A lot of employee performance management programmes stand accused of not performing, but for reasons that may be false or misleading.
Recent media reports have placed company performance management programmes firmly in the dock, charged with, among other things, ineffectiveness, overly burdensome processes and taking up excessive time.
New research from Towers Watson’s Performance Management Pulse Survey 2015 has confirmed that the concerns raised in these articles are shared widely in many companies around the Europe, Middle East and Africa (EMEA) region. Almost 65% of organisations described their performance management processes as ineffective, while only three out of 10 managers and employees reported being satisfied with these same processes.
Source: Towers Watson Performance Management Survey 2015
But while there is broad agreement about the ineffectiveness of many current programmes, the reasons behind the dissatisfaction are surprisingly different from the picture painted by the headlines. Rather than confirming that companies are spending too much time on developing employee performance, the survey found that 83% of companies invest fewer than six hours per year on each employee. Against a background where employees are often demanding more frequent feedback and touchpoints, there is a clear disconnect emerging.
Global employee engagement data confirm how important spending time to set clear goals and objectives and discussing careers is to employees. Indeed, these frequently appear as two of the top three drivers of sustainable engagement and retention.
In this most recent survey, for example, employees said they want to spend more time setting relevant goals (58%) and participating in performance feedback and career discussions (72%). These results further underscore the urgent need to address the risk of having a performance management programme that does not effectively support the performance and career discussions that keep top performers not only engaged, but in an organisation.
Source: Towers Watson Performance Management Survey 2015
Many organisations, recognising these kinds of issues, are considering changes to their programmes to enhance their impact.
Not surprisingly, similar to many other business processes, the most common change anticipated relates to the broader use of technology. Others, however, are rethinking the whole purpose or focus of their process. In particular, one-third of organisations say they are redesigning programmes to focus on forward-looking potential. This suggests that organisations are realising that the value of what has already occurred is worth evaluating at a point in time, but the true return on time invested is likely to be gained through an employee’s future achievements and development.
Another aspect of performance management that has attracted a lot of recent media attention is the movement for organisations to implement ratingless systems. But, as of today, only 7% of organisations have either moved to a system without ratings or are considering the move. What is more, 71% of those surveyed that use performance ratings said they have no intention of eliminating their use.
Nonetheless, possibly as a result of the ratingless discussion, organisations in EMEA appear to be moving away from a numerical score to a more descriptive set of normative scoring labels. Just over half of organisations use a single performance rating, 85% of which use a four- or five-point rating scale. These descriptive labels shift focus away from a discussion about a score, instead to one about the opportunities that are defined behind the rating and what it means in terms of future development opportunities.
The right stuff
Are there organisations who report getting the formula, and the design of their performance management programme, right?
Companies in the Towers Watson study were twice as likely to report an effective performance management programme if they used a continuous feedback process and had managers who spent the ‘right amount of time’ on performance management activities, such as goal-setting, performance feedback and career discussions. That specific ‘right’ amount of time is not illusory, according to the study, and the law of diminishing returns does seem to apply. A direct correlation was identified between programme effectiveness and up to eight hours of time being invested in performance management per employee per review period. After that, returns and perceptions of programme effectiveness begin to diminish.
Words into action
The question, then, is how the time for performance management activities should be spent.
Clearly, there is a need to understand and focus on what drives employee engagement and retention within individual organisations in the first place. In addition, managers need to be well-equipped to deliver on the requirement for ongoing performance feedback and career discussions. Here, organisations reported that managers currently do not have the necessary skills (56%), the time to execute effectively (72%) and, as a result, don’t see the value of the processes (39%). Enhancing manager effectiveness in managing employee performance is a critical first step. Without effective managers to drive the process, the design of the performance management programme itself will make little difference; the equivalent of a novice violinist playing a Stradivarius. Without the will and the skill to effectively execute the process, the results will invariably fall well short of the intended impact.
Employees, too, must take responsibility to close the current gap in expectations. But, as with managers, organisations need to equip them with the right tools and guides to help them more accurately assess their performance and potential for growth, leading to realistic and mutually beneficial conversations about the future.
Change is undoubtedly on the agenda for many performance management programmes. Depending on the results companies have seen so far, this might occur through incremental evolution or revolutionary transformation. No matter the method, the goal is to more effectively impact business performance in a way that is:
- Efficient to execute and supports company goals
- Effective in delivering on the commitments an organisation has made to employees.
How far an organisation moves should be underpinned by business priorities, culture, manager effectiveness and employee drivers of engagement and retention – in addition to a clear understanding of any shortcomings in existing processes.