Carlos Quintana
Feb 22, 2018 · 9 min read
Photo by mathiasjensen via Unsplash

What does the evolution of employee performance management say about our desire to live more fulfilling lives?

For a long time, the annual review was considered the perfect tool for measuring employee performance. However, in the last years the number of companies that have decided to drop the annual review, and less traditional appraisal systems (e.g. self-assessment evaluations), has grown exponentially. In the following lines, we will explore some of the reasons behind this change as well as the ideas that are transforming performance management and empowering people in their search for a more fulfilling life.

Redefining employee performance management

Let’s take a look at two facts supported by extensive evidence: global warming is real and employee performance management is failing everywhere. Let’s discuss the latter.

There are two reasons why performance management has failed so badly across the corporate world. The first one is because this process has been exclusively implemented in terms of appraisal systems such as the annual review. In other words, performance management = appraisal management, which is pretty much like saying 2 = 7! The second reason is because those appraisal systems have proved to be totally ineffective especially in the current, dynamic environment we live in.

Regarding the first reason, there is a broad misconception around performance management. In fact, performance management is a process that goes far beyond appraisals. According to the Human Resources expert, Susan Heathfield, “performance management is the process of creating a work environment or setting in which people are enable to perform to the best of their abilities.”

In order to implement effective performance management, Susan Heathfield has elaborated the following checklist of points that need to occur during this process:

  • Develop clear job descriptions.
  • Select the right people with the right selections process.
  • Negotiate requirements and accomplishment-based performance standards, outcomes and measures.
  • Provide effective orientation and training.
  • Provide ongoing coaching and feedback.
  • Carry out quarterly performance development discussions.
  • Design systems that reward people for their contributions.
  • Provide career opportunities for people.
  • Assist with exit interviews to understand why valued employees leave the company.

Considering the above, performance management is a comprehensive process that spans between the moment a job description is conceived and the moment an employee leaves the company. Having a good performance management process in place helps companies to deal with human capital risks effectively.

The problems with the annual review system

The arrival of appraisals in the corporate world is almost parallel to the birth of the annual review system (think about the 1960s). In fact, it didn’t take long for the annual review to become the mother of all appraisal systems. Most of the corporate world became infatuated with the annual review including big companies like General Electric (GE) whose system for measuring performance known as “rank and yank” was an integral component of the company’s DNA for many years.

Although many companies claimed success and promoted the annual review as the most important variable of employee performance management, the problems with the system were obvious from the very beginning. However, the world back then was full of fixed structures that were difficult to challenge and business continued as usual.

The new millennium came along with significant changes. Further globalisation, flatter corporate structures, overwhelming technological changes and a generation of workers with different expectations created a dynamic environment where constant communication became essential. In this context, something as fixed and vertical as the annual review started to lose its appeal and the problems that were always there became even more evident.

The following are some of the main reasons that have persuaded so many companies around the world to abandon traditional appraisal systems:

Nobody likes it. Neither managers nor employees are fans of the annual review system. The manager “lacks skill in providing feedback and often provokes a defensive response from the employee. Consequently, managers avoid giving honest feedback which defeats the purpose of the performance appraisal,” explains Susan M.Heathfield.

A biased process. In the past, several studies have extensively talked about this problem. According to evidence presented by Vauhini Vara, a former business editor for The New Yorker, “studies suggest that more than half of a given performance rating has to do with the traits of the person conducting the evaluation, not of the person being rated.”

Focused on the past. This is one of the biggest reasons why so many companies are dropping traditional appraisal systems. It also highlights one of the biggest failures with traditional performance management: lack of communication. “Who cares what went wrong and what when right last year? We have this year and next year to think about,” says Liz Ryan, an HR expert.

Furthermore, these reviews tend to focus on recent achievements and issues that people are able to remember more easily, which end up bringing a good amount of bias into the whole process and affects the spirit and momentum of the whole team. Max Nisen, a reporter for Quarz, reinforces that idea explaining how years of research has found that the annual review system “is ineffective at boosting performance, actively alienates employees, is based on a flawed understanding of human motivation, and is often arbitrary and biased.”

A waste of time and money. Considering how ineffective they are in terms of focus, achieving goals, inspiring employees and transforming businesses, traditional appraisal systems represent an enormous cost for companies. In fact, a report published by the management research firm CEB, concluded that “the average manager spends more than 200 hours a year in activities related to performance reviews. When you add up those hours, plus the cost of the performance-management technology itself, CEB estimates that a company of about 10,000 employees spends roughly $35 million a year to conduct reviews.“

As we can see, there are very good reasons to put away traditional appraisal systems, However, that does not mean that companies need to stop measuring the performance of their employees. As stated by Ted Power, Chief Customer Officer at iCoachfirst, “the companies who killed off reviews did not stop communicating to employees about their performance. They have merely replaced those reviews with other, more modern forms of communication.”

From judging to empowering people

One of the most exciting things about performance reviews is that there is a lot of innovation in this field. On the one hand, we have witnessed a changed of ideas that have redefined concepts like the nature of feedback and the role of the manager. On the other hand, we are seeing new processes that involve things like peer-based reviews and a very smart integration of apps in the workplace. Let’s have a brief look.

What is meaningful feedback?

According to an article published by BetterWorks, “annual reviews aren’t enough to feed the demand for continuous feedback. In fact, 42% of millennials — now the largest share of the U.S. workforce — want weekly feedback on their performance.” Because of this, constant and casual feedback has become one of the most important elements when it comes to the design of employee performance management.

However, implementing constant feedback is not enough. Many companies have learned the hard way that constant feedback, as opposed to annual feedback, does not by itself solve the problems associated with traditional appraisal systems. In order for it to work, it is essential that you can measure the quality of the feedback.

Several companies have started to implement processes with measurable feedback. For example, the software company Sift Science, has established a performance review system where feedback is constantly checked. “One of the thing we’re doing pretty regularly is meta-feedback: it’s feedback about feedback. It sounds silly, but I think it’s really important. We poll a team member and ask, ‘How often do you get feedback from your manager?’,” says Jason Tan, the CEO of the company.

These kinds of checks will help your company to bring meaningful feedback and conversations into your performance management process. But what is meaningful feedback, anyway? A recent report published by Gallup, advises that feedback needs to be frequent, focused and future oriented. Furthermore, meaningful feedback needs to be constructive and help people to work better.

Coaching: The #1 skill in the market

The ability to provide feedback has become one of the most regarded skills of the modern manager. Today, more than ever, companies want to bring to their performance management systems people who have the ability to learn and improve the art of giving and receiving feedback.

However, rather than looking for managers who are good at evaluating people, companies are looking for professionals who are good at inspiring people. Today, the corporate world is looking for managers with solid coaching skills that are capable of achieving “a balance of both positive and constructive feedback throughout the year to help employees to achieve their best work,” says Sarah Payne, Managing Editor of the Globoforce’s blog.

The days where feedback was based on evaluations and criticism are over. Today, smart companies invest time and resources in their managers so they can become inspiring coaches. This is exactly what Google’s Project Oxygen unveiled: ‘Being a good coach’ is the number one thing great managers do.

Arrivederci managers: Peer-based reviews

The lack of trust that has defined traditional appraisal systems as well as the scarcity of good managers and coaching skills in the market have inspired other companies to think in different ways. In fact, several companies have decided to remove from the process one of its key components: the manager. Instead, companies such as Facebook have promoted peer-based reviews in order to bring back trust to the whole process.

Raffaela Rein, CEO of CareerFoundry, a company using peer-based reviews, argues that people are more inclined to take input from peers seriously. “They are the ones working together every day, so there’s no hiding. Sometimes, if only the manager gives feedback, then you only work hard while he’s there,” says Rein.

While peer reviews are far from perfect, there is no doubt that some of the processes that have implemented this approach have seen gains in terms of trust, transparency and honesty.

App integration: A new boost for performance management

Technology is playing a big role when it comes to improve performance reviews and performance management as a whole. In fact, various companies are using software and specific apps for handling their own processes. This, of course, didn’t happen overnight. “What’s enabled this change, specifically, is the advent of performance management, coaching and feedback software that lets managers give feedback and recognition right when it happens,” explains Ted Power.

One of the companies that has been taking advantage of the technological aspect is GE. In fact, the company developed an app called PD@GE, which stands for Performance Development at GE. The beauty of this app is that it incorporates some of the principles that didn’t have the traditional appraisal system.

With the PD@GE app each employee has near term goals, communication happens often through the so-called “touchpoints,” and constant improvement is the main focus of it. Furthermore, “employees can give or request feedback at any point through a features called “insights,” which isn’t limited to their immediate manager, or even their division,” explains Max Nisen.

Apps like this represent a step forward in employee performance management. However, they don’t need to be solely focused on goals and feedback. For instance, an employee time tracking app featuring customizable dashboards and budget tracking can also provide managers and employees with everything they need to keep communication open and smooth at all times. A smart integration of apps within the workplace can go a long way in terms of performance management.

A bigger story

The ideas and changes that we have previously discussed are the result of a new mentality mostly defined by millennials and the dramatic technological changes we have experienced during the last years.

The world isn’t really on an annual cycle anymore for anything,” says Susan Peters, Senior VP of Human Resources at GE. Why is that? According to Peters, millennials are part of the reason. In fact, she ‘blames’ this new generation of workers for the changes that GE implemented in the past. “It’s the way millennials are used to working and getting feedback, which is more frequent, faster, mobile-enabled, so there were multiple drivers that said it’s time to make this big change,” explains Peters.

While annual reviews are still popular among many companies and traditional structures are difficult to remove, a significant chunk of the global workforce has come to define new expectations when it comes to the way people and companies work nowadays.

Today, people want to have meaningful, ongoing conversations that are constructive. They want inspiring coaches who can help them to unfold their full potential. They want to be measured by a system based on trust and transparency that is forward-looking. And they love to rely on technology to improve everything they do.

All these expectations can be summarized into one big desire: people want to feel good and happy about their jobs! This, of course, may sound like an old cliche. However, the big difference now is that we live in a world that has empowered us to become more serious about that goal. The bigger story here is that the evolution of employee performance management may be just another expression of our ongoing desire for living more fulfilling lives.

Two Types Of Managers

On this publication, we will be curating and creating content that we think is helpful for managers and business leaders. You will find a mix of posts with tips, opinion articles, and shared knowledge. We like to keep things light and fun while still taking care of business.

Carlos Quintana

Written by

Writer | Journalist

Two Types Of Managers

On this publication, we will be curating and creating content that we think is helpful for managers and business leaders. You will find a mix of posts with tips, opinion articles, and shared knowledge. We like to keep things light and fun while still taking care of business.

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