Rethinking Performance Management in a Changing World of Work: Putting the Focus on Employees and Managers

These days, it’s nearly impossible to talk about performance management without talking about change. Organizational researchers and experts widely agree that when it comes to effectively managing the performance and engagement of employees, traditional performance management practices (most commonly, the annual performance review) are no longer keeping pace with how we work. On the one hand, effective performance management is critical to driving organizational productivity and success. On the other hand, any process that doesn’t foster talent engagement and retention in an increasingly competitive world of work is an absolute liability.

Efforts to “fix” the performance management problem usually start with fixing (or even eliminating!) formal HR processes, such as annual reviews and ratings. If we are to believe the media, it seems like each week a new company has decided to get rid of performance reviews and/or ratings entirely. While this approach may alleviate some of the negative aspects of traditional performance management, the positive aspects, such as transparency and defensibility of performance-related employment decisions, often get thrown out as well, potentially resulting in unforeseen productivity, retention, and legal consequences for an organization.

In a poorly designed PM system, employees suffer the consequences of not having visibility into how they are doing and how they can improve. Managers suffer the consequences of disengaged employees that produce poor work and ultimately leave. Senior leaders suffer the consequences of a poor performing organization. The stakes are high for these stakeholders, and yet we rarely investigate what they hope to get out of an effective performance management process and design our practices accordingly.

Earlier this year, SAP and Baylor University researchers sought to do just that: we wanted to understand what performance management (both current practices and ideal) looks like from the perspectives of managers, employees, and senior leaders, and how formal processes can ultimately be designed to support their needs rather than looking at the problem the other way around. Baylor MBA students interviewed these stakeholders across 26 different companies representing 16 industries.

This study shed light on what today’s employees and managers truly think about performance management and what they wish they could do differently. Some of the major insights and common themes across participants were:

• Employees desire ongoing communication around performance, but they rarely felt they were getting it.
• Managers desire more resources that will help them better manage the performance of poor performers, which is currently a challenge that receives very little help from formal HR processes.
• Employees desire positive feedback as well as negative, but they reported that many of their managers tended to revert to providing informal feedback only when there was a problem that necessitated it.
• Employees prefer working for managers who treat them as individuals, and performance management activities are no exception—the most effective managers do not treat performance management as a one-size-fits all activity.
• Existing HR processes are most commonly described as helpful in driving performance conversations that might otherwise not happen, but there is a lot that organizations can do to build on these, including simplifying the process, promoting transparency, and consistent implementation across managers and business units.

There is a lot of debate around whether performance management is worthwhile for organizations to continue pursuing as the nature of work keeps changing. Findings from this study conducted with people on the front lines of performance management suggest that it is, perhaps with some modifications to the traditional approach. Employees and managers desire processes that will push them to have these conversations in a way that is clear, transparent, continuous, and respectful of their individual needs. Rather than throwing the entire process away, we propose organizations seek to better understand what their key stakeholders want to get from performance management and design their practices accordingly.

To learn more about this study and research-based insights regarding effective performance management, please visit http://www.successfactors.com/en_us/lp/rethinking-performance-management.html?Campaign_CRM=CRM-XJ15-LOB-HR_CPM2 to access the full report.

Listen also to the researchers discuss the changing world of performance management on SAP Radio: http://www.voiceamerica.com/episode/84499/employee-performance-empowering-managers.