A Fix to Performance Reviews: Starts With Asking the Right Questions
It's that time of year for many, yes! Performance reviews. Many leaders cringe at the thought of adding more to their plate. So much so that research has shown over 90% of managers identify that performance reviews are not valuable, ratings cause debates or minimally awkward moments over performance. This creates an overall negative or lackluster feelings towards creating/conducting performance reviews which at the receiving end as an employee is not encouraging. In another study, 54% of people indicated that performance reviews make no impact on actual performance (McKinsey & Company).
What are the reasons holding us to our archaic and arguably 'broken' approach to performance?
In my experience, I've heard classics like:
Well we've always done it like this
It's not the worst system (but not many are happy with it)
We do not have time or money to invest in fixing it
Performance reviews and discussions take too much time to do and our turnover is low, so what's the point!
Other studies as seen published by Gallop point to organizations may not exactly know how to fix their performance management systems issues and that is enough of a barrier to halt any attempts for positive change.
What makes performance matter?
Having employees feel validated and holding performance conversations regularly can increase productivity by up to 20%, studies have shown. If done correctly, performance is a psychological contract between your team members and management resulting in increased employee engagement and less "gaming" on company time. That alone is a cost savings of millions per year in employee retention and keeping company knowledge within your walls. In addition, it gives employees one on one time with their manager and a clear picture of their performance and expectations. The end result leaves the employee minimally knowing where they stand and further engaged, resulting in higher productivity.
How do we fix a broken performance system?
So we understand all of the reasons for what makes a poor performance program that doesn't work and the barriers it may bring. What about the ways performance systems can work? There are so many options out there these days. They do not have to be attached to a huge ticket performance platform with oodles of automation (although your HR team would love you for it!); but it does need to make sense for your company culture and your team members. So how do we fix a broken performance system? You start asking questions and REALLY look at your culture, the actual style (not just what is written on your walls). Diving into fully understanding your culture, objectives for doing performance and dialing it into individual objectives and value for employees are four key components of a successful performance program.
Your organization 'type' impacts the performance management style
What this means is if your company is profit driven, all goals and objectives should be aligned and performance measured the same, within reason and communicated at all levels. Arguably, performance would be aggregate based on company net profits each year with conservative measures. At the other end of the spectrum is if a company is extremely team oriented, their performance program would include agreed upon goals, measures and a budget for managers to oversee for year end performance increases. Having alignment between culture and performance is key. Otherwise you will have disengagement and water-cooler conversations about why the ratings were so hard that year and coincidentally company profits were down 13% that year. In other words, a perception of a failed performance program.
What is the best performance program?
The best performance program is one that fits and is customized to your organization. There are many out there ranging in style and age of inception. When there is culture alignment with the structure of performance program it's an easier fit to your organization:
Is it 360 feedback
Management by objectives
The coach approach
Personally, I am an advocate for a hybrid of objectives and the coach approach to performance, for so many reasons. A few are: ease of use, employee buy in, two way conversations and meaningful objectives that are measurable.
What objectives are you trying to achieve with your overall performance program?
Understanding the what and the why to conducting performance within your organization approaches performance with purpose. Is it keeping alignment? Achieving productivity? Stretching performance? Or simply gains on profit margins? Regardless of the what and why, establishing objectives and communicating them to your team sets the tone and purpose for reviews.
Do we really need individual objectives?
In short, yes! Tying individual objectives to departmental then organizational objectives gives your team members a clear and succinct picture to their daily purpose of their role, how they impact the organization and add value. Making individual objectives clear, measurable, accountable and a joint venture further sets the tone or stage for expectations and the team member's vision for the year. This takes away any doubt as to what they are going to do for the year for achievement. It will also allow for accountability in how the team member chooses to complete the objective, within reason of course. These are such important things to have if you aim for a productive performance program and year.
Keeping the people in performance - is there value?
Here's the thing we often do not think of: if we keep 'people' in mind while building and conducting performance reviews we will be much better off by way of value in performance, ease of conversations, higher levels of retention and effort from employees. Talking to the employee as an asset rather than a liability is a learned behavior that is pivotal to impacting positive performance. Discussing succession, training, mentoring or job enrichment opportunities are all ideas that will assist in keeping your team members proactive and feeling wanted in their roles. Other things that can lead to positive performance outcomes are:
When deciding on ratings think about the actual outcomes and be transparent in communication. How an employee obtains a five should not be a mystery or moving target. Consistent rating is certainly key.
Regardless of the tool, team members must have a comment box. Having team members reflect on their own performance allows for alignment between the manager and team member.
Companies ought to be transparent as to how ratings impact their compensation, if at all. Employees should not be in the dark on the formula.
When discussing annual performance, it should never be a surprise: good, bad or indifferent.
Ensure there is an approach to keep employees engaged and wanting to provide feedback and viewpoints on their goals/objectives and performance.
A performance review isn't broken if there is value. We do not need Cadillac systems, just systems that work for our respective organizations.
If you would like to discuss your performance system(s) in detail, connect with us!