Employees are the most critical asset of any organization. They play an important role in ensuring its long-term success. Thus, it makes sense that companies take extra effort to streamline their performance management systems. Companies with a successful performance management process can engage employees and ensure that they are extracting the best out of their existing potential. All these efforts culminate in improving the bottom line of the company.
Although the world of work is changing rapidly, some companies still rely on traditional methods of managing performance, like annual reviews. These methods of performance appraisals may have worked in the past but it is time to reassess their existence. Due to the complications and time-consuming nature of spreadsheets and documents, many companies are increasingly turning towards better alternatives for performance management.
What are the elements of successful performance management?
Assessing the status quo is the first step of any successful performance management process. By asking questions like if the system provides a consistent performance appraisal and improvement flow, are the current performance standards realistic, how are the performance measure metrics related to the overall goal of the company etc., managers can identify the areas of growth and success areas for their team members.
Performance Monitoring via regular meetings and check-ins
Timely reviews that result in identification of issues and new opportunities, if any
Setting expectations enables employees to understand what is expected of them and how can they go about achieving those how employees can achieve this.
Offering incentives motivates employees, reduces poor performance, and brings team closer
Continued professional development of employees through conferences, 1-1 mentoring and coaching helps them focus on the work at hand, knowing that their organization is invested in their future
How Frequently Should Your Company Conduct Performance Reviews?
The problem with the traditional method of performance reviews – be it an annual review or quarterly reviews – is typically of the ‘too little, too late’ variety. Managers conducting performance reviews focus on the immediate projects, instead of finding out how the performance of the team member can be improved. Employees who are getting reviewed, on the other hand, are focusing on the amount of work done, instead of showing the value-added to the company and self.
The Advantages of Having More Frequent Performance Review Cycles
The right cadence for the performance review cycle differs from one organization to another – and in many cases, can even be different for different departments in an organization. A team like development needs constant upgrading of knowledge (which means frequent performance reviews, at least 1-2 a month during major releases) while accounts teams need not bother with the latest trends in their field. Hence, the leaders should decide the frequency after a thorough discussion with team members and their managers.
- Higher engagement, lower stress
The performance review process becomes an ongoing discussion when it is conducted often, instead of the scary behemoth employees seem to loathe – Annual appraisal.
- Easier aligning of Organizational and individual goals
58% of managers have never received management training, according to a research by CareerBuilder. No wonder even managers feel stressed when faced with annual performance reviews, which can make or break the employee’s and the team’s outlook towards the future.
- Near-accurate evaluation of employee performance
As employee reviews get frequent, the focus shifts to goals and feedback. Organizations that embrace this culture grew by 756% over the last 11 years, according to a HBR study. On the opposite side, the organizations without a robust performance management culture increased net income by only 1% over the same time period. With frequent meetings, managers can understand the issues faster and take preventive measures.
5 companies with the key to successful performance management
Over the past couple of years, a few have sought to find better ways of managing performance in the workplace. Here we have identified 5 companies that have completely changed the way employee performance is managed. One thing that is common across all these companies is that they realize the importance of the frequency of assessments.
Any list that talks about successful performance management cannot be complete without Google. It stands at the top of this list, being our favorite. Google abolished their numerical performance review process in 2014 and replaced it with a peer review system for performance reviews, that leverages OKRs or Objectives and Key Results goal-setting framework.
Here, quarterly reviews rule the roost – with the option of having it on a semi-annual basis. Managers (or reviewers) are asked to note one thing the employee being reviewed should do more of and one thing that should be done in a different way.
Managers then determine where to grade an employee on a five-point scale where five is “superb” through to one “needs improvement” based on the peer reviews. This style of collaborative approach helps to prevent feedback bias to a great extent. The assessments are shared by managers with a set of examples to justify the evaluation, be it positive or negative.
Deloitte previously relied on annual reviews which took 360-degree feedback that resulted in their managers wasting 2 million hours per year (Source). They found that there was a significant drop in employee engagement as well as performance levels. They wanted to introduce an effective performance management system that is nimbler, real-time, and individualized – to focus on developing performance rather than simply evaluating it.
A couple of highlights about the new performance reviews
- The optimal frequency should be weekly
- Carry out regular check-ins about near-time work initiated by team members.
The thought behind this new process is that people tend to be interested in their own insights, achievements, and contribution. Successful performance management processes are those where companies can help individuals become more engaged in their performance.
Adobe also believes that performance management based on regular feedback and check-ins is a lot more important than ever before. They have already scrapped their annual review process. After introducing a frequent check-in program, the company was able to bring about a 30% reduction in voluntary employee turnover.
Another change brought about by this method is that involuntary departures have risen by 50%. The reason being, the increase in ‘tough discussions’ between managers and employees who are particularly struggling with performance issues. Instead of waiting around for the next performance review cycle, these discussions can take place during one of the frequent review sessions.
It’s best to identify issues before they turn into large problems.
Netflix has also moved away from annual performance review to a more frequent feedback process of performance management. Their philosophy is simple. By talking simply and honestly about employee performance regularly, you are bound to get good results eventually. All you have to do is point the employees in the right direction whenever they go astray.
They concentrate on building a culture of high-frequency feedback, one of the key elements of Agile Performance Management. It has helped them reap great benefits in recent years.
Accenture got rid of its rating system a couple of years ago and replaced it with a more flexible system, in which employees receive timely feedback from their managers on an ongoing basis once their work begins.
It is a conscious move by the top-level to move away from micromanagement and let employees focus on doing what they do best. After all, it takes a considerable amount of effort to get the right people for the right roles. If this condition has been satisfied, then it doesn’t make sense to have a rigorous performance management system. They will eventually get the results that are expected out of them.
There are a number of other companies (and start-ups as well) who are coming up with a new approach for managing performance reviews. With time, they too might find popularity once they are able to transform their work culture. Here are 3 things that have the ability to ensure successful performance management globally:
- A culture of continuous feedbackand performance management
- Investing in robust performance management systems
- Chat-bots to ease the process