Are our Performance Management Processes fit for purpose and are Performance Appraisals still relevant in a rapidly changing world?
Britain’s poor productivity record has been highlighted by recent government figures showing the biggest gap with other leading western economies since modern records began in the early 1990s. Output per hour worked in the UK was 18 percentage points below the average for the remaining six members of the G7 group of industrial nations in 2014, the Office for National Statistics reported.
The gap – up one percentage point on the previous year – was the widest since 1991 and showed a particularly marked deterioration since the onset of the financial crisis and deep recession of 2007-09. The shortfall was slightly smaller than the 20-point gap reported in the ONS’s preliminary estimates released in September 2015.
We are all operating in rapidly changing environments which is having profound implications across all sectors and is driving significant changes in our traditional human resource practices and way of doing things. In particular, many organisations are finding that historic approaches to performance management no longer deliver the performance outcomes necessary to sustain competitive advantage in the new emerging world.
We can see the shortcomings of existing approaches and yet most of us are finding it difficult to propose and design a new way forward to performance manage in this rapidly changing world of work. We can appreciate the need to radically transform the impact on individual and organisational performance and in particular, how employee engagement and performance management need to be inextricably linked.
Companies worldwide are questioning their forced-ranking, rigid rating systems and once-a-year appraisal processes. Traditional performance management —the annual process of rating employees’ performance and ranking them against their colleagues—is widely considered to be broken. These “forced curve” evaluations became popular under the influence of the GE model during Jack Welch’s tenure, but they were originally conceived around the turn of that century—the turn of the 19th to the 20th century, that is. At that time, employees were viewed strictly as “workers” whose performance could be accurately measured by output: the number of railroad ties installed, hours worked, or other numeric measures. Today, more than 70 percent of all employees work in service or knowledge-related jobs. Their performance is driven by their skills, attitude, customer empathy—and by their ability to innovate and drive change by working through teams. These skills must be built over time, and successful performance management must be focused on constantly developing these capabilities rather than ranking them at a moment in time.
In addition, today’s business climate and business priorities seldom follow the annual evaluation cycle. Goals shift, strategies evolve, and employees often switch between multiple projects under various team leaders. Given this dynamic, it is hardly surprising that our research shows that organisations where employees review their personal goals quarterly—or even more often—were nearly four times more likely to perform more effectively.
Companies are therefore keenly looking for a new model of performance management. In a public survey Deloitte conducted recently, more than half the executives questioned (58%) believe that their current performance management approach drives neither employee engagement nor high performance. They, and we, are in need of something nimbler, real-time, and more individualised—something squarely focused on fuelling performance in the future rather than assessing it in the past.
At Oakridge we have seen significant changes in the demand for Performance Management training – clients are much more inclined to want us to train and support their managers around engagement and motivation. We have been delivering services to a range of clients across a variety of sectors around topics that include how to improve your performance conversations and practical coaching tools and techniques. We have also seen an increase in demand for our Engaging Conversations programmes and the requirement for practical techniques and strategies to drive up engagement for example the 10/10/10 approach or feedforward techniques rather than feedback. In each and every case our primary purpose is to enable managers to develop their own skills and understanding as to how to motivate and encourage the performance of colleagues in their teams as well as encouraging the necessary mind set and attitudinal shifts.
We have to consider the changing requirements of managers and whether they are sufficiently skilled or experienced to lead colleagues in a different way?
Managers will need to shift away from the annual performance evaluations toward a process of continuous coaching and improvement. The days when managers could lead from a position of command and control are over. In today’s high-performing teams, employees must take ownership of their performance and act on their own to improve their capabilities. Managers become coaches, rather than evaluators.
A successful shift to leading-edge performance management—replacing annual ranking and yanking with continuous feedback, coaching, and development—begins with a frank determination of whether rigid performance evaluation systems are advancing a company’s business priorities. If not, as many organisations increasingly recognize, it is time to take action. Potential starting points and where we have been supporting our clients through expert facilitation and training include the following:
• Getting senior leaders involved—and keeping them involved: Hold a senior executive-level conversation about the strategy and philosophy for employee performance in the company. What does the organisation hope to achieve as a result of performance management activities? What system will best reinforce the organisation’s talent management strategy?
• Use performance management to build skills: Switch from rigid performance reviews to flexible performance conversations aimed at providing employees at all levels with practical steps they can take and the skills necessary to reach the next level of achievement within the organisation.
• Teach managers to give better feedback as well as encouraging them to use feedforward : Boost the skills of managers to enable them to have productive yet less formal conversations about performance that will drive improvement rather than drive employees to look outside the organisation.
• Simplify the process: Separate the performance coaching and evaluation process from determinations of compensation. Reduce the number of forms and make them very simple and easy to use. Ignore the advanced features in performance management software.
• De-link performance scores and compensation: Consider revising compensation structures to include broader considerations, such as how the outside talent market would compensate an employee or how difficult the employee would be to replace. Analyse the extent to which the organisation can take a broader approach to total rewards by offering growth opportunities to employees who have outperformed their peers.
• Coach everyone: Search for opportunities for employees in the “broad middle” of the performance distribution to see themselves as valued contributors to organisational success, rather than merely looking up to the perceived superstars. Hold everyone accountable, but give everyone coaching, development planning, and training to improve.
We recognise that after Summer some of you will be starting your Performance Management process. If you are interested in learning more about what Oakridge has been doing with other organisations then please do give us a call, we would love to talk to you and to learn more about your Performance Management challenges.
In the meantime, we have provided herewith 7 Top Tips for Performance Conversations [Download] and our full White Paper on ‘Are your Performance Management Processes fit for purpose and are Performance Appraisals still relevant in a rapidly changing world’ – you can download this HERE.
We hope you find them useful.