45% of HR leaders do not think annual employee performance reviews are an accurate appraisal for employee’s work (talentmanagement360)
Companies who implement regular employee performance feedback have turnover rates that are 14.9% lower than for employees who receive no feedback (Gallup,2011)
Only 8% of companies believe their employee performance management process is highly effective in driving business value, while 58% say it’s not an effective use of time (Deloitte, 2014)
53% of employees say employee performance reviews don't motivate them to work harder (ClearCompany, 2016)
61% of Millennials say they would switch to a company with no employee performance reviews (Adobe, 2017)
Employees who see performance reviews as inaccurate are 2x more likely to look for another job (Globoforce, 2013)
Only 14% of organizations are happy with their performance management system (HBR, 2013)
Two-thirds of performance management systems misidentify high performers (CEB Global, 2013)
Over an 11-year time frame, companies that had a performance management culture grew net income by 756 percent, versus a 1 percent growth over the same period for those that did not. (Forbes, 2011)
Managers who received constant feedback on their strengths in their employee performance management process showed 8.9% greater profitability (Gallup, 2012)
The performance appraisal has more than a century of practice since the early 1900s when it was a more informal process and not spread very widely. In the 1920s, Elton Mayo, the Father of Human Resources, researched and measured the relationship between productivity and the work environment and as a result several social measures were instituted.
30 years later, mid-1950s there was a more formal approach that appears to be found in many businesses and usually consisted in personality-based systems for measuring performance. The 1960s brought a better focus on performance rather than on the personality traits of the employees and the systems developed focused more on goals and objectives. They focused on the future as well and included as instruments self-appraisals. Pay for performance was introduced in the 1960s.
The systems developed further as the businesses got more complex and the need to measure included also numbers, so during the 1970s included a lot more psychometrics and rating scales in the employee performance management systems. It was also a matter of how subjective and opinion-based the evaluations were, some ended up in law suits, so there was a clear need of more accurate data gathering and evaluation. The term “performance management” was coined by Aubrey Daniels in the 1970s.
The next 20 years 1980s to early 2000s saw an increase in companies focusing on employee’s motivation and engagement; this led to a more holistic approach to performance management and appraisals. Also, the systems focused on seeking multiple feedback sources and this led to the commonly spread 360-degree feedback employee performance systems.
Coming to our days, starting with 2015, there is a shift that appears to shape the employee performance processes from regulated and fixed approaches to more dynamic and flexible ways to assess performance with a consistent focus on integrating technology in this process.
With the dynamic environment in which the businesses develop and the fast rise of technology there are a few things to consider when approaching the subject of employee performance.
Focus more on giving and receiving valuable and ongoing feedback on the work done instead of measuring at a certain moment in time (even if we talk about objectives, goals, KPIs or personal traits or level or competencies). According to a recent internal survey, 53% of our employees seek weekly feedback from their managers;
Embrace and adopt technology as part of your day to day modus operandi, train your staff to use it efficiently and be ready to swift approaches as soon as you observe certain practices become show stoppers instead of big helpers;
Don’t rely on memory when talking about performance reviews, keep records of your observations, and while you focus on giving continuous feedback, there should be no bias and opinion involved;
Always consider the big picture; in our quest to reach those business goals, those KPIs that show the performance of our business, it is important to always keep in mind the context in which the company operates: the market prerogatives, the maturity of the company, the maturity of the employees (average age and level of seniority), the openness towards embracing recent technologies, the investments in raising the company’s efficiency, productivity and technology updates.
Start from the recent findings, do not dismiss last time’s reviews and do not set unrealistic goals, objectives or KPIs.
In many organizations employee performance fails to deliver on its scope and outcomes. Although there are many reasons and generally there is a mix of them, the most encountered are:
1.The performance management system is not correlated with the company’s strategic goals
Solution: Ensure that your employees understand how they contribute to the larger, organizational picture with their own specific roles and talents and create plans for them to offer additional value to the company.
2.The focus of the system is on annual reviews and not on tracking and ongoing feedback
Solution: Give timely feedback. There is no better measure to implement than to deliver honest and on time feedback to daily improve behaviors and shape end results
3.The ratings trap is deadly, when people focus on meeting certain scores instead of building certain behaviors, everybody loses.
Solution: Lower the burden of administrative tasks and the pressure on scores, focus on continuous feedback and how managers can improve their direct reports’ actual performance.
4.The “recent” effect, when the evaluation is done on certain time spans and the examples used are taken only from the recent memory and not the entire assessed period
Solution: Provide the feedback as actions develop. Remember feedback is not personal, is not addressed to the person but the person’s behavior in very specific situations.
5.No follow-up plan or actions no matter you evaluate ongoing or just once a year, some actions need to follow your assessment
Solution: Use a tracking method and always agree with the employee the next steps to follow. They can address a corrective situation or a developmental one, but they need to exist.
Regarding employee performance tools, remember that their role is to make your life easier. If it’s too complicated, too bureaucratic, too tangled as a process, it is not useful. Take time and assess from time to time your system and don’t be afraid to change it if it does not serve the scope.
And the scope should be the tracking and improvement of employees’ performance and productivity. Also, the tools you use should best reflect the activity you do. Whenever possible, go for the technology solution and not pen and paper or good old email.
SWOT Analysis – this 4-perspective matrix (Strengths, Weaknesses, Opportunities and Threats) emerged as a strategic instrument, a framework that allows from internal and external perspectives companies, departments, but also teams and individuals. So, it is a descriptive tool that can be used to analyze a certain team or individual at a certain moment in time and allows them to decide on future priorities, actions to be taken or objectives to be set.
360-Degree Feedback – the system got more visibility in early 2000s and focuses on receiving a 360-degrees overview on a person’s performance. It is done through a set of surveys that focuses on competencies. These competencies can be from the soft side part or from the technical side and usually they need to be ranked on a scale from 1 to 5. An aggregate score is obtained and usually it is correlated with specific effects like: bonuses, salary increases or promotions when expectations are met or above or contrary, correction plans or salary cuts apply when the desired scores are not reached.
OGSM stands for Objectives, goals, strategies and measures – it is a planning process that provides clear goals and identifies the strategic choices to achieve them. The best practice is to have them cascaded from the top management, starting from the company goals and by respecting the same pattern implement them at unit, department and individual level. It is also evaluated by grades from1 to 5.
OKRs stands for Objectives and Key Results - It is a framework of defining and tracking objectives and their outcomes. It is the trendiest instrument as it combines the objective setting process following the SMART* conditions and includes KPIs, as the Key Results component of it. What is noticeable is the evaluation, as they are not focused on 1 to 5 scales, but on percentages of how much an objective was accomplished from 100% and the effect only resides on the fact that certain actions need to be taken to reach the 100% goal. Additionally, it is important to notice that it is most suitable for ongoing reviews as it is very flexible and user friendly.
Employee performance plan – Is an instrument used to establish the employee performance goals (expectations) and to support the performance evaluation of each employee. It contributes to having a systematic approach to the professional development of employees. In some cases, can be used also as an employee evaluation form.
Employee scorecard – In most cases, it is part of the employee performance plan and it reflects the quantitative assessment of the individual, meaning the objectives, KPI and targets associated to the role. The performance scorecard can be used both to set the expectations and to capture and monitor performance results. Most employee performance evaluation software will enable the configuration and automation of such a scorecard. If there is no software solution used, the employee scorecard can also be designed in Microsoft Excel.
* Specific – target a specific area for improvement. Measurable – quantify or at least suggest an indicator of progress. Achievable – state what results can realistically be achieved, given available resources. Responsible – specify who will do it. Time-related – specify when the result(s) can be achieved.
Find out the latest news and success stories on performance management systems maturity level assessments from organizations across the globe. Join our group of professionals!