Is it time to scrap the annual employee performance review? After all, the results it produces don’t seem to be those that many business leaders would welcome, among them resentment, annoyance and stress.
In a survey of 2,500 employees, published in May 2014 by the Chartered Institute of Personnel and Development (CIPD), 30% said that they don’t believe that their employer’s performance management process is fair. One in five said that the way their line managers communicate goals and objectives is ineffective. And 32% feel that career progression in their organisation is “unachievable".
So much for performance reviews fostering employee engagement and motivation - and their impact elsewhere in the organisation is often just as negative, says Donna Ronayne, vice-president of marketing and business development at Halogen Software, the talent management specialist that sponsored the CIPD research.
“Managers resent the time taken up by reviews, so they don’t always give them the highest priority, and for HR leaders, it’s like herding cats, trying to get all participants to submit their information and feedback on time,” she says.
But despite their woeful reputation, eliminating performance reviews entirely is an action that few – if any – business leaders are willing to take, says Andy Campbell, human capital management (HCM) strategy director at software giant Oracle.
“The general view that I hear from customers is that there is value to be had from appraisals – but, in practice, much of the potential value is lost in overly bureaucratic, time-consuming processes that end up being a big drain on company time and resources, and where employees often feel they haven’t had a fair hearing,” he says. “So the hunt is on to find better ways to assess the workforce.”
In other words, bosses still want and need to know how their workforce is performing. Most will say it’s so they can identify high-flyers and reward them appropriately with pay rises, extra training and promotions – but it’s just as big a help in spotting the strugglers and building a watertight case for letting them go. What they don’t want, however, is for the whole process to take months of paper shuffling and resentment, only to yield contentious results.
A better way to appraise
This is where technology can help – and where the IT department has a role to play in helping their colleagues in HR to achieve both the efficiencies and the insight that they crave.
In recent years, these goals have driven a healthy market for talent management software, a category in which performance management applications play a starring role. They’re where most companies start on their talent management journey; in 2013, analysts at IT market research firm Gartner estimated that, of those organisations that had already implemented talent management products, more than half started with performance-management modules, while 30% started with recruitment and just one in 10 with learning.These investments aim to make the performance review process simpler, easier to track, more goal- and action-oriented, and more transparent, according to James Reid, general manager for the UK and Ireland at talent management specialist SuccessFactors, part of software giant SAP.
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What this means, in real terms, is that the software automates certain processes: prompting employees, by email, to complete online appraisal forms, for example, and then routeing their contributions to managers for approval. But more importantly, it provides managers with a trustworthy repository of performance-related information and data, including a record of achievement for each employee. It also offers an explanation of how goals set for individual employees tie into wider business objectives; and imposes a fair and consistent system for performance scoring that applies to every member of the workforce.
“The goal of most of our customers is to allow the system itself to handle much of the heavy lifting of the behind-the-scenes administrative work, while setting the stage for a better-quality conversation between a manager and an employee,” Reid explains.
Quality of conversation is a theme to which HR professionals return repeatedly and, alongside that, frequency and regularity of conversation. These, they say, are what distinguishes a positive, productive performance management process from the more onerous, quarrelsome norm.
At UK motorway service station and hotel operator Welcome Break, director of people Karl Jolly agrees that frequent updates are vital to keeping the company’s 4,500-strong workforce on track. Earlier this year, the company rolled out SuccessFactors’ performance management applications, to tie in with the start of the company’s financial year on 1 February.
“For the first time, we’re in the position where everyone knows what’s expected of them,” says Jolly. “From employees on the frontline team right up to the chief executive, everyone’s goals are now in the system and updated on a monthly basis.”
“Regular, five-minute conversations about the direction in which an employee is moving, what they enjoy most, what they’re good at, their personal ambitions – these are invaluable,” says Ingrid Waterfield, a performance, reward and employee engagement specialist at management consultancy firm KPMG, and previously the company’s head of performance and reward. “A quick chat once a week or once a fortnight between an employee and their manager beats the traditional, once-a-year form-filling exercise hands down, which is why many employers are trying to move away from annual or half-yearly appraisals to a process of ongoing discussions, feedback and recognition.”
It’s also fairer to employees, giving them the opportunity to address any issues their employer has with their work before the problems become insurmountable, and encouraging them to do more of the stuff that gets them praise and recognition, says Stevan Rolls, head of HR at management consultancy firm Deloitte. “A day-to-day, week-to-week, month-to-month process is a source of continuous feedback on which employees can act, giving them a better chance of managing their own performance in line with what’s expected of them.”
Performance management goes social
At its heart, a conversation is a social exercise, and, according to many performance-management vendors, social technologies are an increasingly important aspect of the applications they sell.
A recent report from Oracle sums up the vendor’s own strategy here: “Whether done periodically as focal reviews or as ongoing conversations, performance management that is actually about not just improving the 'what' but also the 'how' in the achievement of goals successfully, is inherently a social experience. The development of competencies in support of performance is, in particular, a coaching exercise between manager and employee.”
With that in mind, the report continues, the Oracle Social Network (OSN) Conversations tool for social networking will increasingly be embedded in its performance management applications, among others.
More socially enabled performance management processes also have the potential to enable a wider cross-section of colleagues to offer their input into an individual employee’s strengths and weaknesses, points at Oracle’s Andy Campbell.
Many companies have already incorporated "360 degree feedback" into appraisals, where employees receive feedback from the people who work with and around them, he says, “but that can get complicated if people need to be chased for their contributions, so social technologies have huge potential to make collecting this information on a regular basis a lot easier.”
In fact, by 2018, around one-quarter of large organisations will incorporate social employee recognition and rewards into their performance management processes, according to analysts at Gartner.
That trend fits well with the way employees now prefer to work, says Gartner analyst Yvette Cameron. “Today’s workers, particularly those in knowledge and service-based firms, seek out social engagement, personal reputation development, peer recognition, meaningful rewards and continuous feedback against purposeful work,” she says.
Already, she adds, the market for social performance management is “moving to an adolescence phase” – but within two to five years, she adds, it will “reach early mainstream".
The employee-performance review is here to stay – but many of its more negative impacts, for everyone involved, may soon be on their way out.