The modern world of work requires a new and equally modern approach to performance management. With the rate at which things are constantly changing, organizations have to adapt and have a more agile approach. This means, end of year appraisals and reviews are not the most practical approach to managing performance anymore. However, changing a performance management process that has been at the core of many organizations for years is a challenge, and requires a much greater cultural shift. Stakeholder buy-in is crucial for this change because it doesn’t just require a technical shift, nor is it as simple as implementing a new process. It requires a change in mindset, and most of all, buy in from everyone, including senior leaders and employees.
Change perspective on how a successful performance management process is measured
There is a pressure and expectation to get high completion rates with annual appraisal forms. It’s possible that as you switch to more regular performance conversations, that you are still putting yourself under the same pressure. However there needs to be a shift in the type of metrics you measure and that will come from getting the senior management team to understand which metrics actually have more value.
For example, with annual appraisals, you might measure “success” by the completion rate of forms. Although you might have a 90% completion rate, do these appraisals really lead to more meaningful discussion to improve performance? Probably not. Once annual appraisals are over, it’s a relief for most people—they just want it over and done with and get back to what they were doing.
However, if you have more regular performance conversations under a continuous performance model, although you might not get a 90% form completion rate, you may get 50% of employees having regular meaningful performance conversations in the first few months. This already is a much better result and more impactful than the “90% completion rate” that didn’t mean anything at all.
Although the metric is lower in value, it’s a much bigger win because a higher percentage of your workforce will improve performance and feel engaged through regular feedback and performance conversations.
What’s in it for them?
Higher productivity with reliable metrics and real attribution
Employee performance and engagement no longer becomes a “fluffy” topic at the head table if you have real metrics to back it. Traditionally, employee performance has been measured through annual appraisals, and employee engagement through long unengaging engagement surveys—often resulting in unreliable data and failed initiatives. As a result, performance management and employee engagement never becomes a priority.
But, it’s a whole other ball game if you have a system that captures metrics from a new performance management process. A system that captures new data can give you a whole new set of metrics that senior leaders didn’t know existed, and so you have a new set of success measures from performance metrics.
For example, by setting goals on a system like Clear Review, you can track completion of objectives which can be used as a productivity indicator across the organization. Through data from the Clear Review system, we found that organizations that set goals had a higher goal completion rate and thus increased their productivity by 33%.
You can also gather quantitative data from measures such as the frequency of conversations/check-ins across teams and the amount of feedback given across the organization. You can then use all these different data points to make correlations and compare how productive and engaged your workforce are. The fact that you would be having more frequent conversations, regular feedback and shorter term goals means that you can get data more frequently to understand performance across the organization, rather than rely on annual or biannual reviews. Data from goals, feedback and conversations can also help you distinguish between teams that are doing well vs those they may require further support and training.
Take the first step to start transforming your performance management process
The Performance Management Academy has a ton of resources to help you change your performance management process
Improve the bottom line by:
Increasing job satisfaction and productivity
Organizations often think that to improve employee performance and engagement, you need to give pay rises and bonuses. However, research has revealed that only 15% of the effect of a salary increase survives longer term. So, rewards have to be given frequently in order to continue to have an effect. If employees are offered a pay rise elsewhere, they will most likely take it and leave. So we cannot solely rely on extrinsic motivators and must look at intrinsic motivators such as autonomy, mastery, purpose and feedback.
Continuous performance management focuses on intrinsic factors such as motivation, engagement at work and recognition — this doesn’t cost an organization anything. According to research by Deloitte, employee engagement, productivity and performance are 14% higher in organizations that proactively foster recognition. By making a cultural shift to where employees are recognised, and understand their purpose, you can do a lot to improve productivity, performance and engagement, all of which will have a positive impact on your organization’s bottom line.
Cutting staff turnover
Losing your employees and trying to find their replacements is costly. A cost which can be easily avoided by prioritising employee engagement and performance. As mentioned previously, intrinsic motivators have a much more significant positive impact on performance than extrinsic motivators like pay. For example, when Adobe switched to continuous performance management, they found a 30% decrease in the number of employees quitting.
There are costs associated with training new employees rather than retaining and supporting existing ones. Time and resources have to go into training new employees. With this approach, it is hard to see an immediate ROI because you have to wait a few months until they are fully geared up to do the job that your ex-employee did. One study revealed that employers will need to spend the equivalent of six to nine months of an employee’s salary to find and train their replacements. For example, if an employee has a salary of £60,000, it will cost the company between £30,000 to £45,000 to hire and train a replacement. Plus, if your new employees are not yet up to speed, this could affect their performance and productivity initially, causing a lag in meeting team objectives.
By focusing on the performance and engagement of your existing employees, you are giving them value and satisfaction in their job that they won’t find from an incremental pay rise in another job.
More time efficient than annual appraisals
Regular performance conversations are much more time efficient than annual appraisals. When Deloitte analysed their appraisal process, they found that employees spent nearly 2 million hours a year on performance reviews! Adobe had also changed their approach to performance management and switched from yearly reviews to regular catchips and recovered thousands of hours that would have otherwise been spent on reviews. And if the performance process doesn’t bring any real value, that’s hours wasted that could have been spent on something much more productive for the organization. Switching to regular performance conversations removes the need to gather a year’s worth of evidence of your performance, removes paperwork, and eliminates the need to constantly email and nag everyone to complete their forms. Instead, you have richer data, that’s more relevant and reliable and captured often on a system so it’s not lost. This allows you to act in the moment rather than a year down the line when issues and priorities have changed.
Use internal advocate team as examples of success
You need an internal team who perhaps already do some elements of good performance management and gather them together to form an advocate team. They can act as a tried and tested example of a high performing team to the stakeholders. Once your stakeholders are convinced, they can also in turn become advocates, and help champion any new changes in the organization, to help bring managers and employees on board with the new way of managing performance.
Identify the skeptics
The skeptics are one of the most important stakeholders in your organization. They exist in every organisation and often they have seen “initiatives” in the past that have failed. Your skeptics are the ones that resist the most. But if you can get your skeptics on board with the new performance management process, it can be a huge win. The benefit of speaking to your skeptics is that they can help you find mistakes or areas of concern that need to be addressed when rolling out a new process. This also gives them a voice and helps them feel like they have contributed to a wider positive change. So if your skeptics are on board, everyone else will be too. They can in turn, become your advocates too and shout out about the benefits of continuous performance management.
Learn more about transforming performance management in your organization
Join our FREE Performance Management Academy to learn the everything you need to know about continuous performance management, and how to manage the change in performance. We have a range of free courses that you can take, as well as multiple communities where you can learn connect with HR professionals, share your insight, and learn from industry experts.