited and gathered in real time, as opposed to traditional 360-degree feedback models that operate off set times for collecting feedback. Because traditional feedback approaches can be colored by experiences that occur between project completion and project review, in-the-moment peer reviews can collect performance feedback that is closer to what actually occurred.
Despite its potential for improving current performance review models, there are key challenges to keep in mind when using peer feedback. These include:
- Determining the rating criteria employees should use when evaluating a peer’s performance. Many experts recommend eliminating a rating scale altogether so that employees can focus on comments about behavior instead of numerical values.
- Ensuring that employees are trained to provide credible performance feedback. However, some thought leaders such as Marcus Buckingham contend that managers or peers are not credible or reliable raters of other people’s performance, even with training and time.
- Identifying how to roll out the new peer review approach to the entire organization. For example, GE rolled out its new performance management process using an iterative framework. The Hershey Company launched its SMILES peer-review program with an online campaign kick-off, accompanied by posters, badges and luggage tags, and launch-day events featuring cupcakes, photo booths, tutorials and more. This led to 40 percent of all employees participating in the program within the first 90 days.
Performance Management Must Transform
Performance management practices must evolve to keep up with rising demands for more agile goal-setting, continuous feedback and development, and timely recognition of achievements. While there are many exciting innovations happening in the world of performance management, it’s important to remember that what works for one organization may not work for another. As with any change in organizational structure, changes to a performance management process need to fit with organizational culture and senior leaders’ strategic goals.
By helping to improve ― and continuously refresh ― performance management processes, HR professionals can drive the kind of collaborative, frequent communication that engages employees and boosts performance. Finally, by focusing more on aligning the entire performance management process to organizational strategy rather than relying too narrowly on the performance appraisal itself, HR leaders can also enhance their role as a strategic business advisors.
Holly Burkett, Ph.D., SPHR, is an accomplished talent builder, strategic change agent, HRD consultant, speaker, coach, trainer, and award-winning author of Learning for the Long Run. Her Twitter handle is @evalworks. Portions of this article are excerpted from her book.