The New Performance Management Era

Seven common challenges when implementing a new Performance Management approach

A new Performance Management era is unfolding. There is now widespread recognition of the benefits in adopting Performance Management approaches that stimulate real-time feedback, focus on development rather than remediation, engage the manager as coach and are also underpinned by data.

Seven common challenges

In 2015, only 12% of companies believed their existing Performance Management process is “worth the time put into it” (Global Human Capital Trends Report 2015). The Performance Management methodology was perceived as an administrative burden rather than motivating employees to work on their personal and career development. Thus, the desired added value around employee engagement and retention remained missing. Once this fact was realised by HR and business leaders, about 89% of the organisations started changing their Performance Management processes (Global Human Capital Trends Report 2015). However, the route from vision to implementation can be lengthy and bumpy, particularly because the process is closely linked to KPIs, business strategy and compensation just to name a few of the touchpoints.

In this new Performance Management era performance and development should underpin your organisation’s strategy. Focus should be applied to the employee by placing their needs and performance journey at the center. As such, regular check-ins, personalised goals, instant feedback and unique career paths are key to Performance Management refreshes for many clients.

We’ve asked our clients to tell us about their most common “bumps”, challenges and lessons learned when implementing a new Performance Management.

1. Letting go of “how we’ve always done it” or the last Performance Management refresh

It’s hard to let go of the old Performance Management legacy. Performance Management has been a hot topic for decades, thus many companies have spent significant time developing job descriptions, competency frameworks and other tools that might help to ‘manage performance’. The old tools are familiar and likely used throughout the organisation. Change requires support across the entire business to retrain all employees and ensure appropriate communication to make the changes stick. Furthermore, most of these legacy tools may not support the new process. To quote one of our clients: “We keep all those tools. In a drawer. Which is locked…”

2. Involving only HR stakeholders

Performance Management expands well past HR’s span of control. The revitalised Performance Management era is about both business outcomes and the employee journey. Thus, the employee and business should be at the forefront when making design decisions. New Employee Experience tools and methodologies can be used to redesign the whole performance experience, as it is an experience and not just a process. As one of our clients pointed out: “We do not want to think out of the box anymore, we want to get rid of the box!” Performance Management should be seen in its context as an all-round experience in which there are multiple participants: HR, line management, employees and the business. Implementing new Performance Management takes a dedicated project team with a large network, because this touches all parts of the organisation.

3. Letting go

Putting the employee at the forefront sounds desirable however for more traditional and hierarchical organisations it can be challenging to adopt a more devolved employee-driven process. Many companies, regardless of industry, are still policy and process driven. Tracking how many people filled in their Performance Management forms, pulling reports of ‘high performers’ and ‘low performers’ and tracking average team ratings in different departments has traditionally been the role of HR. A process focused and report driven culture can hinder the best conversations. It remains a challenge to trust that managers will have critical conversations with their employees and that those employees will be motivated to continue developing and performing without excess guardrails and reminders. Ultimately, with a vision for true revitalised Performance Management, employees should feel empowered and not compelled to schedule performance and development meetings, create their own career paths and use managers for feedback and support.

4. Building coaching capabilities and a culture of trust and positivity

To become or remain a high performing organisation while developing your next generation of top talents requires your employees to be coached and supported by their managers. One of the biggest challenges organisations face is upskilling managers to be great coaches. It requires rethinking core manager training and skills, expanding beyond just the “what” of this role to also the “how”. In cases where training proves a challenge or the desire isn’t there from the manager, the new Performance Management era includes innovative career paths and the potential to create “Performance Manager” roles that may sit separately in the structure to line management positions. Not everyone will make a great coach.

5. Feedback frequency

Annual assessments do not always support business outcomes in a dynamic environment. Goals can change and employees have little opportunity to adjust their goals or track their progress in real-time. Once or twice a year reviews are often too little too late. With historical Performance Management employees were often surprised by outcomes, felt out of control and wondered if their whole year could be accurately represented in a single short meeting. The new Performance Management proposes a shift towards regular check-ins and encourages real-time feedback so that people always know where they stand. As a result, employees, managers, peers and teams are expected to give as well as receive immediate feedback and use it to grow. Behavior does not change by introducing a new policy, it will require employee perseverance, manager adaptiveness, and leadership persuasiveness.

6. Collecting, interpreting and using data

This real time, feedback centric approach often begs the question of how to measure and keep track of data points and employee progress without becoming an even bigger administrative burden. Further, companies opting out of one-dimensional ratings as a part of the new Performance Management era have the added challenge of collecting multidimensional data on employees, aggregating the data across various functions and interpreting the results to make critical talent decisions (CEB – The Real Impact of Eliminating Performance Ratings). Many boutique software companies are popping up to deal with data challenges head-on, and major HCM vendors also include more agile ways to do Performance Management to keep up with robust user needs. Having a clear HR Technology Strategy is key alongside having strong analytical skills within HR to see the bigger picture of the collected data and broader impact on the talent strategy including compensation, rewards and strategic workforce planning.

7. The unknown that comes with change

And finally, the ‘new Performance Management’ in whatever form requires mindset shifts, which for some will not come easily. Change invariably leads to more uncertainties for all parties involved. Different types of questions can arise: What is expected from me as an employee? What do I have to do as (performance) manager? What will the role of HR be? It is a shared responsibility of leadership and HR to find the right balance between ‘giving freedom’ and setting up the ‘rules of the game’. A culture of trust and positivity needs to be created that focuses on and recognises what goes well.

This level of change and cooperation between the business and HR takes time. Don’t expect a major performance shift to be a ‘quick win’, it will take time to embed but the results will be worth it. In 2017, 90% of companies that re-designed their Performance Management see direct improvements in engagement, 96% state that processes are simpler, and 83% say that they see an improvement in the quality of conversations between employees and managers (Global Human Capital Trends Report 2017).

We will discuss these challenges and several more, our own implementation experiences, the important link between Performance Management and rewards and lessons learned during our Performance Management Round Table on November 21. There are no simple answers for the challenges faced and there isn’t just one right way to change and implement new Performance Management. Each organisation must find its own right path to change the way in which it connects performance to business goals and improves the employee experience. If you want company on your long and bumpy road consider joining our Round Table to speak to Deloitte experts and peers and avoid some of the common pitfalls to realise the true benefits. Contact Judith Eickhoff to find out more!

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