Performance reviews are dead, or so we have been told. The data shows a shrinking support for the traditional method: only 15% of companies have not adjusted their annual performance management process and do not plan to.
But the data from our Performance Management, Culture, and Business Results study shed a different light on the subject as well. High-performing companies, those with increases in revenue, retention, and engagement, are more likely to prioritize multiple goal-setting and review sessions annually versus low performers focusing on the once-a-year session.
While it is true that the outdated systems of forced ranking and administrative paperwork might no longer be in style, the new model of performance management is gathering steam. Like a phoenix from the ashes, this revised version of performance management does more to ensure positive outcomes for both employees and their employers. From 360-degree, continuous feedback to an increasing link between performance and results, the shift has positive implications for the businesses willing to make the change.
Are Your Process- or People-Focused?
When it comes down to it, many organizations believe their performance management process is more process-focused than people-focused. For instance, the goal setting, assessing, and review process is at the forefront instead of incorporating elements such as employee strengths, in-the-moment feedback, and recognition. Perhaps that is why just 4% of companies say their current approach is a highly effective method for managing employee performance.
Traditional performance management does not deliver value for companies and creates an adversarial relationship between employer and employee. By gathering information on how employees are performing once or twice a year, performance management seems more punitive than productive. In addition, traditional performance management is not tied to business outcomes or overall organizational success. When surveyed about what has changed with existing programs, companies touched on some areas that clearly indicate a shift in the traditional approach:
- shifted annual discussions to more informal, frequent feedback
- eliminated use of a forced ranking system
- brought recognition and strengths-based coaching to bear
These three items are a stark contrast to the performance management processes of old: they are focused on actual business and individual performance.
Consider Skills and Mobility in Performance Conversations
Another related area of talent management that more and more companies are wrapping into the discussion is around skills and internal mobility. Talent mobility is about connecting employee skills and aspirations with the needs of the business. In a recent training session with a set of HR executives, I asked them how many actually had insight into the skills their organization has on hand. Less than ten percent of the hands went up, signifying that most companies don’t have the capability to take a more mobile approach to talent.
At the same time, there are companies winning at this process. A great example is Credit Suisse. The financial institution’s nearly 50,000 global employees have access to a program called Internals First, which prioritizes internal hiring and transfers over external hires. In 2016, the firm filled 39% of all vacancies with internal hires, and nearly 10% of the workforce made internal moves during the year. The company takes an innovative approach of having recruiters call internal workers that seem to fit requirements, discussing roles and moves with them instead of making it purely rest on the shoulders of the employees.
Career development is a critical part of the larger talent conversation. The recent ADTRAN case study we published exemplifies this well. The firm has used hackathons to tie together disparate pieces of its HCM strategy: branding, retention, skills development, and more. And the employees even bring it up in their performance conversations as it’s a key part of how they see themselves growing and contributing to the organization.
Employers that want to truly engage their workers should look at ways to do so within every touch point of the employee experience and every step of the employee life cycle. Because career development and skills growth are tightly interwoven with performance management, it makes a natural fit to focus on both of them with overlapping, complementary processes.
Ben Eubanks is the Chief Research Officer at Lighthouse Research & Advisory. He is an author, speaker, and researcher with a passion for telling stories and making complex topics easy to understand.