Trends in Performance Management – A White Paper

A few years ago, I was watching a painful process take place.  Our engineering manager, with very good intentions, was conducting his annual performance reviews.  At the same time he was also telling them what their salary increase would be.  I watched person after person go in for a 2 hour discussion and I am not sure who had the more pained look on their face, the person coming out of the meeting or the one who knew he or she was next!

This exercise happens in many business organizations every year.  Some organizations are very inconsistent in doing reviews and some organizations are regimented in their process, but in most cases the managers dread writing the review almost as much as the person receiving it.  The Society of Human Resources Management did a survey and found that an astounding 90% of reviews were viewed as painful and ineffective.

The traditional review typically has been based on the manager’s view of an individual’s behavior and traits.  Some organizations utilize 360 reviews or at least consider others input when preparing the review, but most focus on the manager’s perceptions.  Reviews may touch on annual goals, but many of the goals were set independent of any company goals and are either development goals like taking a class or project related.  The focus of the goal was completing the task or project, not what the actual result or outcome of the goal was.  The review ends with the manager’s subjective score or rating.  Many times the salary increase is discussed at the same time, which means that anything the manager said was forgotten and what the employee remembers is the salary discussion.

Organizations are starting to look at the review process differently.  Millennials in particular need more frequent and relevant feedback.   The review process really starts by the organization looking at goals differently.  Organizations are looking at what they need to do in order to be successful, setting specific goals and they are beginning to connect them throughout the organization.  This works its way down to the individual employee.  Each employee should understand how they connect to the overall company goals and what is expected of them from a performance standpoint in order for them to help the organization succeed.  This isn’t just the top tier of managers, but everyone throughout the organization.  Reviews should be based on performance against expectations and focusing on actual outcomes.

The frequency and look of the review is changing as well.  Rather than the annual painful discussion and subjective judgement, managers are meeting more frequently with employees.  They are reviewing expectations, actual results or outcomes and focusing on looking forward.  If individuals need assistance or development to meet their expectations, it is more of an ongoing discussion.  The review process is frequent and focused on helping the employee succeed.

Companies are also increasingly looking at software packages tailored to help managers track the information.  Many of the packages serve as a document storage system for not only discussion notes, but emails or other documents.  Because they are online, HR and top managers can have access to the files to see how the discussions are going and to help provide feedback to the supervisors and managers.  Most of these packages are available at a fairly low cost.  This allows HR to know the discussions are happening and provide some level of consistency in the process.

Some might wonder where compensation fits in this.  While that is a separate topic, the bottom line is there is less emphasis on a performance rating for compensation purposes and more emphasis on market value.  Where is the employee in relation to where they should be in the market?  Their value includes a lot of different factors, performance just being one of them.

Organizations should take an honest look at their review process.  They should be asking themselves and their employees how the process is working.  Unfortunately, many organizations are not even conducting reviews at all.  Doing this is missing an opportunity for organizational improvement and missing the chance to give employees the feedback that most of them want.

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