How to make continuous performance management work?

For many decades in HR, performance management has been centred around annual performance appraisals. These occurred at both the individual level (the dreaded annual review), and the company level (the engagement survey which staff never saw the results of).

Both processes are based around the practice of looking back and attempting to measure past performance. However, the value of this model has been questioned by both research in human resources and a number of leading organisations around the globe.

Performance appraisals are widely unpopular with both staff and managers. Many people are now querying whether annual performance reviews and ratings are best serving the needs of organisations and their people. Yet employees still want some sort of feedback and review and business still want intel on who their star and at risk people are. While it is still seen as good practice to be providing employees feedback on how they are doing, there has been movement away from using rating scales or internal comparisons to do this. Many large companies in the US, UK and beyond have either dropped annual performance reviews or are planning to rethink their performance management system.

Current best practice in human resources promotes regular conversations about performance and development between managers and their staff. This reflects a shift in focus from assessing the past to actively building the workforce you need. Many businesses are replacing or supplementing annual reviews with frequent, informal check-ins between managers and employees.

In this blog post we unpack the key aims of a performance management process and offer some tips for how to innovate existing processes to promote staff engagement, motivation, retention and development.

Disrupting the old model - Why move away from performances reviews and ratings?

Research suggests that both managers and staff often view performance management processes as time consuming, subjective, demotivating, and ultimately ineffective at improving employee performance. As such, one key motivation for moving away from annual reviews is that they hold people accountable for past behaviour at the expense of improving current performance and building future talent. As explained by Deloitte, organisations increasingly require data which helps the business respond to changing businesses needs and career trajectories as they happen. Increasingly, businesses want to be able to respond to change rather than follow a plan. Teams are more likely to rely on collaboration, self-organisation, and self-direction. Staff need to be enabled to partake in regular reflection on how to work more effectively to respond quickly to feedback and changes in requirements.

Alongside the critique that existing annual performance reviews occur too late to influence performance in real time, there is a convincing body of research which shows performance ratings are biased. Research on appraisal scores shows ratings are affected as much by who the rater is as they are by actual performance. Whether conscious and not, personal biases influence our appraisals of other people, resulting in ratings revealing more about the rater than they do about the ratee. Such research refers to the ‘the idiosyncratic rater effect’ to describe the bias of the rater on the rating given to an employee. Taken together, these factors might help to shed light on why managers consistently report they do not see the value in performance reviews.

Looking forward to new solutions

Beginning in the early 2000s, there have been tentative shifts in some businesses towards the relinquishing of annual performance reviews in favour of more regular, forward-looking, manager check-ins. Businesses are looking to methods for evaluating performance that are less costly and time consuming, and more effective. Over 70 percent of companies surveyed in Deloitte’s 2017 Global Human Capital Trends research reported they were in the process of reinventing how the performance process is managed in their organisation. A plethora of point systems have been developed specifically to cater to the new model of performance management so that employees and managers are getting feedback more regularly and are able to act more quickly to address issues.

Businesses want the information generated to be used for productive change and growth rather than simply reflecting on past performance. HR commentators suggest that if companies want engagement and retention among their staff and the ability to capitalise on their existing talent, their performance management processes need to be future-oriented, user friendly, and have an immediate effect on workers’ performance.

Best practice for performance management

The old (annual reviews; looking back) and the new (regular coaching; looking forward) approaches to performance management represent a ‘tug-of-war’ between staff accountability and staff development respectively. That is, the shift in emphasis to improving and developing existing staff as opposed to holding them accountable for past performance reflects a position that staff performance is not fixed or predetermined for each individual, but able to be enhanced through effective coaching and management. The shift to this approach has emerged through a labour market which requires employers to be able to develop their workforce, be agile in response to change, and to utilise teamwork.

The frequent check-ins throughout the year that are increasingly replacing annual appraisals mean that employees are constantly receiving feedback on their current work. Research suggests that the most effective team leaders conduct regular check-ins with each team member about near-term work. These brief conversations help to set short-term expectations, review priorities, provide feedback on recent work, and keep both parties informed on progress. Regular check-ins promote frequent communication between manager and employee to empower people rather than micromanage them. In short, best practice points to having frequent feedback discussions rather than or in addition to annual ones, and to focus on forward-looking coaching for development rather than backward-focused rating and ranking.

Regular assessment and feedback into performance management allows the capture of multiple data points, which are referred to in some organisations as “touchpoints” or “snapshots”. While managers might still have an end-of-year discussion with staff, this is a summary of many prior conversations and opportunities for change. This model emphasises speed, agility, constant learning, and an individualised approach.

As well as reconsidering the process and structure of performance management, organisations have also sought to innovate in the ways in which performance data is collected. For example, Deloitte has sought to eliminate rater bias by asking managers to evaluate their staff not in terms of what they think of the individual, but what they would do with each team member. Instead of asking what the team leader thinks of a staff member’s skills, they ask what actions the manager would take in relation to their performance in terms of money and hiring. These both measure performance and highlight differences among team members in a ‘moment-in-time’ capture of performance.

Developing the new process - how can businesses innovate performance strategy?

Ideally, a performance management process should be able to do three things: measure performance, reward performance, and improve performance. Performance management systems should be able to not only assess and recognise talent, but to stimulate performance improvement and growth.They should provide a process for evaluating the work of an organisation’s people, and using this to develop, promote and compensate them accordingly.

While annual compensation decisions are still important, these can be augmented with faster and more frequent captures of performance data. Aggregating regularly captured performance data over time can support businesses decisions in relation to succession planning, development paths, and performance-pattern analysis. The quick attainment of these data points enable businesses to respond to the information (e.g. promotions) rather than draining resources to ascertain that information through meetings and discussions. It provides a rich basis for understanding, improving and recognising performance in your organisation.

A frequent, ongoing check-in approach to performance goes hand in hand with the realisation that an annual engagement survey is not enough. Many companies are either introducing pulse check surveys to sit alongside an annual engagement survey or investigating throwing it out completely. Again, there are multiple solution providers in the market that will provide mobile-friendly, easy-to-use, functionally-rich tools that can sit alongside your core HR technology platform.

Essentially, these tools do the same job as a traditional engagement survey, but they offer the ability to get the results immediately, and to survey the pulse of a small group or the whole organisation as often as required. Kiwi company AskYourTeam has extended the workplace survey beyond issues of organisational culture into operational areas. The system gathers the data from every member of an organisation about where and why the organisation is performing well and poorly.

Smart HR practitioners are using this data to develop performance plans with managers and many are seeing immediate improvements in their organisation’s performance measures. Productivity improves, and employees who provide the raw data are empowered by the Continuous Involvement System process. They are more motivated, more engaged and less likely to leave the organisation.

For more information on revising and innovating the design of performance management in your organisation, get in touch with Tomorrow’s People or AskYourTeam.