Think about your last performance review or development discussion. Did it make you feel empowered? Motivated? Or did it leave you feeling uninspired and unappreciated? What about when you led performance discussions and gave your employees feedback? Did the return on the time you invested feel right to you? Our guess is probably not.
Turns out everyone really does hate performance management. Employees complain that it’s demotivating, unfair, and it doesn’t fully reflect their contribution. Managers find it time-consuming and burdensome for little incremental impact.
So, the process obviously is not working. Yet, what should replace it? That ranks among the most frequently asked questions by our clients as more high-profile companies toss out traditional elements of performance management such as reviews, ratings and rankings.
A recent survey of ours found that more than half of companies are dissatisfied with their current performance management and two-thirds already have made various changes to their processes, such as simplifying ratings. However, our research also uncovered that while companies are eager to embrace change, very few know where to focus their investments and what parts of the performance-management process to emphasize. This is exactly where we have seen companies run into issues. Many organizations try to change too much too fast, which confuses employees and damages trust in the system.
We see many companies miss these two crucial steps as they move to redefine their performance management:
- Define your future state. Determine your philosophy about talent and what you seek to accomplish. Many companies fix pain points from current processes rather than take a step back and ask the purpose that their performance management serves. The entire organization must align on your vision. Answers to two questions will direct that answer: What is our belief about how people are motivated, and what do we believe about people's ability to grow and learn? No one-size-fits-all solution may exist, so having a set of design principles that align with these philosophies can really direct what you do and why. For instance, a large Latin American financial institution had a strong performance management system in place that was very focused on evaluating employees on the ‘what’ (i.e., goals and KPIs). Recently the organization embarked on a major digital transformation and realized that in this new context, evaluating the ‘how’ (i.e., leadership behaviors) is becoming as important as the ‘what’ and they are adjusting their performance indicators accordingly. Thus, understanding exactly what your performance management system seeks to accomplish and your context for change is imperative in order to address the right pain points and design an effective future state.
- Engage your workforce. Ask your employees to identify their pain points and what they most want from performance management. You may be surprised. When executives at a leading financial institution recently felt the need to eliminate ratings to improve performance management, more than three-quarters of the workforce came back and said they wanted a rating. Far too often, the performance-management redesign is an HR exercise and not informed by the ultimate users and beneficiaries of the system.
As more organizations recognize the impact of performance management on both individual and business performance, their energy and focus increases to ensure they get performance management right. And as they deploy changes, they must keep the future performance-management system in mind and ensure that employees align with its vision.