Out with the old…

​​​​​​​As performance management practices undergo transformation, HRD looks at the key trends shaping this critical aspect of people management

Out with the old…

As performance management practices undergo transformation, HRD looks at the key trends shaping this critical aspect of people management

As the end of the financial year approaches, it’s likely your HR team will be heavily involved in the performance appraisal process – especially if appraisals are still completed as part of the annual review process. In this traditional approach, staff are stacked and ranked through cross-team calibration – the overarching goal being to determine annual remuneration decisions and identify opportunities for cost reduction through restructure.

However, times have changed. Significant global companies like Deloitte, Accenture and SAP have overhauled their approaches to performance and questioned traditional methods because of the behaviours they drive and how they define organisational culture.

It’s something Rob Bromage, CEO of intelliHR, has witnessed first-hand with clients. “Our clients are now realising that it’s essential to continuously invest time in their people and regularly refl ect upon, evaluate and measure performance at all levels against specific criteria,” he says. “This includes ongoing meetings with individuals and teams, allowing them to be provided with timely feedback, making sure they are rewarded for performance, and helping them through any performance challenges.”

He adds that giving employees ongoing support to grow and learn is absolutely critical. All meetings (and observations) about performance need to be well documented and meaningful data provided to business leaders in real time so they can be used as indicators of business performance.

“People should never go into performance reviews and feel elements of surprise,” says Bromage. “If performance feedback has been ongoing and provided as it happens, people will understand what their strengths are and what areas they need help with. As such, they should be able to participate in a performance review which is more a two-way discussion around how they can improve.”

Repositioning ratings systems
A common theme linking the overhaul of performance appraisals in many of the aforementioned companies is a rethinking of performance ratings. Bromage says the issue with a rating system is that it puts a negative spin on employee appraisal; employees are nervous, and if it is only happening once a year they don’t know what to expect. This can lead to a poor employee experience in the lead-up to and also after a review, which will negatively impact on performance and reflect poorly on the business itself.

Rating systems say a lot about the culture of a business. For example, Company A uses traditional ratings like ‘exceeding expectations’ and ‘unsatisfactory’ or ‘below expectations’, whereas Company B uses language such as ‘awesome’ for great performance and ‘needs help’ for low performance. If you give a staff member a choice, most would prefer to be working at Company B. Rating systems like Company B’s encourage openness and honesty when people need help, while also helping managers to understand their role in supporting the staff member in reaching their potential. “So instead of asking staff to rate themselves as ‘poor’ in an area, change the wording so that it allows people to rate themselves as ‘I need help’,” says Bromage.

“The key to empowering an employee is to be clear around expectations and give them room to grow, whilst maintaining guidance through continuous feedback and positive reinforcement. A rating system should be crafted to be used positively, building trust to help the staff member on their journey from unconscious incompetence to conscious competence,” he says. “Every staff member will have their own strengths and areas for development. A good leader backed by a supportive company will know how to bring out the best in its people.”

What can be misleading is when leading companies claim they have ‘scrapped’ performance ratings. This is rarely entirely true. While there are companies moving away from the rating system, which can be beneficial as it urges leaders to invest more time in their people, there is still a need for ratings as an effective tool for providing quantifiable data and a guide for feedback. When effectively used, ratings can help an employee and manager identify what needs to be focused on to help an employee reach potential, but also where a superstar can be recognised and better leveraged for organisational economic value.

THE PERILS OF PERFORMANCE RATINGS
Researchers from Kansas State University, Eastern Kentucky University and Texas A&M University found that even people who are motivated by a genuine desire to learn respond negatively towards less-than-perfect performance reviews. “We thought, if anything, they’d be able to take it and apply it to their own jobs,” says management professor Satoris Culbertson. “But they simply don’t like negative feedback either.”

Culbertson and her team concluded that much of the time and energy spent on the performance review process is often wasted, as employees tend to forget the helpful elements of a discussion as soon as they hear criticism. “For a really strong performer, getting a four on a five-point rating scale can be devastatingly bad,” Culbertson says.

Trends to note
Two other key trends in this space are self-empowerment and autonomy for employees; and continuous and transparent feedback for all involved parties.

While self-empowerment and self-service has been a theme in everything from employees taking ownership of their professional development to how they reward and recognise others, the same concept should also be applied to performance management, suggests Bromage, who says just about every employee comes to work to achieve something for the good of the company. Whether it be at an operational or strategic level, everyone wants to contribute in some way to have purpose – it’s a key motivational driver.

Employees will generally be happier when they have control over their work. When you give good people more responsibility, they tend to flourish. Being in charge enables people to regularly evaluate and measure their own performance, which in turn will encourage meaningful and constructive discussions with business leaders.

When it comes to more regular feedback, it’s standard for most people leaders to check in with their staff daily, ask how they are going and give some direction and feedback.

When extended into a regular one-on-one catch-up, Bromage says this activity can be leveraged to support better conversations between staff and their leaders.

“Quality conversations and interactions increase engagement and communication,” he says. “When notes are recorded, the data captured is likely to be related to support needs, development needs, coaching, job satisfaction, performance expectations, achievements and recognition. This information can provide powerful insights into performance, inform learning and development initiatives, or even be used to simplify formal reviews by tracking performance conversations over time.”

NOT SO FAST…
Analysis by CEB shows that eliminating ratings may lead to three unintended outcomes:

• An average of 10 fewer hours spent by managers on performance-related conversations, despite having more time available to them. Managers do not shift that extra time towards ongoing, informal performance conversations.
• An 8% decline in top performers’ satisfaction with pay differentiation because managers have trouble explaining how pay decisions are made and linked to individual contributions.
• A 6% drop in employee engagement because managers are unable to set expectations for their employees, hold clear performance and development conversations, and provide appropriate rewards and recognition.

To guard against this, CEB recommends providing ongoing, not episodic, performance feedback; making performance reviews forward-looking, not backwardlooking; and including feedback from peers, not just managers.

HR data and performance
The performance review process can provide a rich pool of data from which HR can make more informed decisions. Indeed, as performance appraisals are a key source of employee data, and many business performance issues can be distilled down to people-related problems, effectively analysing trends in data becomes even more important.

Bromage cites the example of sales performance, which may be suffering because the business has been recruiting the wrong people and training is insufficient to bridge the skills gap. Upstream, this negatively impacts job satisfaction and engagement in the team, leading to increased sick leave and high levels of attrition. Unplanned leave and attrition directly lower the capacity of the organisation to produce, service or sell, and are costly.

“Without deep HR insight, the business cannot fully understand the right action to take, potentially missing a great competitive opportunity through maximising performance,” Bromage says.

The role of technology
Technology has been the enabler of most of the key trends outlined above. Technology has changed the way we live and interact with one another, and as part of that businesses must move faster to keep up. Bromage says businesses must apply creative thinking to what workforces will look like in the future – and technology can play a critical role in maximising the performance of those workforces.

“When we first started developing the intelliHR platform, we were setting out to develop what we thought was largely an HR system. We realised as part of our journey that it was actually all about people management,” he says. “As part of this learning we came to see that tools shouldn’t just be about the business and meeting objectives but about the people as knowledge workers, their empowerment, and improving the holistic employee experience.”

INTELLIHR
Rob Bromage is an HR technology specialist with more than 20 years’ experience. He is the managing director of intelliHR, a cloud-based people management platform that allows organisations to maintain a real-time handle on performance, creating a culture that contributes to strategic decision-making with data-driven insights.

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