The future of Performance Reviews

Performance reviews are a business tool that ought to evolve at the same speed as business itself – yet in a dramatically accelerating business environment they have failed to keep pace.

Ursula Fear, Director, Human Capital: Deloitte Consulting explains that performance management or review remains a vital tool in measuring performance. In order to extract maximum value from the time-consuming process users have to evolve it from a rear-view mirror process, useful for little more than evaluating salary adjustments, to a dynamic gauge of the future potential of employees.

This is a means of empowering the employee to become more responsible for his or her own career. With regular feedback, employees can initiate conversations about their objectives (instead of waiting for their leaders to do so), request feedback regularly (to avoid unpleasant surprises at annual review time) and make adjustments as necessary to keep their careers on track. 

Their performance will become a reflection of their own hard work and initiative – ‘What is the next thing I can do to add value?’ - an approach that’s good for everyone involved.

“In a business environment where the pace of change is palpably speeding up; where even Fortune 500 companies do not have a lifespan of more than 40 to 50 years (according to an article on the World Economic Forum website); where the average lifespan of all companies in Europe and Japan is 12,5 years (according to a study by Stratix Group, Amsterdam); where the Millennial generation expects instant feedback on performance; and where a market disrupter can come from anywhere anytime; it is the soft issues which have become the hard issues in a boardroom. Competitive advantage lies not in technology or products but in your people,” explains Fear.

“The challenge with performance management systems is that it should not be viewed as a system at all, but a process of constant employee engagement and two-way conversation. Because of the considerable demands that performance review places upon the leader, it was almost inevitable that the process would degenerate into a tick-box event that was dealt with just twice a year, and was often viewed as a highly painful event because it became so subjective, often surrounded by fear.

“To do justice to a proper process requires a specific skills set by the leader, and for this we recommend dedicated development to augment the traditional leadership skills. This skill has to filter down to every level of management, and while it may seem daunting it has to be seen in the context that it ultimately has the effect of changing the culture of the organisation to a more engaged and empowered one, and in the process optimising the performance of the business,” says Fear.

The right skills and conversations by leaders is an enabler for a successful retention strategy.   That level of engagement enables the retention of skills, which today increasingly might have a life span of only two to five years.  

“Cultures are changed because the process involves continuous conversations with staff, continuous feedback on their performance and continuous alignment of their performance and behaviour with the values of the organisation. There’s no opportunity for misunderstandings because the leader is close enough to the individual to know exactly what he’s doing. It satisfies employees because there is a consistent process across all levels of leadership.”

The new employee value equation

Fear says that while there remains a place for ratings and measurements of staff, these have to be seen as peripheral to the heart of the process which is engagement. “This is a process which, to do it right requires skill and appropriate engagement intelligence.  It is based on qualitative conversations more than quantitative ones. 

“The 21st century is demanding a new way of doing things and a new level of consultation. Organisations today are becoming ever leaner in a more globally competitive business environment, and they don’t have the resources to waste. 

“In South Africa, this evolution of performance management is therefore more of an emerging trend, whereas it is currently already happening around the globe. Performance management has not fundamentally changed, but it is being refreshed, and with a different energy,” says Fear.

The new learning organisation

It reflects the fact that with cognitive technologies coming on the market, today’s skills have a shorter shelf-life, and learning within organisations has to take on a much higher profile. It becomes the leader’s role to ensure regular learning is engrained in the organisation. “Effectively, business organisations are the universities of the future.”

“The results of this new style of performance management include greater productivity and an improved bottom line. That’s what we mean when we say the soft issues are becoming the hard issues,” explains Fear.

“Feedback we receive from clients suggests it brings about remarkable improvements in areas such as engagement and culture. In addition, adopting this practice in no way affects the accountability of employees – in fact it increases it,” she concludes

Contact

Ursula Fear

Deloitte & Touche

Director, Human Capital

Tel: +27(0) 11 5174963

Email: ufear@deloitte.co.za