7 Ways to Make Performance Management Meaningful

HR is being upended by a number of different factors, including workforce demographics, digitization and a general lack of patience for bloat. Many of the policies, processes and tools that have been put into place to help manage yesterday’s workforce no longer apply.

By and Large, Performance Management is a Waste of Time

Enter performance management, the ultimate ‘let’s get this over with’ exercise. Indeed, nearly half of HR professionals who recently participated in our first Workforce Experience Study indicated performance management as being in their top 3 improvement areas over the next 12 months. You can click here for a copy of the study; click here to view a recorded presentation of the results.

There is good reason for this. Despite the declarations of ‘goal alignment’ and ‘career development’ provided on corporate portals everywhere, we all know what real outcomes of performance management tend to be:

  • The compensation group gets a rating to plug into their merit matrices and bonus calculations.
  • Managers — many reluctantly — are able to grade and delineate their direct reports.
  • The employee’s record gets a little thicker.
  • No one thinks it’s worth the time worth put into it.

It’s been this way for a century. Companies have developed a myriad of procedures, forms and rating systems, but, in the end, the vast majority still use a process where goals are set at the beginning of the fiscal year, possibly reviewed at some interval, and then rated annually by the line manager.

Eliminating Ratings Can Be a Siren’s Call

Thousands of organizations that have targeted performance management for ‘transformation’ over the past few years have chosen to nix ratings. This stands to reason. After all, ratings have played a role in the traditional, ‘let’s get this over with’ performance management model, which is backward-looking, stressful, administrative, time-consuming and arbitrary.

However, as a CEB Global Study pointed out last year, simply eliminating ratings can have unintended consequences. Some highlights of what happened at their sample population of organizations that eliminated ratings:

  • Measures of employee engagement and performance dropped by 10%
  • Manager conversation quality declined by 14%
  • Managers spent less time on informal reviews conversations
  • Top performers’ satisfaction with pay differentiation decreased by 8%

So assessments of performance do not simply become more accurate or consistent when ratings are eliminated. And as the Talent Strategy Group points out, performance ratings can be useful in that they:

  • Foster differentiation (e.g., for promotions, bonuses).
  • Increase transparency [assuming they’re shared].
  • Support idea of ‘Big Data’ in HR.

As we discussed during a recent Leap Chat, these are all true statements ASSUMING one systematic condition — that performance management practices are tightly tied to the day-to-day work — what is expected of us, our actions, our behaviors — needed to make all of us productive in our roles, and in turn, make the organization successful. Unfortunately, this condition DOES NOT hold at many organizations. Hence, performance management continues to serve as a whipping boy for both those who participate in it and even those who design and manage it.

In the End, Ratings Don’t Matter All that Much

I’m often asked what my position is on ratings. In truth, I’m neither for them nor against them. And while I hate to give the typical consultant answer, ‘it depends,’ it truly does. For me, it’s not an all-or-nothing argument. Just like some students thrive in schools that hand out grades and others don’t, some employees succeed in environments where ratings are used whereas others do not. The good news for most of you reading this is that you are at-will employees who can choose in which of those two types of environments you work.

What I do know is that people generally need a mechanism to understand what is expected of them. For some, a rating scale is part of the solution. For others, clear-cut guidelines, SMART goals, sharp competency models and/or definitive job descriptions suffice.

I have recommended to the vast majority of companies I’ve consulted with on performance management they either eliminate their current rating scales or simplify them. However, that’s because these scales are typically symptomatic of a broken system that needs an overhaul. At Leapgen, we look to eliminate friction from the workforce experience (for more on that, check out this post from Jason Averbook). And removing bloat from rating scales and other elements of longstanding performance management practices is often an effective way to make it more seamless to people.

Bottom Line: Before Making the Call on Ratings — Or Deciding Whether or Not You Should Have a Performance Management Process at All — Make Sure You Do These 7 Things

Performance management will never be perfect — ratings or no ratings. The key is determining what makes sense for your workforce. I recommend to anyone reading this they do the following things when examining ways to blow up or refine their performance management practices. If you have not taken every single one of these actions before your next fiscal year, I urge you to scrap performance management for the next 12 months, see if anyone cares or misses it, and take the time that would have been spent ‘getting it over with’ to rethink how it’s done.

1. Get your CEO to own it and help define its purpose and outcomes. Do we need to enable goal sharing and socialization so that people understand what is expected of them and how they support the success of the organization? Are we a pay-for-performance [for some or all roles]? Support a culture of ‘growing our own’ by identifying high-potentials to retain and develop? Your CEO should be be directly involved in answering these questions as part of defining the purpose of performance management. If not, the value of the process and the extent to which it is taken seriously by anyone will be hamstrung.
2. Get a cross-section of business leaders to champion it. Provided your CEO is onboard with defining the vision, his/her direct reports need to be fully buy into the vision (hint: if they’re involved in defining the vision, their buy-in should be a piece of cake) and be responsible for it being adopted and executed in their respective function/dept. This is true whether you’re introducing changes to the process or not.
3. Get a cross-section of performers to design it. This may be some combination of the business leaders referred to above and/or people they appoint. If the vision calls for significant change to what the purpose and outcomes of performance management should be, a tiger team should be engaged to help design the process. Every major business function/department should be represented.
4. Take a role-based approach to performance process and content. Think job family. The performance of an inside salesperson vs. an engineer vs. a patient-facing health care worker vs. an IT project manager is inherently different because the nature of their work is different. Therefore, the process may need to vary a bit. At a minimum, the content (e.g., rating scale, competency model, goals) will. Defining personas is a great way to start down this path.
5. Make performance an ongoing series of conversations and interactions, not an annual or semi-annual event. Regardless of the job function, it is the job of a manager and [to a lesser extent ] co-workers to both let people know what is expected of them and provide feedback and coaching to people. Plain and simple. Performance management needs to support these interactions, not be seen as some administrative to-do that sits outside these things. If you don’t have mechanisms to easily and seamlessly share and update goals or give and get feedback in a timely manner (e.g., discussions/meetings that happen during the normal course of business, social collaboration tools, team sites) as part of your performance management practices, you need to get them.
Figure 1: Leapgen Product Development Lifecycle Process Example
When we work with clients on performance management, we start with a baseline of asking how it will keep the organization and everyone involved in the mode of ‘perpetual beta,’ meaning ongoing improvement. Staid, sterile annual and semi-annual check points simply don’t do a good job of this. The graphic below depicts one example of how employees and managers meet to discuss how things are going with respect to goals and performance risk factors (e.g., work-life balance, changing or competing priorities, etc.) that need to be mitigated or removed.
6. Develop managers’ capabilities (e.g., expectation-setting, delivering feedback, developing others, recognizing others) and hold them accountable. As the CEB Global study points out, you’re dead in the water. You can have the sleekest process and toolset available, but if you don’t have managers ready to use them, it’s like handing the keys to a Ferrari to someone with a learner’s permit.
7. Separate compensation and development discussions. If as part of Step #1 you decide performance management will be used to foster both pay-for-performance (short- and long-term incentives with a performance factor tied to them, not a ‘2% raise if someone meets expectations and a 2.5% raise if someone exceeds them’ practice masquerading as pay for performance), make sure you don’t design discussions blending both topics. Even the most development-oriented person is going to tend to focus on what their reward is, not what they can be doing to improve their performance and that of the organization.

Be sure to download the playbook to have as a reference or share with colleagues!

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