Let’s face it, there are a few things that make employees, managers, and HR professionals wince more than when it is time to do performance reviews. Managers often dislike them because it is seen as a yearly compliance activity that they are forced to do. Performance reviews commonly produce anxiety for employees and impede to what they are most interested in… how much their increase and bonus is. Human resources feel like they are the performance review police, having to chase people down to rewrite comments and deal with the multitude of complaints about ratings.
So much has been tried, but in the end, other than technology, there is not much of a difference since social psychologist Douglas McGregor called for engaging employees in performance assessments and goal setting more than 70 years ago. Since then, innovations in performance management have been tried, but the experiments always seem to fail or take hold. In the early 1980s, GE’s infamous forced ranking system promised to revolutionize performance management and increase productivity by heavily rewarding the top performers and eliminating the bottom 10%. Many companies followed suit, but the process of forced ranking is broadly seen as ineffectual since individual performance is not on a normal distribution curve (also known as a vitality curve).
Coming out of the pandemic, we have seen a strong uptick in clients looking to update and modernize their performance management processes and systems. They all generally have the best of intentions and have three objectives:
- Make the process fair and equitable.
- Create consistency across all their business units.
- Simplify the process so that it is less painful for everyone involved.
Many organizations will start with technological solutions they hope will make the process less painful, but this may be a big mistake if there is no strategy in place first. If experience has taught us anything, it is that hope is not a strategy.
When done right, performance management is a relational experience between an employee and their manager and can be a motivating experience that increases engagement, fosters a growth mindset, and helps you retain the talent you want.
The reality is that there is no one-size-fits-all approach to performance management and an organization must design the system that best fits their goals and culture. If you are thinking about revamping your performance management process, consider the following five best practices.
Start with a Performance Management Philosophy
Typically, emphasis is placed on the appraisal forms, ratings (pass/fail, three-point scale, five-point scale, etc.), and electronic systems. While these things are important to help you document and manage the process, it is most critical to start with and clarify your performance management philosophy. A performance management philosophy is your organization’s belief in how to help your employees achieve the performance level needed for success. A cohesive philosophy becomes the foundation for the process you wish to adopt and helps employees and managers understand how they will engage with one another related to performance management.
Focus on both the “What” and the “How”
Competencies are the red thread of any talent management strategy. When incorporated into performance management, core competencies become the behavioral benchmark by which all employees are measured. When you have multiple employees who are meeting their goals and objectives, it is the “how” they approach their job that will differentiate them from each other. My favorite example of this is when a client was considering promoting a rainmaker salesperson based solely on their productivity. While this person received top ratings for many years, the organization’s concern was that this salesperson had, as they described, created a wake in her path. When asked if this person had received any feedback on their behavior, not surprisingly, the answer was no.
Annual conversations focused on past events are being replaced by continuous feedback and coaching
Today’s employees want ongoing conversations about their performance. This trend is driven by the desire for real-time insights, skill development, and an understanding of how their work contributes to the organization’s goals.
Continuous feedback allows for quicker adjustments, enhances employee engagement, and fosters a culture of transparency and trust. However, the challenge lies in creating a process that facilitates and formalizes these regular interactions without becoming a time-consuming burden for managers and employees.
Managers and employees will need training on how to engage in productive conversations that are focused on critical behaviors, goals, and development.
Meet employees where they are
We have heard much about how Millennials and GenZers are motivated differently and have unique needs than GenXers and Baby Boomers. Much of this is an over-generalization, but one area where they are different is the high value they place on continuous learning and development opportunities. Performance management systems must evolve to include more focus on employee growth, skills enhancement, and career mobility.
It is important to avoid generic development plans that do not address individual employee needs or aspirations. It is essential to tailor development initiatives to suit each employee’s unique goals.
Performance Ratings Reimagined
Many companies are contemplating moving away from traditional performance rating scales. The debate is the same everywhere. The opponents of ratings say they are demotivating and distracting from the performance conversation. Proponents say that the ratings are needed to maintain a watermark for determining merit and bonus increases. Both sides are valid. The issue is not the numerical rating, but how the rating is described. Standard descriptors like Consistently Exceeds Expectations, Exceeds Expectations, Meets Expectations, etc., are a disservice to the employee. They are overgeneralized descriptors that only 20% of your employees will not feel bad about. I recall a conversation I had with a manager, who rated me an Exceeds Expectations. In the hopes of receiving the top rating, I asked him what I must do differently next year to obtain the coveted rating. His response was, “I don’t know, but I will know it when I see it.” I should have left that meeting feeling good about my appraisal, but instead, I was confused and unmotivated.
Instead of general descriptions or numerical values, adopt more qualitative and narrative-based performance descriptions that include a balanced description of their performance. If your organization isn’t ready to move away from ratings, avoid language that makes 80% of the organization feel underappreciated.
While change is a welcome shift towards fairer and more meaningful evaluations, companies must ensure these new assessment methods are consistent and well-documented, so that employees still receive clear, constructive feedback. Emphasizing development and an eye towards the future, you will find performance discussions to be more motivational and a tool for maintaining an engaged workforce.
