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By Melissa Campeau

Imagine a workplace that hums with cooperation and collaboration. Workers are fully engaged in what they’re doing, knocking projects out of the park and happily going the extra mile for colleagues.

Now imagine it’s performance review time. Is the hum still happening? Does it come to a screeching halt? If so, do the end results justify the time, effort and disruption of that hard-won flow? And is the process as agile, innovative and productive as the organization wants to be?

According to a recent survey by Corporate Executive Board, a whopping 95 per cent of managers say they’re dissatisfied with their performance management (PM) systems and 90 per cent of HR executives don’t believe their existing systems yield accurate information.

Those “existing systems” are likely to follow similar tracks: employees – working with their supervisors – establish yearly goals, then managers appraise and rank employees’ performance in relation to those goals at the end of the year on a numerical scale, tied to salary, bonus and promotion opportunities. There may or may not be a set number of check-in periods during the year to ensure employees are on track to meet their goals.

“Most PM systems are imperfect, but they’re also such an integral part of an organization’s culture that resistance to change, combined with the lack of a new recognized standard for performance management, has tended to keep organizations using the old tools,” said Jose Tolovi Neto, managing partner with Great Place to Work Institute, Canada.

But new ideas and new tools are in the works, now. And a growing number of high-profile companies have tried their hands at shaking up their PM system. GE, for example, abolished its bell-curve ranking system, which involved assigning employees a score relative to their colleagues. Accenture CEO Pierre Nanterme says his company will replace the yearly reviews and rankings with what he calls timely, personalized employee feedback. Microsoft completely retired ratings and annual reviews and says it’s now emphasizing continual learning and growth. Deloitte has made some of the biggest changes of the pack, doing away with cascading objectives, annual reviews and 360-degree feedback tools, and replacing them with new ways of collecting reliable performance data, constant learning and feedback and one-size-fits-one initiatives.

If there’s change in the air – and the number of organizations redefining PM systems suggests there is – that’s really just par for the evolutionary course. A quick review of the history of PM shows distinct shifts in philosophy over time. The personality appraisals popular in the 1950s, for example, eventually gave way to the introduction of psychometrics and ratings scales in the 1970s, followed by an increased focus on engagement and motivation in more recent decades. If we’re in the midst of change, then, it’s perfectly natural.

A touch-up, or a renovation?

There’s more than one school of thought about if and how to shake up a PM system for better results. But much like an underperforming employee, a system that’s not living up to expectations may not necessarily need out-and-out replacing; adjustments to specific trouble zones could potentially solve the problem in a less disruptive way.

After all, the bones of a traditional performance management system make sense.

“The system drives you to establish goals for the next period of time,” said Tony Papa, SVP of global HR at Federal-Mogul Motorparts. “It drives you to meet, and then if you set up a review process, it drives you to meet again – to track the performance against the actions and against the objectives.”

At that point, says Papa, managers and employees have a chance to adjust course, if necessary.

The evolution of work

One frequent complaint about PM systems is that they no longer reflect the way business works. The 12-month cycle of the typical PM program, for example, lines up with very little in most work environments. A December review to talk about a project that wrapped in August, for example, or a major bump in the road in May or a big win in March isn’t practical or all that useful.

Younger employees, in particular, tend to want more consistent direction and feedback. As a result, many organizations are encouraging managers and employees to connect more often between official review periods.

“We seem to be identifying a move towards more regular informal checkpoints, or ‘performance conversations,’ as well as tools that allow employees to register ‘performance moments,’ like completed projects, positive feedback, awards and achievements and so on,” said Tolovi Neto.

There’s no one correct formula. The frequency for those check-ins is something organizations – and the managers and employees involved – will need to determine for themselves.

“One of the challenges is to find what that ‘sweet spot’ is,” said Claudette Knight, VP of talent management at Meridian Credit Union. “I don’t think doing a mid-year interview and end-year interview is frequent enough, but that approach of constant feedback and almost relentless input into how you’re performing – I think people would find that overwhelming.”

There’s also the issue of what should be covered during those check-in sessions.

“It’s tempting, as a manager, to say, ‘Just give me the high-level updates,’ because all companies are so busy,” said Knight. “But it means the employee is getting shortchanged on the real development aspect of performance management, and I think you need to be very intentional as a manager to ensure that’s part of your practice.”
Establishing smaller-scale goals, either in place of or in addition to the yearly goals, can pair well with the frequent-meeting process. The smaller goals give managers and employees motivation to meet regularly, and keep the process more agile and timely.
Another way to look at review meetings is to consider the bigger organizational picture and how the employee is contributing.
“Mission and financials are what we’re doing at work, if you boil it down,” said Mark Cook, growth leadership consultant with performance improvement company O.C. Tanner. “Not the mission that’s on the wall behind the receptionist, but the real reason we drive to the parking lot and come into the building every day. Find out how the employee has contributed to this in the past year.

“Financials is a little harder,” said Cook, “but it’s why we’re doing what we do, so why not have that conversation?”
He suggests employees should understand the six levers that affect financial performance (revenue, expenses, cash flow in, cash flow out, assets and liabilities), and then understand how what they do impacts them.

“Ask if they’ve found a great asset in IT, reduced the amount of money the company has to borrow or found a cost savings somewhere,” said Cook.
Questions like this can help employees feel connected to the bigger picture.

“I don’t think anyone’s asking these types of questions, but they should be,” he said.

At the other end of the spectrum, there’s the more radical approach of scrapping the year-end review altogether. At Gap, for example, the company ditched the traditional review process and replaced it with monthly one-on-one conversations as part of a new PM process called “Grow, Perform, Succeed.” Part of the motivation for the redesign was to take some of the formality – and, therefore, the tension and awkwardness – out of reviews and encourage quality conversations in a less threatening format.

Ratings and rankings

A common trouble zone for many organizations is the rating and ranking system, where employees are assigned a score based on how well their performance stacked up against stated goals. While it serves an important purpose in theory – helping management spot the high-performance employees and weed out the underperformers – it can also introduce some challenges.

“The success of most traditional performance review processes is dependent on the talent of the manager leading the process,” said Tolovi Neto. “We also often hear that the review results are usually a reflection of how the manager perceives the employee, rather than being based on measurable facts.”

Food processing company Cargill, for one, found their ratings system wasn’t a trustworthy indicator of performance or engagement, so they set up a three-year, no-ratings pilot project to see what would happen. Year over year, 90 per cent of the people involved in the pilot reported that their experience was positive, so Cargill has now expanded the pilot to the entire company, doing away with the ratings systems altogether.

The practice of ranking employees, in which many organizations apply a bell curve to the ratings results, has come under scrutiny, too. Recent research suggests this process inhibits collaboration. A 2015 Harvard Business Review article noted that because systems like this prevent everyone from getting top marks, employees learn that hard work doesn’t necessarily pay off. Even with a team full of A-players, a manager has to rank some higher or lower than others. This, say the researchers, encourages competition rather than collaboration among teams. It’s an argument that made sense to Microsoft, convincing the company to drop its ranking system in 2013 – a move the company says has noticeably propelled collaboration.

Even without the curve system, Kansas State University researchers report that simply assigning people a numerical rating that’s less than the highest score can be interpreted by them as negative feedback, and that typically people don’t react constructively to negative feedback.
“One of the inherent challenges with ratings is that an employee might think he’s doing a really good job and a manager might think he’s just doing an okay job,” said Knight.

As a result, employees feel frustrated and may perceive the organization to be less than fair.

Room for confusion

Ratings and rankings do provide valuable metrics and information for management. Getting rid of them generally means replacing them with some other process.
Some choose to engage in very structured conversations with employees about performance. For example, HR might suggest specific questions on such topics as collaboration, innovation and so on, and then offer some training on how to discuss these issues with employees.

Other organizations opt for more of a “guided conversation,” where employees discuss the goals they’ve set for themselves, their progress, what they’ve added to the company in the past and what they’ll bring to it in the future.

While the conversations are meant to be casual enough to remove some of the anxiety around performance management, they need to be structured enough to be consistent and fair.

A well-structured system is also a benefit for organizations that operate in multiple countries, helping to navigate cultural differences and avoid miscommunication and the appearance of subjectivity.

“I’ve had the good fortune of putting performance management systems in organizations across the globe, so I’ve seen the effects of doing it in a very structured manner,” said Papa. “When you’re trying to do that across the globe, you have different values, different skill sets and people come from different lots in life. Having a PM tool gives you some framework and structure to drive proper decision-making and proper strategic planning.”

Coaching for better performance

One of management’s stickier challenges is how to handle an underperforming employee. “Constructive criticism,” so the theory goes, will help motivate the employee to achieve better engagement and performance. Anyone who’s been on the receiving end of such criticism, though, might disagree.

“We call it constructive criticism, but it’s an oxymoron,” said Cook. “There’s no construction when you’re doing demolition. When someone does a lousy job, you have three choices: You can do nothing. Someone thinks they did a great job, and life goes on. Your second option is to write or call back and say that wasn’t what you wanted and ask if they could show you something else instead. With this option, you might get what you want, but you just torpedoed the other person’s day. You’re ‘just being honest,’ or ‘just giving feedback,’ but you’ve done a number on the other person.”

Cook says that in his previous work in the sales arena, there was consensus among managers that you just couldn’t afford to give negative feedback.

“If someone does something negative, you can handle it – it’s your job to handle it – but you have to handle it in a positive way,” he said.

The third and best option, says Cook, is to figure out how to ask for what you want the employee to do differently, in a way that’s entirely positive.

“When you do this, the focus isn’t on what the person did wrong in the past, but on resculpting what you need now and in the future – what should have happened rather than what didn’t,” he said.

So if a report didn’t cover the ground a manager hoped it would, he might reach out to the employee and say, “Thanks for the report. I really did appreciate the work you put into it and I’m wondering if I could see even more information,” said Cook. “Could you expand a bit on point X? And I’m really interested in a high-level version of point Y, in addition to the specific version you’ve given me, which I’m going to use, for sure.”

On the receiving end, says Cook, an employee hears that a manager valued his work and is looking for more help, and he’s got specific instructions on what to do next.

“I think it’s a much healthier way to give feedback,” said Cook. “I would then get really specific about when you want the task done and ask if they’ll do it.”

Cook admits this approach takes practice.

“It’s more work on the leader’s part to recast all the negative feelings and present them as positive potential rather than failure,” he said.

This is where managing is moving more and more into the realm of coaching. A recent report out of University of North Carolina’s Kenan-Flager Business School supports this idea. Researchers there found that workers no longer see their managers as subject-matter experts, as they did a generation ago. Younger workers who’ve grown up with the Internet believe all the expertise they need is available at their fingertips. To them, a manager’s role is to serve as mentor and coach, helping them constantly learn and grow on the job.

“Communicating – and doing it well – is an integral part of PM,” said Tolovi Neto. “When it’s done right, the byproducts of that are employee engagement and empowerment.”

Final thoughts

Great performances, organization-wide, aren’t going to happen organically. And while a lot can go wrong with PM systems, with strategy and effort, a lot can go right, too.

After all, the tenets of performance management are solid: a recent CEB study found setting goals increased performance by 36 per cent. And even feedback – a touchy subject at best – can be productive if it’s done positively.

“If the system is properly designed, activated, sponsored and understood by all involved, it can be a great method of building employee engagement,” said Papa.
Business is changing, so the systems that support our organizations – and our people – shouldn’t be stuck in neutral. The most successful PM systems will evolve with the times, stay nimble and reflect what drives, encourages and maintains the best possible employee performance.

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