According to a 2019 CEB global study, 95 percent HR leaders were unhappy with the traditional annual performance review process and 60percent employees felt that performance reviews did not help improve their performance in any way.
The two main issues with traditional performance appraisals are that the administrative effort is too high and the relevance and accuracy is too low. As we approach the end of the year, most companies are gearing up for their year-end appraisals and the traditional way of performance management is best described in three stages I call set, forget and fight or flight. What does it feel like for your people?
Here, you would fill out a form with generic or standardised role-based goals at the start of the year. Sometimes these are pre-filled based on the role you’re in and you didn’t even have a conversation to understand the objective or their impact on them.
This method could be used for those working in factories where an employee’s output is straightforward and easily measurable, but for today’s knowledge workers, setting goals annually doesn’t quite make sense.
Next, you’d ‘forget’ the set goals and engage in actual work that has dynamically changing priorities on a daily/weekly basis, that may or may not be aligned to goals you filled in the form, which you won’t open till the end of the year.
As one continues with their daily tasks the likelihood of reviewing the goals set initially drastically reduces, leaving the process of setting goals rather redundant.
Fight or flight
In the final stage of this process an employee would be assessed based on the goals set out in the beginning of the year, that they may not have chased. You’d get a rating or a ranking at the end of the year based on this ‘performance’ that has no relevance to the actual work you did and outcomes you delivered through the year.
This inaccurate representation of your work leads to receiving feedback from your manager (that is highly biased at times) on how to do better.
This incongruence between the work done in reality vis-à-vis the feedback received based on the goals set at the top of the year gives rise to two sets of thought in an employee – “should I defend myself and push back (fight) or wait to see if I’m getting a fat bonus before I decide whether this place is even worth my time” (flight).
The world we work in today is very different where companies operate in dynamic market environments where business priorities change rapidly. Value to customers is best delivered by cross-functional teams (pods or squads) that get formed on demand and not by top-down functional silos.
Hypergrowth companies today look at performance management as the operating system that accelerates business growth through the continuous performance development of their people and teams – driven by transparency across levels and a cadence of continuous conversations.
So, what does this ‘continuous conversations’ paradigm look like?
Open and transparent goal management
Successful organisations allow for goals to be changed and targets to be altered. They drive this through quick stand-ups amongst teams across levels, typically fortnightly. This helps ensure employees actually have relevant goals they are working towards every day, and all their contributions are duly accounted for in any performance related decisions.
According to a 2019 McKinsey RTS study, managing goals openly and transparently increases the rate of achievement by a whopping 42percent.
In addition, knowledge workers need to feel there is a connection between their day-to-day effort and the needs of the business and they are more likely to apply high levels of effort towards meeting purposeful goals.
These connections are also established by sharing open and transparent updates about the company’s current priorities and progress against strategy, on forums like town halls or letters from the CEO’s desk.
Real time feedback
The best performing teams today focus on on-going feedback provided in the natural flow of work.
Rapid feedback loops give people specific and actionable inputs to implement in real time, learn from and course correct before it is too late.
Leading players like Accenture, Adobe and Deloitte have reported that regular, organic and multi-directional feedback between team members, or from managers and project leaders have led to more meaningful relationships, deeper insights and greater employee satisfaction.
By allowing employees to socially recognise a job well done, a helping hand, someone going above and beyond, or even company values demonstrated in the moment, organisations can promote a culture of collaboration, improve engagement, increase job satisfaction, and motivate employees to improve performance.
According to a 2019 Great Places to Work study, ‘recognise me frequently’ emerged as the strongest contributor to producing great work at 37percent in comparison to ‘pay me more’, which stood at only 7percent.
One-on-ones are a regular checkpoint to peek into progress, discuss what has transpired, and the steps forward for what’s to come next. They allow the manager to learn about their team member’s experiences and expectations and create the right opportunities to grow.
By doing so, managers also develop a well-established rapport with their team members and aren’t prey to biases when it’s time for performance reviews.
In a nutshell, performance management today isn’t only an HR process that needs to be run once a year because compensation outcomes need to be finalised. It’s a process that needs to be equally owned by leaders, managers and individual contributors alike.
And the outcomes of this process aren’t only greater profitability or better pay, it’s about putting a ding in the universe, individually and collectively. And that’s really why your top talent shows up to work every day!
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)