You’re probably sick to death of reading articles about “the death of the appraisal” or that “performance management is broken”. I’ve been an HR practitioner, director and talent management consultant for 20 years and from what I can tell most of us in HR have known this for a long time. We just haven’t known what to do about it.
So why is now the time to fix it? Firstly because we now have the proper evidence and research we need to support making a change and justifying it to our boards. Here are just a couple of examples:
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Deloitte (2017): 82 percent of companies reported that performance evaluations were not worth the time
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Mercer (2017): 95 percent of managers are dissatisfied with their organisation’s performance management system
Secondly, and most importantly, enough companies have now successfully made the switch away from annual appraisals for us to know what actually does work in performance management. It started out with global giants like Adobe, Microsoft, Deloitte and GE who famously binned appraisals in favour of a continuous approach to performance management. Since then, many thousands of companies around the world have adopted similar practices.
My company, Clear Review, has been fortunate enough to work with over 100 of these organisations, ranging from public sector bodies, banks and law firms through to schools, football clubs and film studios. Over the course of six articles, I’ll be sharing some of our most valuable insights and learnings about how to fix performance management and how to overcome some of the common obstacles.
I’m going to kick off by introducing 6 of the key principles that lead to successful performance improvement in a
post-appraisal world.
Principle 1 – regular, meaningful conversations
Organisations succeeding with performance management (or performance development as I prefer to call it) are putting regular, coaching conversations at the heart of their processes. These ‘check-in’ conversations are typically forward-looking, developmental and focus more on strengths and less on weaknesses. Research from Gallup has found that employees whose managers hold these regular discussions with them are almost 3 times as likely to be engaged and 22% more productive.
Principle 2 – frequent, ongoing feedback
We can improve employee engagement and performance even more by giving employees ‘in-the-moment’ feedback as events occur. This provides instant recognition and aids continuous development. According to the CEB, ongoing, informal feedback has a 25%+ impact on improving performance. This contrasts with traditional, and usually anonymous, 360 degree feedback exercises which the CEB found had minimal impact on performance.
Principle 3 – agile goals
Priorities change frequently in today’s organisations so annual objective setting is no longer appropriate. A more effective approach is to set ‘near-term’ goals (typically with
a 1-4 month timeframe) and review them regularly. Near term goals (or “priorities” as some of our customers call them) are more relevant to people’s actual jobs and are more motivating as they can be achieved quicker.
Principle 4 – decouple performance evaluations
One of the reasons why appraisals don’t work is that they try to combine discussions about achievements and personal development with evaluations. The two do not mix. Employees are unlikely to be completely honest about their strengths and areas for development if they know a rating is coming at the end of the discussion. To overcome this, organisations are separating out evaluations and pay decisions from coaching conversations and feedback.
Principle 5 – keep things simple
Over the last 20 years, we made performance management increasingly complex. Competency frameworks, objective weightings and calibration sessions we all introduced, mainly in an attempt to increase the objectivity of performance decisions. Yet research has since found that these tools do little to improve accuracy and take up valuable time. HR teams can add more value by spending time coaching managers on how to have effective conversations rather than administering complicated processes.
Principle 6 – use appropriate technology
Most performance management software has been designed to facilitate annual appraisals and focuses on capturing data and documenting evidence. This kind of software is not fit for purpose in the new world of continuous performance management and using it can seriously jeopardise the success of a new performance management initiative. Companies who have successfully moved away from appraisals have done so using technology that is purpose built to enable and encourage meaningful conversations and feedback.
Making the change
For some organisations, adopting these 6 principles will require substantial change and it may be tempting to make ‘easier’ changes such as simplifying the appraisal form or removing ratings. But both research and experience shows that these kind of changes won’t impact performance.
So I urge you to be brave and do what it takes to fix your performance management once and for all. No, it won’t be plain sailing, but your managers and employees will ultimately thank you for it. If you’re not convinced, here’s what a bank manager at Clydesdale & Yorkshire Banking Group said about their new continuous performance management approach which they implemented last October:
“I love it, it adds real structure and I look forward to receiving and giving feedback. Thank you for the change, it’s making a real difference.”
Surely that’s worth aiming for?
Discover the simple continuous performance management process you can use to replace annual appraisals, whilst increasing employee performance, engagement and satisfaction.
