Performance Management – Part II – Best Practices

We recently discussed that performance management has been undergoing extensive changes in recent years, moving from a rigid and often ineffective process to one more centered on the employee with more consistent feedback. In this article, we’ll review problems with traditional performance management and current best practices.

Problems with Performance Management

There are many problems associated with the traditional process of performance management.

Employee Dissatisfaction and Turnover

Traditional assessment practices have failed to empower employees, often having the opposite effect.  Research has found that half of employees who received an annual review were surprised with their rating with 87% being negatively surprised.

This can easily demotivate employees. An Adobe study of 1,500 U.S. workers found that 47% of Millennials began looking for a new job after receiving their performance review.

Processes are Inefficient and Costly

Another issue with performance management processes is that they are incredibly expensive. The estimated cost of conducting traditional performance reviews is $3,500 per employee.  That’s more than a company traditionally invests in employee training.  The time sacrifices are also quite extensive with the average manager spending 210 hours annually for the process. That’s equivalent to over five weeks of effort.

Traditional performance reviews are not effective at their goals. It has been found that these reviews are ineffective in identifying high performing employees. This occurs two-thirds of the time. This clearly identifies that aligning with a best practice program is clearly needed.

Performance Management Best Practices

The key towards transforming performance management to an intuitive process that benefits employees and organizations lies in adopting established best practices.

Center the Employee

Centering the process around the employee can involve several things. Perhaps most crucially, it is important to make the goal setting process a collaborative one between supervisor and employee.

It is important to use performance management as an opportunity to focus on employee growth and professional development.  These steps often require managers to be trained so they possess the tools necessary to make this happen.

Make the Process Continuous

A modern performance management process should be continuous in nature. Employees want frequent feedback. Weekly or bimonthly one-on-one meetings are a great way to facilitate this. Research from Gallup found that employees who receive frequent feedback are nearly four times (84%) more likely to be engaged at work than those who do not (22%).

Integrate 360-degree Feedback

Instead of limiting feedback from a manager or supervisor, successful organizations implement a 360-degree feedback program. This enables employees to get feedback from supervisors, subordinates, and peers.

This is effective in better identifying employee strengths and weaknesses and also provides a more balanced view of employee performance. The results is better targets for growth.

Utilize Agile Goal Setting

Many employee performance goals are structured through a long-term lens. However, most goals can be broken down into smaller segments or steps. This is known as agile goal setting.

Agile goal setting focuses on the establishment of goals that are CLEAR: collaborative, limited, emotional, appreciable, and refinable. This provides greater input, flexibility, and internal investment in the process from managers and employees.