3 ways performance management has changed

Did you know that performance management was first introduced into a workplace more than 100 years ago, in 1920? Since then, it has slowly changed over the decades, but this change has accelerated in the past 10 years.

The traditional approach to performance management involved a rigid, annual cycle that focussed on employees’ performance in the past year. It didn’t involve any discussion about the future, thus limiting employees’ growth opportunities.

Its evolution into agile performance management is structured in a way that will help employees use feedback gathered to grow their performance.

It’s no wonder that Founder of Bersin & Associates, advisor, and HR analyst Josh Bersin estimated that around 70% of multinational companies are transitioning into an agile performance model.

So in this article, you’ll explore how performance management changed, why performance alignment is important, and what you can do in your company to evolve the process.

Here’s what we’ll cover

Why old performance management is no longer working

Performance management is changing, alongside shifts in HR. The old performance management process looked something like this:

• Track and measure what the employee does throughout the year.
• Wait until the end of the year to have a meeting with the employee.
• Use the meeting to tell the employee all the things they could have fixed in the year and give them a score.

There are several problems with this type of performance management:

• The employee had no idea if they were doing well or not in their job.
• Receiving feedback only at the end of the year isn’t helpful to either the employee or the company. The employee can’t fix something that they didn’t do well a couple of months ago (because the window to fix it has passed) and the company doesn’t benefit from the employee fixing the mistake, which causes lower performance levels overall.
• Measuring only what happened puts the emphases firmly on the past. There needs to be a discussion about future steps, growth, and progression.

Instead, it’s now necessary to adapt your processes to keep up with the trend for regular cycles of feedback as a new phase in performance management begins.

Modern performance management: 3 tenets

The marketplace today functions on innovation and fast iteration so employees, along with companies, have to adapt their processes to it.

A recently commissioned report from Sage found that more than half of HR and business leaders (58%) think that performance management is important now more than ever.

As many as 74% of respondents said they find it more difficult due to hybrid working.

However, 75% believe their performance management processes are out of date, showing there is a renewed demand to improve processes and provide suitable access for remote workers.

To keep up with this demand, you need to reassess and revise your performance management processes. Here are 3 tenets to remember:

1. Shorter feedback cycles

The old way of doing performance management was all about the yearly review; the new way is about having shorter feedback cycles.

This is where gamification comes into play.

Imagine you’re a character in a game and you’re levelling up.

To increase your character’s level, you need experience that you get by successfully finishing a mission. You have a bar that shows your current experience and you just completed your mission.

You will have no idea whether the mission was a success or a failure until you receive feedback on it—in a year. After a year, you learn that the mission was a failure.

In a game today, that would be ludicrous, but this was how performance management used to be.

Employees had to wait for about a year to find out if they were doing a good job or if they needed to learn and adapt.

It’s no wonder that the 2017 McKinsey Global Survey found that 54% of respondents said their performance reviews had no positive impact on performance.

So companies started implementing shorter feedback cycles with their employees. 1-on-1 meetings really help with this, allowing managers to focus on 1 employee at a time and go over their performance in the meetings.

These meetings usually happen every 15 days or once a month. This way, the employees can continuously see if their performance aligns with the company’s standard.

And if their performance isn’t meeting the desired level, there’s a solution for that as well: performance development.

2.   Performance development

The old way of doing performance management focussed on past performance, but the new and evolved performance management splits the focus between performance appraisals (the past) and performance development (the future).

Agile performance management also encompasses the growth potential of employees, using meetings to talk about their development.

Companies have started using development tools such as Massive Open Online Courses (MOOCs) to help their employees learn new skills and improve their current ones.

Because of the speed of innovation in the marketplace, employees will have to learn new skills every few years if they want to have a relevant skillset in the shifting market.

Companies should start focussing more on developing their existing staff because it’s more effective than hiring new employees.

A study done by Bain&Co discovered that inspired employees are 225% more productive than engaged employees.

To inspire employees, you need to invest in them and make sure they’re growing on their job— performance development is one of the best ways to do this.

According to the Sage report, more than half of HR and business leaders (59%) said they’re not using data to inform performance conversations and over half (55%) can’t spot high and low performers.

This presents an opportunity to refresh your performance identification process and create a more accurate development pathway.

With investment in performance development, you can create growth plans and goals with your employees and track their progress to ensure that their skills remain relevant in the organisation and the marketplace.

Look at Human Capital Management (HCM) software that can help you make the best investment decisions for your teams. Upskilled workers will be happier and more productive

3. Co-creation of goals

The old way of doing performance management was almost 100% top-down structured and the employee had little input in the process.

The new way of doing performance management is more of a bottom-up process, where the employee forms goals together with the manager (co-creation of goals).

How this works is that the manager talks with the employee about the company goals and objectives and what the employee’s role in accomplishing them is.

The employee talks about their (personal and professional) development goals that will ensure that they hit those targets and keep their skills relevant in the market.

In a recent Gallup survey, employees whose managers involve them in goal setting alone are over 3 times more likely to be engaged than employees who aren’t involved.

This is a win-win situation where both the manager is satisfied with the situation because the company’s objectives are going to be met, and the employee is satisfied because they will learn new skills and grow during the process.

Performance alignment brings goals closer

Performance alignment goes hand-in-hand with performance management. The difference between them can be described as the difference between efficiency and effectiveness.

Effectiveness is doing the task right while efficiency is doing the right task.

Performance management investigates how productive, dedicated, and focussed your employees are. Performance alignment re-steers your employees into being productive, dedicated, and focussed on the right operations, tasks, and objectives.

The objectives the employees pursue need to be aligned with the overall organisational goals. So make sure that your employees are productive (performance management) about the right things (performance alignment).

Using technology to enhance the process

Tech and applications should be used to enhance the performance management and performance alignment process. If the employee and the manager aren’t in the same physical location to conduct their 1-to-1 meeting, they can use video call applications like Zoom or Teams to do them.

There are other applications that can really make your managers’ jobs easier. So, consider investing in apps that:

• Help them track their employees better
• Enable them to communicate more easily with their team members
• Provide them with insights into the employee’s wellbeing and employee experience

The easiest way to understand which tech you should use is to divide the entire performance management process into its essential steps and then see which app would be helpful for which step.

The 4 main steps of a performance management process are:

Planning

The tech in this phase should help you communicate better with your employees, set the right expectations, and clarify any questions regarding roles and responsibilities in the manager-employee relationship.

Reviewing

In this phase, you should use applications to help you set up meetings and track your employee’s performance during their daily tasks.

Coaching

This phase of performance management is focussed on the performance development and growth of the employee. So have apps that can establish micro-learning in the workplace and guide the employees through the learning process.

Rewarding

The last part of the performance management process is the rewarding stage.

You can use apps in this process to set up a point system and have employees know where they stand with their points, what the rewards are, and how often can they exchange their points for a reward.

Final thoughts

Performance management has evolved and so should your company.

Following the above steps will help you restructure your performance management process and make it agile.

You will experience multiple benefits in having shorter feedback cycles, implementing performance alignment, and investing in your employees’ growth and wellbeing.

The new focus on employees and the transformation of managers into coaches will help you achieve better results for your business.

If you’re looking for a performance management tool that can empower your workforce, support and retain your best and brightest people, and elevate communication, explore more resources for performance management and sign up for a free demo session here.