Performance review makeover
The same study found that 86 percent of employers report being unhappy with their performance management. Other research has found that only 8 percent of HR executives thought their performance management systems made a significant contribution to employee performance. Universal dissatisfaction with the traditional performance management process is causing more and more employers to very publically retire their old performance management systems of rankings and ratings in favor of less formal and more frequent performance discussions.
Why traditional systems arent working
Employers are increasingly frustrated with traditional performance management systems because the purpose and terminology has changed. In the not-too-distant past, employers did not use the traditional performance management process to develop employees. Instead, they used an annual performance review process to assess an employee’s past performance. In recent years, however, employers want to more actively manage and develop employees, and a shift in terminology from review to management evolved. The annual performance review process, however, did not. As a result, the backwards-looking process no longer fits the needs of employers looking to develop and promote better performance.
The traditional performance review process is simply not designed to improve performance or develop employees. Today’s work requires goal cycles as short as a month or a week, yet the traditional performance review process remains based on a 12-month cycle. The traditional performance review process also fails to take into account that organisations are increasingly working in teams and emphasising collaboration. Performance review processes based on rankings and ratings are a poor fit in these synergistic working environments because they encourage competition and discourage collaboration among team members. Employers are also reconsidering their traditional performance management approaches because they are viewed as costly and cumbersome without equitable return.
In today’s workplaces, employers want managers and supervisors to talk to employees about their development and their performance more than once a year, a trend being demanded by Millennials who place a premium on communication, continued learning, and career growth.
Replacing the traditional performance management approach
Research has found that about 70 percent of organisations are reconsidering their performance management strategies to look forward, not backward. This approach allows people to learn from their mistakes and grow because they are based on the belief that talent can and should be developed. There are three ways employers are revamping performance reviews. They are:
1. Eliminating the annual performance review altogether.
This would be in favour of more regular, real-time feedback. Retail giant The Gap, for example, has replaced their annual performance reviews with monthly coaching sessions between employees and managers. General Electric (GE) has taken advantage of technology by using a performance tracking mobile app that allows employees to make text or audio notes.
2. Removing rating systems that cause competition amongst employees.
Research firm CEB found that 6 percent of Fortune 500 organisations had already eliminated rankings because they believe they lower performance, increase attrition, and have a negative effect on stock prices. Instead, more employers are assessing employees based on their personal objectives, not against their peers. Others are using more multi-rated feedback methods, such as peer feedback, to improve communication and collaboration.
3. Revamping compensation systems to more personally reward employees.
Some organisations are moving to bi-annual bonuses and peer-to-peer rewards. Co-workers at Google, for example, can give $100 rewards to peers for jobs well done. All of these options, or combinations thereof share similar characteristics: they are more continuous than static, more conversation-based than rankings-based, and focus more on development rather than remediation.
The field of performance management has evolved in recent years from a focus on remediation to one of development. The traditional performance appraisal process, however, has lagged behind. An increasing number of employers are moving away from the traditional process to better reflect how work today gets done and to improve employee performance. For many employers, this change saves time and money, and improves teamwork and collaboration.
There is no one solution for every organisation’s performance management process, but most organisations would benefit from thoughtfully revisiting their performance management goals. Leaders will always need information on employee performance and employees will always desire feedback. Employers are seeking an easy and effective way to do that within the model of a flexible system. The solution for many may be as simple as small, more frequent performance conversations in a feedback-oriented business environment.