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Employees complain that it’s demotivating, and it doesn’t fully reflect their contribution. Managers find it time-consuming and burdensome for little incremental impact.
FREMONT, CA: More than half of companies are dissatisfied with their current performance management system, and two-thirds have already made changes to their processes, such as simplifying ratings. While businesses are eager to embrace change, very few know where to direct their investments and which aspects of the performance-management process to prioritise. Many organisations try to change too much, too quickly, which confuses employees and undermines system trust.
1. Defining Future State: Determine a talent philosophy and the goals to achieve. Many businesses focus on resolving pain points in existing processes rather than questioning the purpose of their performance management. The company vision must be shared by the entire organisation. That answer will be guided by two questions: what to believe about how people are motivated, and about people's ability to grow and learn. Because there is no such thing as a one-size-fits-all solution, having a set of design principles that align with these philosophies can direct what to do and why. The organisation recently embarked on a major digital transformation and realised that evaluating the 'how' (i.e., leadership behaviours) is becoming as important as evaluating the 'what,' and they are adjusting their performance indicators accordingly. To address the right pain points and design an effective future state, one must first understand what the performance management system seeks to accomplish and a context for change.
2. Engaging Workforce: Request that the employees identify their pain points and the most important aspects of performance management. When executives at a major financial institution recently felt the need to eliminate performance ratings to improve performance management, more than three-quarters of the workforce responded that they desired a rating. Far too often, performance-management redesign is an HR exercise that is not informed by the system's ultimate users and beneficiaries.
3. Balanced Feedback: Feedback is critical information that tells a performer what they should do more or less to improve their performance. To have the desired impact on performance, feedback should be given immediately or as close to the situation as possible. It should NOT be accumulated over the year and used to justify a poor performance rating. This is not only demotivating for the employee, but it also represents a list of missed opportunities for performance improvement and reinforcing good behaviour. Employees are receptive to feedback for improvement if it is fair and accurate; employees will expect managers to be prepared and knowledgeable before providing feedback. Managers who work on their relationships with their teams and create a trusting environment will also have more credibility when delivering difficult feedback than those who manage behind closed doors.
4. Regular Progress Reviews: Performance management will be a once-a-year paperwork exercise if there are no reviews. A year later, the objectives that were written at the beginning of the year will have changed focus, moved up or down the priority list, or even been dropped entirely, so progress reviews are critical.
Employees and management work together to plan, monitor, and review the employee's objectives, long-term goals, job trajectory, and overall contribution to the company during the performance management process. This process is ongoing, with regular sessions in which both management and employees can provide and receive feedback.