The global pandemic has affected business operations and policies dramatically, most notably through a transition to working from home and widespread changes to performance review processes. One third of over 3,500 organizations surveyed by Culture Amp globally decided to reduce or simplify their performance goals for 2020, while 22% reduced or simplified their performance process. Meanwhile, 9% sought to delay their performance reviews altogether in light of the pandemic and its disruptions.
Despite these changes, global benchmark data showed 83% of employees found that they had continued to work productively in their hybrid or remote environments.
Despite the challenges of 2020, findings also showed that learning and development, along with accompanying career opportunities, remained key drivers of engagement. As business rhythms regain momentum and teams return to their offices — albeit in a largely hybrid way — the new challenge for companies will be to update their approach to performance reviews, measurement, and employee development.
Performance management has two core components: performance measurement and performance development. While measurement tends to dominate, development is the part that really drives motivation and engagement. Effective performance management helps employees and teams achieve their goals and achieve organizational success.
In fact, performance has been identified as the fourth highest driver of employee engagement. Therefore, if set up correctly, your performance processes can become a powerful way to develop and retain top talent, increasing both organizational and individual performance and engagement over time. But that will take a modern, holistic approach to performance — that is, one that includes both performance measurement and performance development.
Performance development takes a forward-focused view, seeking to inspire and equip individuals to excel in their future tasks. Through the intentional design of performance systems with a development mindset, organizations can help employees identify their own areas in which to improve, empowering their teams with both agency and the necessary resources to help them actually get better. For many companies, this requires a dramatic managerial shift and a recalibration of measurement and reporting.
Here are three core guiding principles for designing a modern, performance management and development process.
Traditionally, performance management has been viewed as looking only at past performance and measuring against metrics rather than including discussions around an individual’s future growth and development.
Research by Deloitte found that only 38% of individuals highlighted that their evaluations helped them develop Further, high-performing organizations were 3.7 times more likely to address workforce development needs and 4.5 times more likely to develop leaders continuously.
Additionally, research by Culture Amp found that development is a key driver of engagement, with organizations that give employees opportunities for growth having more engaged employees. Consequently, leaders and managers need to adopt the mindset that performance processes exist to help employees improve their performance and help them grow and develop, not merely to measure past achievements and shortcomings.
In practice, this means ensuring that employees are given opportunities to create development, as well as performance-related, goals. It means fostering conversations that look forward to improving development and look back at evaluating past performance.
Furthermore, plenty of data shows that employees crave feedback. As HR thought leader Josh Bersin explains, the goal of performance management is really “growth and development.”
A Gallup study found that only 1 in 3 employees feel that their performance review is fair, but what does that actually mean?
When we use terms like “fair” and “objective,” we are speaking to all parts of the performance process, including procedure, interactions, and outcomes.
Industrial and organizational psychologist Jerald Greenberg developed a framework called Organizational Justice, which describes fairness as ensuring employees understand that what they will be assessed on will be consistent across the organization. It also includes giving workers a voice in the process. In fact, if employees believe that processes and interactions are transparent and consistent, they will be satisfied even if they do not receive the desired outcome like a raise or promotion.
Indeed, many companies make decisions about promotions and compensation based on singular points of data collected in an annual or bi-annual performance review. A lot is at stake in these encounters. By making the process fair, transparent, and clear, individuals will also be motivated and engaged by the process.
In fact, research has shown that employees can even become more engaged after a disappointing review — so long as they are satisfied with the process and perceive fairness in the decision.
The Deloitte research highlighted that only 45% of employees believed the way their performance was measured was transparent. It also found that people despised most performance-management processes. A key reason is because processes are not always clear, replicable, and transparent for all parties.
For HR in particular, a process that ensures the above can provide an organizational view and basis for remuneration and talent mapping. For managers, such criteria help simplify their work. And of course, for individuals, well, it’s impossible to overstate that employees hate when work processes feel opaque and confusing.
Ultimately, like any complex people operations responsibility, performance management is not a rigid one-and-done process. It should be customized and based on the uniqueness of the organization, its people, mission, and challenges. Hence, the importance of capturing performance data for strategic decision-making and talent development, recognition, and remuneration.
Modern managers should incorporate performance data as an accurate, unbiased measure that allows them to act fairly, provide useful feedback, and invest in their people over time.
