Performance Reviews

Why we love data driven performance management? (And you should too!)

By on November 21, 2017

We have consistently written about how annual performance reviews (done traditional way) rarely provide any value in today’s dynamic work environment.

A typical performance management system consists of self-assessment by employees followed by a response from a direct manager & then a face 2 face discussion. The performance management process is designed to bring to fore important achievements & potential improvement areas for the employee.

This whole exercise does not account for a lack of objectivity from both the parties – employees as well as managers. That is, even though this process is known to be vulnerable to common psychological biases it is still popular in numerous companies.

What is data driven performance management?

Data driven performance management is a process that relies heavily on factual data to make informed judgments & decisions about managing employee performance.

The underlying intent of using these performance management systems in a company is to bring to the fore, employee strengths & weaknesses in the most objective way. Bypassing all the biased opinions that employees’ managers, peers, or direct reports may have. It rests on the fact that an individual can be good or bad at certain aspects of his job & the performance should be managed to take that into consideration. Not based on a blanket judgment.

Challenges in managing performance driven by data:

Today, data analytics play a huge role in many decision making processes in an organization. However, such analytics haven’t been consistently used for individual performance management and monitoring, with a few exceptions of course.

The primary reason being the amount of work being done by employees may not generate sufficient performance management data to analyze. Secondly, it is difficult for managers to obtain such data as employees typically collaborate with multiple entities/departments within the company. And lastly, everyone is simply too busy firefighting to invest a significant amount of time in data analysis.

By using data driven analytics in a performance management system, large volumes of right employee review data can be translated into meaningful information about how employees have performed over a period.

There could be multiple data points that could be pivotal to an organization’s employee performance management strategy. But almost in all the cases, these data points will differ across organizations, departments, roles, etc.

That doesn’t mean this data shouldn’t be gathered at all. It simply conveys that organizations and managers will need to invest some resources till they formulate & streamline a data driven employee performance management strategy.

Once there, recent advances in machine learning & predictive analytics will start bringing in an exponential return on that investment.

Below, we have gathered a few performance management data points that could be instrumental in helping you build your employee performance management strategy. Some of these data points could be generic whereas others could be specific to a role or a function.

Data points for performance management

Feedback from multiple sources & over a period of time

Rather than doing annual or even semi-annual performance reviews, make them more frequent. Gather these feedback items from multiple sources, not just managers. This will allow you to get rid of (to an extent) the recency & confirmation biases.

Additionally, train people to provide feedback along with as much context as possible. That lets you see the big picture down the line when the feedback is being analyzed.

Measurable goals that are tracked more frequently

Annual goal setting is known to be a wastage of resources, due to its ‘set & forget’ nature. The set & forget philosophy of goal setting is proven to be ineffective. If you are seriously looking to gather factual data around employees’ corporate goals, use OKRs or SMART methodology.

Not just set the goals measurable & time-bound, ensure they are updated more frequently. These frequent updates along with final grades will provide you with a holistic view of the employee’s efforts.

Adherence to timelines

We would recommend giving employees the freedom to perform the tasks they own. That doesn’t mean tasks should not be time-bound, it just means ‘stay away from micro-management. And whenever there is an instance that deserves praise or improvement, document it for future reference.

Quality of deliverables

While measuring quality for some functions could be very straightforward, for others it could be a peculiar challenge. e.g. Sales teams are known to be measured by the dollars they earn. But do we know the most common metrics used by other functions for example technical writers?

Before measuring the quality, it’s important to document the metrics & agree on them with respective employees. Make sure there is no room left for interpretation.

Innovation

Innovation is one of those aspects, that are immensely challenging when it comes to their measurement. Having said that, academics have advanced the research so as to allow us an objective measurement of innovation.

For example, one of the recent measurements for innovation is RoPDE (Return on Product/Service Development Expense). Interestingly, RoPDE is derived from standard accounting data.

As mentioned earlier, there could be a number of performance management data points related to efficiency, effectiveness, relationships at work, work-life balance, and so on. It all is going to revolve around your company values.

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