In this ultimate guide to agile performance management, we’ll explain what agile performance management is, why it is increasingly important and how you can embed it into your existing performance management system
Agile performance management (also known as continuous performance management) has been around for a number of years now. More and more high-profile companies are making the transition and are reaping the benefits. Despite this, a great deal of organisations have yet to make the change away from more traditional annual performance appraisals.
To understand why it’s worth rehauling your employee performance management system towards agile performance management, we’ll answer the following questions:
- What is agile performance management?
- What are the main differences between traditional and agile performance management?
- Why is agile performance management important?
- How can I implement agile performance management to drive effective performance?
- Do I need software to transition to agile performance management?
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What is agile performance management?
Agile performance management is an approach to managing employee performance and development throughout the year as opposed to on an annual or bi-annual basis. It is collaborative, involving regular conversations and continuous feedback. Agile performance management isn’t solely focused on the destination (i.e. an annual performance outcome or rating) — it is more about the process of getting there, which involves regularly readdressing objectives and barriers to effective performance. Agile performance management was created for a brave new world that is faster, more social and more communicative.
The main feature of agile performance management is the frequent performance discussions, or ‘check-ins’, which should ideally take place on a monthly basis. These sessions are designed to help cultivate authentic, meaningful relationships and dialogue between manager and employee while providing the opportunity to exchange much-needed feedback.
The concept behind agile performance management is to address the drawbacks and inadequacies of traditional performance management, forming a more forward-looking and meaningful approach. To better understand, we should look at the main differences between traditional performance management and agile performance management.
Agile performance management vs traditional performance management
Traditional performance management doesn’t enjoy a glowing reputation. In fact, it has been proven to be insufficient when it comes to improving and measuring an employee’s performance and contribution to a business.
Traditional performance management revolves around an annual appraisal with a mid-year review in between. At the annual review, managers are typically expected to identify how well an employee has met their objectives over the last year, how effective they have been at displaying company’s values, behaviours or competencies, what their career aspirations are, what their objectives should be for the following year and what their personal development plan should be. To achieve all this in one meeting is simply not feasible so appraisals frequently end up becoming a ‘tick-box’ exercise.
Agile performance management, on the other hand, enables these items to be discussed periodically over time during check-in meetings, meaning that the conversations are more meaningful and less rushed.
Traditional performance management is associated with rigid goals, set annually, which frequently become out of date or irrelevant by the time the annual appraisal comes around. Under agile performance management, goals (or “priorities” as we like to call them) are set with a ‘near-term’ focus, often quarterly, ensuring they stay relevant to the shifting priorities of the business. There is also a focus on employee development rather than just on delivery and outcomes.
Under a traditional annual appraisal model, feedback is typically ‘saved up’ for the appraisal meeting, meaning that it has little impact as too much time has passed between the event and the feedback being given. Agile performance management, however, involves the exchange of frequent feedback — something employees today are craving and deserve.
Why is agile performance management important?
Agile performance management might sound good in theory, but what evidence is there to suggest we should all be implementing it into our businesses? Organisational change isn’t something to be taken lightly, so it’s natural that you will be looking for some real business benefits to get everyone on board.
To get a real-life insight into the benefits of agile performance management, watch this inspiring case study video from Clydesdale Yorkshire Banking Group who were the first major bank in the UK to remove annual appraisals in favour of agile performance management:
Here are some additional statistics to bear in mind:
- Companies who manage objectives quarterly generate 30% higher returns than companies who manage them annually.
- Research by Deloitte has found that companies that are more collaborative in nature are generally twice as profitable, while also being twice as likely to beat their competition.
- Almost every modern employee hates the annual performance review. This level of stress eventually leads to high employee turnover. In fact, Adobe found that there was a high percentage of employees handing in their notice following annual appraisals. After transitioning to agile performance management, they saw a 30% drop in voluntary turnover.
- Chances are, the way you are conducting performance reviews isn’t filling managers with confidence, either. According to CEB research, a remarkable 95% of managers are dissatisfied with their current performance management process, stating it doesn’t yield accurate information.
How to implement agile performance management
To get your agile performance management system off to a good start, we recommend you take the following steps:
- Get your people on board — Your leadership and management team will need to buy-into the benefits of agile performance management (not too difficult to achieve considering the low opinion of traditional performance management). This useful video can help to explain this. Your employees and managers will also need to understand why your company is making this transition, what the benefits are to them and how it will impact them. Transparency and good dialogue are key to a smooth transition. A lack of communication will result in resistance, confusion and frustration.
- Provide the right training — Agile performance management requires a shift in thinking and behaviour. Just because you have made the decision to switch to regular performance discussions, this doesn’t mean your management team will automatically know how to conduct them. Spend time properly training your leaders so they know what to discuss during employee one-to-ones. This is the only way your managers will have the confidence to carry them out and it is the only way your employees will feel supported.
- Create a dynamic goal setting process — This new system will require a shift in the way you approach SMART objectives. Instead of cascading down 12 month objectives, you should be encouraging employees to work with their manager to define their own SMART goals that are near-term and aligned to the organisation’s goals. This means taking the time to communicate the company’s overriding objectives to your workforce. This is an important step that can’t be skipped. Employees have to know where the company is going and what it wants to achieve if they are to help drive it forward.
- Provide development opportunities — Employees and managers alike are going to be more excited about the transition to agile performance management if they understand how it will benefit them. Explain how this new system will help them fulfil their personal development objectives and their career goals. This can be encouraged by incorporating a career/personal development agenda item into your regular check-in meetings.
- Conduct regular reviews of your new system — Regularly monitor the adoption levels of your the new performance management system, and where there is low adoption, find out why and address the concerns as soon as possible.
You need the right performance management software to reinforce your agile performance management approach
Having regular performance discussions and giving continuous feedback is a simple concept, but without the online tools, it can be difficult to manage on a day to day basis. Therefore, investing in performance management software that can help managers and employees schedule and keep track of check-ins and goals, and which can facilitate the easy exchange of real-time feedback, is pretty much essential. We’ve spoken to numerous organisations who have attempted to move to agile performance management informally, without a dedicated online tool and have failed to get traction.
When considering technology, it’s important to choose performance management software that was purpose-built for agile/continuous performance management. If you try to customise a tool that was designed for annual objectives and appraisals to be more agile, it will end up feeling ‘clunky’ and your employees and managers simply won’t engage with it.
Clear Review performance management software has successfully helped companies large and small transition to agile performance management while boosting performance and employee engagement. To find out more, book a free performance management demo today.