According to Deloitte’s research, 58 percent of companies don’t even believe performance management is an effective use of time. It’s not surprising then that many organizations are continually updating their performance management systems in an effort to achieve better results and improve the process. Unfortunately, they often find that these efforts don’t produce the desired outcomes. For example, ranking- and ratings-based performance management strategies often have the unintended result of reducing employee engagement and frustrating high performers.
How do you ensure that your performance management process is actually having a positive impact? OnPoint Consulting has observed a variety of enhancements companies often make to their performance management strategies. We’ve identified some of the most common trends that can add value if implemented effectively.
8 Employee Performance Management Changes to Consider
1. Web-Based Systems
Web-based systems facilitate the collection of data which, in turn, facilitates cascading goals. It also provides a common framework for leaders and employees to participate in the various components of performance management, thereby increasing consistency in application.
Well-developed, web-based performance management tools will facilitate the consistent application of the process across the organization. The objective nature of the solution can also enhance the perception that it will be fair and accurate. However, the use of web-based systems does little on its own to clarify the link between pay and performance.
2. Rating Scales
One of the most common changes organizations make to their performance management strategies centers on the rating scale used to evaluate performance. If companies are using a scale as part of their assessment process (either numeric or descriptive), they need to make sure each rating point is clearly defined and leaders have a common understanding of how to apply the scale to differentiate levels of performance. This is critical because it addresses consistency and makes it possible to more accurately assess the person’s performance.
If the scale exceeds five points, the descriptors must clearly capture distinctions in ratings. In most cases, clearly defined five-point scales (that include numbers and labels) are easiest for people to interpret and apply.
3. Forced Distribution
A forced distribution requires managers to evaluate a person’s performance relative to other people rather than against clearly defined individual goals and performance expectations. This can negatively impact teamwork and collaboration if employees know that their performance is being “judged” against their peers.
Furthermore, because it prevents leaders who do not want to deliver “bad news” from inflating ratings, a forced distribution is frequently used as a “workaround” for leaders who are unwilling or unable to address poor performance. The problem is that once poor performers have been “weeded out”, a forced rating may result in an employee with acceptable performance receiving the lowest performance rating. Given these problems, it’s no surprise that most organizations have moved away from forced distribution systems.
4. Skill Training
Leadership competence across all four elements of performance management—goal setting, coaching, development planning, and job performance evaluation—is essential for the success of a performance management system. Without these fundamental skills in place, no form, rating scale, or technology will make the system work.
Training increases consistency, which is one of the key drivers of people’s perceptions of fairness, accuracy, and overall value to the business. Training in coaching and development planning also increases the likelihood that managers will provide feedback on performance and work with their direct reports to put development plans in place. This, in turn, has a positive impact on a direct report’s perception that the performance management system helps employees build their skills and competence.
5. Periodic Performance Reviews
Requiring or encouraging leaders to conduct periodic check-in meetings ties directly to the perception that the system helps employees build their skills and competencies—a key driver of fairness, accuracy, and overall value to the business. It also increases the likelihood that the annual performance review discussion will be a productive dialogue (as opposed to a surprise). However, it is important to note that requiring periodic check-in meetings will only be successful if leaders recognize the importance of these discussions, make time for them, and have the skills and tools to provide effective coaching and feedback.
6. Multi-Rater Feedback
Multi-rater feedback, also known as 360º feedback, gathers feedback from a variety of sources, including other co-workers, managers, and senior leadership. Since feedback is anonymous and drawn from multiple people, it can potentially make the assessment process seem more fair and accurate to employees. Although multi-rater feedback has a number of advantages, incorporating it into a performance evaluation strategy is often counterproductive. People are less likely to be candid and forthcoming when they think their comments might impact the performance ratings and compensation decisions for fellow employees. For this reason, multi-rater feedback should not be gathered right before performance reviews are conducted, and it is critical that managers and employees have a shared understanding of the purpose of multi-rater feedback and how the data is used.
The use of self-assessments for employee performance reviews is based on the belief that providing a vehicle for employees to give input into their evaluation, they are more likely to view the process as fair and accurate.
However, simply introducing self-assessments alone will not have the desired impact. What makes the difference is the extent to which self-assessment data is actually integrated into the employee performance review process. This requires skill on the part of management and cannot be accomplished by a form alone.
Self-assessments are unlikely to make or break a performance management system. In fact, they may do more harm than good if they are perceived as another “task” and leaders are not skilled in incorporating self-assessment data into the performance discussion.
8. Monitoring the Quality of Performance Evaluations
Human Resources professionals can monitor the quality of completed performance evaluations in an effort to achieve greater consistency across the organization and ensure that assessments are backed with supporting evidence and examples.
Monitoring the quality of completed evaluations is generally a good practice. However, this time-consuming task will have little impact unless leaders are held accountable for preparing effective reviews. In addition, monitoring is only useful when follow-up and coaching take place with leaders to confirm “what good looks like” and reinforce appropriate behaviors.
Although any of these changes or enhancements can have a positive effect on the performance management process, caution is advised. Making frequent changes in an attempt to “get it right” undermines its credibility and frustrates employees. When it comes right down to it, our experience has found that it’s leadership and management skills—not tweaking forms, updating technology, or revising rating scales—that determines whether performance management tools are being used effectively. Leaders must be competent in identifying and developing high-potential employees to grow their teams. Using objective leadership assessment tools can give them a comprehensive, data-driven view of performance and a better understanding of where further coaching and development is needed.