Winding Up Performance Management

Performance management is critical to any organization’s success, yet it’s something many fail to do well.

The core of the problem is often the dreaded performance review itself. The annual review between manager and employee has evolved into a chore that managers must get done and filed away, rather than a process that ultimately contributes to the goal of evaluating and improving performance. Whether someone is giving or receiving an annual performance appraisal, there always seems to be something throwing a wrench in the effectiveness of the practice.

Then there’s the outcry that’s grown over the value of rating and ranking employees on a curve, as many companies do. Take these parts together, and the act of trying to manage performancebecomes a self-fulfilling prophecy — a waste of time and effort at a high expense that crushes employee morale and alienates high-performing employees.

“Employee performance management in many companies is broken,” writes Josh Bersin, principal and founder of Bersin by Deloitte, a human resources research and consulting firm, in a 2014 report, “Predictions for 2014: Building a Strong Talent Pipeline for the Global Economic Recovery.”

“Despite billions of dollars spent to automate the performance appraisal process,” Bersin writes, “it often does not drive results.”

Most companies seem to agree. A March report by Lisa Barry, Stacia Sherman Garr and Andrew Liakopoulos in Deloitte University Press showed 58 percent of companies said their current performance management process is “not an effective use of time.” Meanwhile, just 8 percent said their process “drives high levels of value.”

In light of companies’ distaste in the traditional performance management process, many have shifted to a practice that is more qualitative (for example, technology firm Adobe Systems Inc., as profiled on the cover of the September 2014 Talent Management).

Most of the current alternatives appear to follow similar themes. Companies should view performance management as something that provides timely and relevant feedback. Rather than fretting over rankings, employees and employers alike should treat the process as a chance to find creative opportunities for employees to improve and grow. The process should be designed for a workforce that has grown up in an era of online communication. Performance management should be a motivator, not a soul crusher.

Designing a performance management structure that satisfies these things isn’t necessarily easy. But there are four key elements to address when reframing companies’ performance management approach.

Many organizations continue to use a system that rates employees once a year, while others have abandoned the practice altogether. The approach many companies have started to introduce is to have conversations between employees and managers that focus on continuous capability development. These conversations could occur on a regular schedule or could be more ad hoc with completions of project or assignments.

Rather than a burden, many companies have aimed to make these conversations something employees look forward to as a way to connect with their managers and develop their capabilities and career plans. These conversations also need to happen among managers to discuss the people the organization should be heavily investing in, those who are at risk of leaving and those who might be ripe for a new opportunity.

These conversations should also aim to be positive. A 2013 study by psychologists at Kansas State University, Eastern Kentucky University and Texas A&M University evaluated how people respond to negative feedback and found that people are more likely to respond productively when feedback is given in a positive light.

With millennials occupying a greater percentage of the workforce, it’s become increasingly important that organizations communicate effectively to employees. As research from Deloitte and others have shown, Generation Y is highly communicative, collaborative and connected. The generation is also highly tethered to mobile devices and social networks — important attributes to consider when developing performance management designed for today’s workforce.

Conversations between managers and employees can be richer if supplemented by real-time, ongoing feedback. Talent managers should train managers to make feedback seem simple and natural in the moment, whether it’s from a computer at work or on a smartphone during the train ride home. Feedback should also be easily accessible across communication mediums.

Feedback should also be specific. Example questions: Did the employee bring educational value to the team by sharing specialized knowledge that was consumable by others, or contribute innovative thinking during a team brainstorm? Or can the employee use some tips on how to work better as a team member following a communication snafu on a project?

While in-person conversations are important, and email is still the most commonly used online communication tool, consider the value of online feedback tools designed specifically for this purpose. Documented feedback helps make performance feedback conversations more objective, based on the results of real projects and events.

Performance isn’t a one-way conversation. In addition to the manager, peers and other stakeholders should be encouraged to share as well. HR practitioners can help managers develop best practices on providing feedback through coaching and training.

Many organizations may be struggling with a shortage of incentives — salary increases, stock grants, promotions, new assignments and development opportunities remain scarce. Talent managers need a way to allocate these resources fairly and provide the best outcomes for the business. Rather than ranking, rating and automatically applying the results to a pay matrix, organizations would be wise to return focus on the qualitative performance conversations and talent reviews.

A nine-box calibration tool, for instance, can provide the backdrop of rich conversations in which managers discuss and agree on needs and expectations, who to invest in and for what, and where changes might be needed.

As managers come together to share their expectations and needs for who on their teams may be ready for growth assignments, it’s important to create a level of transparency that promotes opportunities for internal mobility.

The performance management capabilities within an HR technology system should be designed and used to help individuals build their personal brands. The more information they are able to supply, the more skills they are giving management teams to analyze and assess their abilities. As new needs arise, managers can return to talent information that can help them reach their goals. By providing this information transparently across the organization, it promotes internal mobility at a macro level. 

When all employee data is contained in a central repository and accessible online, an organization is able to have a full understanding of its employees and their performance as it relates to their potential to move farther up the company ladder. It also makes it possible to see employees’ potential in other parts of the organization.

Consider a hypothetical example scenario. John Smith, who has been with a company for five years and is based in its corporate headquarters in Chicago, had midlevel potential and midlevel performance on the nine-box grid during the last calibration process. John is a director who manages three people. In a previous review, he mentioned an interest in taking on a bigger managerial role as among his personal goals. He also noted that he feels his career has stalled a bit.

So what’s next for John?

A single repository contains John’s profile, which includes his résumé that he imported from LinkedIn. John’s résumé shows that he speaks fluent Spanish and held international assignments in his previous job. Meanwhile, his company is opening up a new production center in Mexico.

Through the HR system’s search and analytics capabilities, a hiring manager or recruiter discovers John and his past international assignments and command of the Spanish language. If John is the right fit, this may be a new opportunity for him to take on a bigger managerial role. John may be able to achieve one of his personal goals and ultimately move into a new role that will help propel his career forward, as a result pulling him out of his perceived career rut.

John’s scenario is not uncommon. For companies to better recognize employees and be able to place them in the right positions, a performance management face-lift is needed. Turning performance discussions away from a quantitative, once-a-year chore to a qualitative conversation based on productive feedback is the initial step companies can take to create a more actionable culture that opens up the flow of information.