Performance management – Could a new approach transform your business?

Maybe you have the standard tick box appraisal form.

Maybe you have dabbled in a heavier dialogue style but found that it just takes more time and the ends still don’t justify the means.

Regardless of your current approach, it probably needs updating.

A trend we are seeing more and more is the movement away from the traditional approaches to performance management in exchange for more personal and fluid processes.

Peter Cappelli and Anna Tavis explained in a Harvard business review article that, “Historical and economic context has played a large role in the evolution of performance management over the decades. When human capital was plentiful, the focus was on which people to let go, which to keep, and which to reward—and for those purposes, traditional appraisals (with their emphasis on individual accountability) worked pretty well. But when talent was in shorter supply, as it is now, developing people became a greater concern—and organisations had to find new ways of meeting that need.”

Netflix for example no longer measures their employees against their annual objectives, because their objectives are more fluid and can change very quickly.

The chief talent officer for Netflix, Patty McCord, wrote in another article for the Harvard business review that, “many years ago we eliminated formal reviews. We had held them for a while but came to realise they didn’t make sense—they were too ritualistic and too infrequent. So we asked managers and employees to have conversations about performance as an organic part of their work. In many functions—sales, engineering, product development—it’s fairly obvious how well people are doing. (As companies develop better analytics to measure performance, this becomes even truer.) Building a bureaucracy and elaborate rituals around measuring performance usually doesn’t improve it.”

So how can you go about updating your approach?

• Scrap the bureaucracy – If we learned anything from the above, it is that the long-winded, bureaucratic, death by paperwork approach needs to go.
• Scrap the numbers – Part of achieving this also means binning ratings. Research has clearly shown that not only do most involved detest it but also that it can be inaccurate as the score might have much more to do with the person giving the rating than receiving it.
• Communication – As pointed out by Patty McCord, having conversations between employees and managers “as an organic part of their work” is much more effective than having allotted formal reviews. This also means that you can work towards a more continuous feedback approach instead of a more rigid, annual review for example.
• Think about your business needs – as highlighted by Netflix and many other businesses, the idea is that you create a bespoke process that suits your business needs. This is the most fundamental part of Reality HRs offering to our clients. HR processes need to be tailored to your business needs and one size fits all approaches just don’t work.
• It’s not all about money – We have spoken to you before about how money isn’t everything and is actually lower down on people’s priorities than you might think. As such, you need to have a good understanding of what motivates your people.
• Go digital – If you’re going to commit to this kind of approach you’re going to need the right kind of software to help you.
• Invest – Developing and retaining people is a top priority for most businesses today. This means that an effective performance management process is crucial but it also means that your managers need to know not only how to execute them but also why.

Some recent CIPD research found a very clear disagreement between managers and employees about what performance management is capable of achieving. In their survey, 30% of the participants felt that it enables people to understand and know what they are supposed to be doing, but 13% disagree and a whopping 57% didn’t agree or disagree. In fact, that was a trend across the board. Between 50-60% selected this option for every criterion listed for what performance management achieves.

There were also discrepancies between what people thought should be involved in the process (over 90% agreed that regular reviews should be involved) and what are actually involved (only 62.7% actually carry out regular review meetings).

If you want support developing a performance management system that is up to date, built around yours business and supports your objectives, then give us a call on 01256 328 428.