Companies across industries and geographies are relooking at the way they measure their employee’s performance. In Deloitte’s Global Human Capital Trends Report 2017, 79% executives rated the redesign of performance management at a high priority, up from 71% in 2014.
Why is reinventing performance management so critical and why is it picking up at such a pace?
There can be various responses to this question but the fundamental reason is that the way we work has changed. It is not just the way of work, but also the way employees view work that has also seen a massive shift, owing to the new workforce generation and their ideas of work life. This has been combined with the explosion of technological devices and the internet. In such a dynamic situation, the traditional end of the year appraisal doesn’t fit or make sense for employees or organizations.
Here are the major reasons why a reinvention is critical for organizations to undertake –
1.Organizations are increasingly getting team-centric
Traditional reviews gave ratings for individual employee performance. But people hardly work in silos. There are team collaborations in every organization. Companies have also made the shift from focus on individuals to teams. This went completely ignored in traditional ranks.
New performance management tools hence aim at evaluating the contribution of an employee to a team and the team’s impact on achieving the overall business goals. The team’s performance rewards each employee in it and the company as a whole. But this is also critical to achieve as in order to measure team performance, organizations need to work hard and identify metrics for the same. Trust, inclusion of diverse groups, clarity of roles and good employee relations are critical to team success.
Team leaders are now more important than ever because they need to to passionate in becoming effective coaches and keeping team members actively engaged. Evaluating managers on the quality and quantity of their conversations is key here. Inter team collaboration is also important for success. Measuring these new metrics is quite a revolution in itself, which would require not just the right technology, but also thoughtful experimentation and a willingness to experiment with new models.
2. Employees want regular and quality feedback
Quality feedback is important for any organization as it helps improve worker engagement as well as increase productivity. According to a study by PwC, nearly 60% of survey respondents reported that they would like feedback on a daily or a weekly basis. This number increased to 72% for employees under the age of 30.
54% of millennials have reported having frequently felt that their manager is unprepared to give feedback during performance reviews. Such a system will not work anymore as feedback is key to millennials. They want to know how they are performing and what is needed for improvement. Hence, performance reviews need to move from being a once in a year event to regular review meetings, pulse surveys and the like. Managers also need to be held accountable for their contribution in bringing about behavioral changes in millennial employees. Once again, managers play a very critical role in achieving this objective of continuous learning. Their interaction with fellow team mates is key to making continuous performance reviews a success.
A traditional system like annual reviews and ranks will definitely not work for employees because they want to know how they are performing and what is needed for improvement. Employees need to be given the opportunities to be able to contribute to the professional development of their subordinates and give it a personal angle.
Giving feedback is not a task, but a responsibility. Know more about the elements of a quality feedback.
3.Employees demand environments with continuous learning
Employees today want to grow continuously in their professional and personal lives. 87% of millennials say development is important in a job. Career growth is the biggest contributor to higher retention levels for this generation. Employees want to be learning continuously, and not necessarily always about their field of work. It can be any aspect that relates to them.
Today’s employees expect performance measuring tools to also facilitate regular discussions about issues that they want to learn about, discussion of their capabilities and skills, and a mechanism that allows employees to explore the best options for themselves and also help them learn where to focus on.
So, are ratings dead?
No, they aren’t. In fact, a large number of organizations still widely use ratings to measure performance and most importantly, make compensation decisions. Important decisions about whom to promote, how much of a raise to give etc. still depend on ratings to a large extent. It is difficult to decide on the pay scale of an employee without any formal evaluation. However, what has changed is the quality and quantity of data used to make compensation and performance related decisions.
[easy-tweet tweet=”The focus has shifted from talking about people to talking with people in open conversations.”]
91% of companies that have adopted continuous performance management as a tool say that they now have better data for making critical people decisions, eliminating bias and discretion. So, even though the bell curve hasn’t vanished completely, today, data is richer. Data is derived using input from various sources and in continuity. For instance, Adobe has reported a drop in voluntary attrition rate by 30% and an increase in involuntary attrition rate by 50%. This has been possible after Adobe rolled out its frequent feedback and development processes through its system named as “Check-in.”
Over the last five years, organizations have radically changed the way they measure, evaluate and recognize employee performance. There have been a lot of experiments conducted by organizations worldwide with regards to the annual review system. Most companies have adopted and deployed continuous performance management practices on a wide scale. With so much experimentation and a few successful results, the new practices are becoming clearer and much more standardized. Though there is no “This is it!” moment yet, the learnings are going to mean a lot for defining future approaches.