Redesigning performance management – key trends of 2015

Back in April, my interest was piqued by an article in the Harvard Business Review. It focused on Deloitte’s new performance management strategy, specifically the research and thinking behind the innovations. But it wasn’t the first clue we’ve had that performance management (PM) is changing.

Intel’s OKR (objective and key results) strategy has been sweeping through technology companies for years. More recently, we’ve seen Adobe, Juniper and Microsoft drop annual performance reviews and forced rankings. Now Accenture, one of the largest companies in the world, has announced plans to do the same. With this in mind, I thought it was high time we took a look at the new initiatives that are revolutionising performance management.

The old model

To understand why performance management is changing, we first need to acknowledge the aspects of the old model that are struggling to meet our needs.

Based on annual or biannual reviews, the traditional approach is all about setting long-term goals and objectives: it doesn’t respond to changing needs or provide in-the-moment feedback. Employees are rated by their managers based on their overall performance for the year, and some companies use forced rankings (where managers rate employees relative to the performance of their peers, distributing ratings into a pre-specified distribution) to further quantify performance.

This model is gradually being phased out as new research demonstrates that numerical ratings have a negative impact on engagement and self-confidence. 

89% of organisations surveyed for the Global Human Capital Trends 2015 report have recently changed their performance management strategy, or intend to do so within the next two months.

Yearly reviews have also been found to be less valuable to both individuals and performance than regular feedback – in fact, in a past blog I shared recent research that showed the optimal period between one-on-ones is just one month.

The new model

The new approach is all about agility and flexibility, so there is no universal approach as companies search for solutions that work best for them. However, there are, a couple of characteristics that these new models have in common.

1. Real-time feedback

One of the most prominent changes across the board is the increase in feedback (something I noted when we were looking at changes to Performance management over the last five years). This increased transparency means that employees are always aware of where they stand, and it prevents managers from delaying tough conversations with under-performers.

Since adopting this approach in 2012, Adobe has reported a spike in productivity. Its Global Senior VP of People and Places even credits the new model with the stock price spike it has experienced since adopting it (Adobe’s not the first to identify the benefits of agile performance management either).

2. Tailored approach

Research has shown that setting clear goals and objectives are essential to the success¹ of any PM strategy (whether you’re working on the old system or the new).

Accenture and Deloitte have both championed a one-size-fits-one approach. Requiring more training for managers, this system focuses on coaching individuals to succeed in their roles and managing to their strengths (i.e. helping to expand roles and move employees into the positions best suited to their skills).

In a 2014 survey by Deloitte, 68% of HR respondents cited performance management as ‘important’ or ‘very important’. This year, that figure rose to 75%.

3. Team-centric goals

The new models also focus heavily on collective goals, aiming to improve collaboration and performance by setting targets that require the strength of an entire team to meet.

4. Integration

Technological advances mean that performance management is no longer an isolated HR initiative and can be integrated into our day-to-day lives.

Adobe’s ‘Check In’ system, for example, is completely isolated from HR. It allows both employees and managers to set specific goals for each fiscal year and requires review meetings at least every eight weeks. At the yearly rewards check in, managers can assign rises and bonuses based on how well an individual has met their targets.

5. Categorisation

The new models all acknowledge that understanding your workforce is critical, and categorisation goes hand-in-hand with all of the four points I’ve already touched on.

If we’re regularly meeting with employees, it is that much easier to identify who the high potential individuals are. The agility of the new approach, with its real-time feedback and individual focus, enables managers to instantly identify talent. By disassociating the process from HR and managing to strengths, managers can move these folks more quickly into situations where their skills yield the most value.

In conclusion:

It might look like a completely new system, but it’s really not all that different to the old model. Yes, today’s workforce wants an agile, flexible approach, but the needs the new strategy meets are exactly the same as those met by the traditional system. We still need categorisation, open communication, feedback, progression and development; we’ve just shifted our focus slightly. Now, we’re working to meet these needs in real time — and reaping the engagement, productivity and staff retention benefits of this new approach.

Jon Windust is the CEO at Cognology – Talent management software for the future of work. Over 250 Australian businesses use Cognology to power cutting-edge talent strategy. You can follow Jon on Twitter or LinkedIn.

Reference:

¹Lawler, E. E. 2015. Performance management: the three important features you’re forgetting. Forbes.