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5 Game-Changing Performance Management Trends for 2018

Performance Management Trends in 2018.
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As we near the end of the decade, what changes can we expect to see in per­for­mance man­age­ment practices?

At Clear Review we are talk­ing to HR pro­fes­sion­als day-in day-out about per­for­mance man­age­ment and each year we write our huge­ly pop­u­lar annu­al sum­ma­ry of the lat­est per­for­mance man­age­ment trends.

We cov­ered the per­for­mance man­age­ment trends of 2017 12 months ago, and we have watched as organ­i­sa­tions have become increas­ing­ly employ­ee-focused and less process-dri­ven. In this excit­ing cli­mate, we’re wit­ness­ing change and see­ing that com­pa­nies are hav­ing the courage to shake up their per­for­mance man­age­ment sys­tems and try new things.

As the year draws to a close, we’re excit­ed to announce our pre­dic­tions for 2018.

1. Atten­tion will move from quan­ti­ty to qual­i­ty of con­ver­sa­tions and feedback

2017 was the year that Con­tin­u­ous Per­for­mance Man­age­ment moved from being a dis­rup­tive HR trend to being wide­ly recog­nised as the most effec­tive approach to man­ag­ing per­for­mance. Com­pa­nies of all sizes are shift­ing away from annu­al appraisals to more reg­u­lar check-ins’ and fre­quent real-time feed­back and the redesign of per­for­mance man­age­ment is now a high pri­or­i­ty for 79% of exec­u­tives accord­ing to Deloitte.

As organ­i­sa­tions embrace this new approach, atten­tion is now being turned to how to make per­for­mance dia­logue more mean­ing­ful. To achieve this, in 2018 com­pa­nies will need to:

  • Pro­vide employ­ees and man­agers with a frame­work for hav­ing high-qual­i­ty dis­cus­sions and giv­ing effec­tive feed­back. Per­for­mance man­age­ment frame­works or sys­tems should encour­age future-focused, devel­op­men­tal dia­logue sup­port­ed by in-the-moment, qual­i­ta­tive feedback.
  • Min­imise form fill­ing and bureau­cra­cy (see Trend 2 — Sim­plic­i­ty — below)
  • Pro­vide train­ing for man­agers in every­day coach­ing skills
  • Decou­ple per­for­mance mea­sure­ment from per­for­mance improve­ment con­ver­sa­tions and feedback

Address­ing these issues is vital con­sid­er­ing that employ­ee expe­ri­ence has been a top trend in 2017 and that man­agers and employ­ers are hav­ing to come to terms with the fact that we’re liv­ing in an employ­ee-dri­ven mar­ket. If we don’t focus on employ­ee devel­op­ment and growth, we’ll fail to keep hold of our top performers.

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2. Per­for­mance man­age­ment sys­tems will strive toward sim­ple’

If we are increas­ing­ly con­cerned with employ­ee expe­ri­ence and how to improve per­for­mance at work, we need to start with the sim­plic­i­ty of our work­place process­es. Michael Arm­strong said in his Hand­book of Per­for­mance Man­age­ment that a per­for­mance man­age­ment sys­tem should be ridicu­lous­ly easy to under­stand’, and this is some­thing busi­ness­es are now wak­ing up to.

Over the last decade, per­for­mance man­age­ment became increas­ing­ly com­pli­cat­ed as organ­i­sa­tions focused on mea­sur­ing per­for­mance and link­ing it to pay. How­ev­er, we’ve now come to realise through research that these process­es do not actu­al­ly result in reli­able data and actu­al­ly dam­age employ­ee per­for­mance and engagement.

So as we enter 2018, com­pa­nies will fol­low the exam­ple of glob­al giants such as Gen­er­al Elec­tric and Microsoft who have stripped out com­plex­i­ty such as annu­al appraisals, rat­ings, cal­i­bra­tion meet­ings and com­pe­ten­cy assess­ments, focus­ing instead on reg­u­lar, qual­i­ty per­for­mance con­ver­sa­tions and feed­back. Deloitte’s 2017 Glob­al Human Cap­i­tal trends found that 96% of com­pa­nies who have done this say their process­es are now sim­pler and 83% say the qual­i­ty of con­ver­sa­tions between employ­ees and man­agers has gone up.

Sim­plic­i­ty will also be a huge con­sid­er­a­tion in terms of soft­ware. As a com­pa­ny that prides itself on hav­ing the sim­plest per­for­mance man­age­ment soft­ware sys­tem on the mar­ket, organ­i­sa­tions are approach­ing us every day say­ing that their cur­rent per­for­mance man­age­ment soft­ware is no longer fit for pur­pose in the new world of agile per­for­mance man­age­ment. They are now look­ing for soft­ware that is sim­pler, lighter touch, flex­i­ble and which sup­ports mean­ing­ful dis­cus­sions and feed­back, rather than a sys­tem which just cap­tures data and auto­mates out­dat­ed appraisal processes.

Com­pa­nies no longer need fea­ture-rich tech­nol­o­gy as it is more expen­sive, less reli­able and acts as a bar­ri­er to good per­for­mance man­age­ment. Sim­pler soft­ware, on the oth­er hand, requires lit­tle to no train­ing, and encour­ages pur­pose­ful dia­logue rather than pre­vent­ing it.

3. Com­pa­nies will change the way they man­age per­for­mance-relat­ed pay and bonuses

As we pre­dict­ed in our pre­vi­ous year’s per­for­mance man­age­ment trends blog, com­pa­nies are con­tin­u­ing to dis­card annu­al appraisals and employ­ee rat­ings. This is a great step for­ward and leaves employ­ees feel­ing more val­ued. On top of this, it results in a more pro­duc­tive workforce.

That said, some com­pa­nies are strug­gling to under­stand how to han­dle per­for­mance-relat­ed pay and bonus­es under a con­tin­u­ous per­for­mance man­age­ment mod­el. Because of the inad­e­qua­cies of per­for­mance rat­ings and the fact that there is lit­tle cor­re­la­tion between rat­ings and actu­al per­for­mance, we pre­dict that some com­pa­nies will aban­don per­for­mance relat­ed pay entire­ly in 2018, and instead, base pay deci­sions on mar­ket rate and respon­si­bil­i­ty and bonus­es on team or com­pa­ny per­for­mance. This removes the sub­jec­tiv­i­ty inher­ent in per­for­mance-relat­ed pay and saves every­one sig­nif­i­cant time and effort.

For many organ­i­sa­tions though, this is a step too far. There­fore, these com­pa­nies may adopt the approach rec­om­mend­ed by McK­in­sey where­by efforts are focused on iden­ti­fy­ing and adjust­ing reward for only the top per­form­ers and the under-per­form­ers, rather than every­one. As McK­in­sey puts it, it’s a fool’s errand to iden­ti­fy and quan­ti­fy shades of dif­fer­en­tial per­for­mance among the major­i­ty of employ­ees, who do a good job but are not among the few stars.”

Per­for­mance relat­ed pay is a big top­ic and we don’t have time to cov­er all the options in this arti­cle, so we have writ­ten a ded­i­cat­ed eBook on How to man­age pay with Con­tin­u­ous Per­for­mance Man­age­ment which you can down­load for free here.

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4. The focus of per­for­mance man­age­ment data will shift from com­ple­tion rates to man­ag­er impact

Tra­di­tion­al­ly, per­for­mance man­age­ment data has focused on per­for­mance rat­ings and appraisal com­ple­tion rates. How­ev­er, as organ­i­sa­tions make the tran­si­tion from per­for­mance mea­sure­ment to per­for­mance improve­ment, the data they need will change. In 2018, com­pa­nies will increas­ing­ly be eval­u­at­ing the qual­i­ty and impact of per­for­mance man­age­ment dia­logue between man­agers and employees.

Giv­en that man­agers account for up to 70% of vari­ance in employ­ee engage­ment and that only 22% of employ­ees agree their per­for­mance is man­aged in a way that moti­vates them, HR pro­fes­sion­als will need to be mon­i­tor­ing how often per­for­mance check-ins are tak­ing place and how fre­quent­ly feed­back is being giv­en. HR will also need to under­stand the impact these inter­ven­tions are hav­ing on employ­ee morale and per­for­mance. This will pro­vide them with the insight they need to under­stand who their best man­agers are and which man­agers need coach­ing and sup­port to bet­ter devel­op their teams.

5. Busi­ness­es will opt for con­tin­u­ous per­for­mance man­age­ment soft­ware over appraisal software

As we men­tioned ear­li­er, annu­al per­for­mance appraisals are falling out of favour and reg­u­lar one-to-one per­for­mance dis­cus­sions and feed­back are becom­ing the de-fac­to way of man­ag­ing per­for­mance. What we’ve noticed dur­ing 2017 though is an increas­ing num­ber of organ­i­sa­tions approach­ing us who have tried to move infor­mal­ly to a con­tin­u­ous per­for­mance man­age­ment approach, with­out using ded­i­cat­ed soft­ware, and have failed to get traction.

The prin­ci­ples of con­tin­u­ous feed­back and reg­u­lar check-ins are sim­ple and man­agers like this approach, but new habits take time to devel­op. So hav­ing soft­ware that active­ly encour­ages these ways of man­ag­ing per­for­mance, reminds peo­ple of what they need to do and when and pro­vides vis­i­bil­i­ty to HR of who is and isn’t doing it is essen­tial for success.

We’ve also spo­ken to many com­pa­nies who have tried to cus­tomise their exist­ing appraisal soft­ware to sup­port a more agile, con­tin­u­ous per­for­mance man­age­ment approach and it hasn’t worked. When soft­ware is changed to do some­thing that it wasn’t orig­i­nal­ly designed to do, it ends up feel­ing clunky’ for users and becomes a bar­ri­er to good per­for­mance management.

For these rea­sons, we pre­dict that in 2018 there will be an accel­er­a­tion of com­pa­nies procur­ing pur­pose-built con­tin­u­ous per­for­mance man­age­ment soft­ware rather than annu­al appraisal software.

Start your New Year off with a bang and invest in a qual­i­ty per­for­mance man­age­ment sys­tem that will trans­form your staff per­for­mance. Our per­for­mance man­age­ment soft­ware is used by com­pa­nies around the world and our team of per­for­mance man­age­ment experts will work with you to ensure it is adopt­ed suc­cess­ful­ly in your organ­i­sa­tion. Book a demo now.

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