Does your organization still use a traditional annual performance review process? If so, as an HR leader, you’ve probably encountered your share of employees and leaders who dread the process. Maybe you even dread it too? After all, nobody likes to continually nag their workforce about something that should be positive: providing employees with feedback on their performance. Companies realize it’s time to overhaul the annual performance review. They are trying—with varied success—to swap out the one-time, static evaluation process with something more frequent and agile. Here’s a rundown on the state of evaluating employee performance.
The Goal of Performance Management
A company’s performance management process doesn’t have to be a drag. The premise of performance management is simple: to help managers work with employees to collaboratively set goals, track performance, and develop employees’ skills over time. Those who lead the HR function are in a unique position to remind their company’s leaders of performance management’s higher calling: to connect leaders and their team members in the shared goal of creating value for themselves and the company.
When done effectively, performance management moves from an annual check-the-box exercise to providing real value to employees in the form of improved skill development and career opportunities. In turn, this leads to a stronger employer value proposition (EVP) for companies seeking to recruit and retain top talent. The challenge for HR departments is to help their leadership teams keep the EVP front and center.
Both HR professionals and executive teams realize that the annual performance review is limited in effectiveness, and they’re taking action to bring about change. According to Deloitte’s Global Human Capital Trends report, over 70% of companies interviewed are in the process of reinventing their performance management practices.
Many of the changes companies are considering incorporate more frequent feedback and recognition, rather than the traditional once-a-year performance review. This shift is in response to the workforce itself, with employees making it clear that they want more feedback, coaching, and mentoring. Advances in technology make it easier to deliver on this promise, with many companies using internal feedback and recognition apps that allow two-directional conversations with employees and their managers.
These changes are having a positive impact. Research conducted by IDG found that 88% of employees at firms with informal performance management processes say they are more satisfied with their jobs.
Striking the Right Balance of Informality
Instituting a process that is less formal and driven by employee interests doesn’t automatically make it more effective. Many HR leaders are concerned that when companies remove a standardized process, team leaders won’t step up to the plate. In off-the-record conversations, HR leaders share concerns about legal issues and consistency of feedback without a formalized process. Their concerns have merit: as this Harvard Business Review (HBR) article points out, if HR leaders can hardly get their management staff to conduct one solid performance discussion a year, how in the world will they create ongoing, consistent, and meaningful dialogue?
The reverse is also true: there is such a thing as too much feedback. Australian site The Conversation explores the new frontier of more informal performance management in both the US and Australia, and asserts that more feedback is not necessarily better. Communication studies show that “increasing the frequency of feedback had a positive effect on learning and performance but only up to a point,” they write. The HBR authors agree: “Being on the receiving end of all that continual coaching could get overwhelming—it never lets up.”
The takeaway here is that there’s a Goldilocks “just right” approach to modern performance management: Too little, and employee performance withers on the vine. Too much, and employees are overwhelmed or annoyed. Neither scenario is good for them—or for your employer value proposition.
Success Factors in Moving to a Culture of Continuous Feedback
The key to creating a successful informal performance management process is the frequent flow of high-quality feedback between managers and their team members. “Check-ins” are the standard communication mechanism for an informal performance management system, whether it’s via text, Slack, in-person, or video meetings. Unfortunately, not all managers hit the mark with their informal feedback. The IDG study found that only 50% of employees say their manager both gives enough feedback and is also adequately skilled at doing so.
HR managers are in tune with employee perceptions, as 62% of HR leaders report a struggle on how to build organizational competency in feedback and coaching skills. For any company considering ditching the annual performance review in favor of a more informal process, it’s clear that managers must possess the skills to more effectively provide feedback to employees. Although there is a perceived skill gap in this area, there is also encouraging data. The IDG study reports that both HR leaders and company managers felt that they would be able to make time for more frequent check-ins with employees.
Clearly, there is willingness on the part of managers to improve the quality of their feedback to employees. What remains is for their organizations to help them gain skill in giving feedback. Companies will significantly improve the probability of success for moving to an informal performance management if they provide training and coaching to their management staff on best practices for giving feedback to employees.
Making the leap to a more informal way of managing performance requires developing a culture of continuous feedback. Organizations that have already embarked on the journey are reporting more meaningful employee-manager discussions, and deeper employee satisfaction. When managers are given the tools and coaching to do it right, through strong and continuous communication, performance management can add value by increasing employee engagement and better retention.
Is your company ready to make the move?
For more information on IDG’s research, click to download the white paper, Making informal Performance Management Work in the Workplace.