“Performance reviews are a business tool that ought to evolve at the same speed as business itself,” a Deloitte report states. While performance management is a key HR mandate that helps build a high performing organization, at its core, performance management is about driving the desired behaviours amongst people through the sequential processes of goal setting, self-appraisals, performance appraisals, performance ratings and moderation, and performance communication. While the core elements remain the same, the construct of PMS has evolved through the years. Earlier, the forced ranking methodology emerging from the Bell curve was used to drive a carrot & stick approach. In recent times, performance is being looked upon as a key engagement and development tool, leading to a collaborative and communicative stance towards performance appraisals. 

The business and talent state of today 

The change in performance management paradigm draws from today’s organizations being in a state of constant flux. An ever-evolving business environment means that organizations must adapt and adjust to stay ahead of the curve. Business goals, functional goals and team goals are prone to change. By the time six months have passed in the annual cycle, the business priorities may be pivoted due to a number of micro and macro factors including shifts in the business environment, technological advancements, and even the talent landscape.

Today, we see diverse employee demographics coming together to create value for organizations. They expect to be at the centre-stage of various talent processes and wish to be empowered to realise their potential. This empowerment shall come only if people collaborate in a flexible and agile manner consistently. 

Naturally, a one-time annual performance appraisal intervention cannot do justice to modern-day performance evaluations and demands a more continuous and engaging approach. 

Why don’t your performance appraisals work? 

Organizations must move away from traditional PMS norms, both at a process, system, and people level. Some of the reasons why performance appraisals do not work are: 

 Unaligned Goals Setting and Management: To realise the goals, the first step is to define them right. There are different methods of goal setting and goal management, from Objectives and Key Results (OKR) to The Four Disciplines of Execution (4DX  to many more). Using a process which is not aligned with the strategic business objectives, is a step to a failing performance management process. Hence, HR and business leaders must deep dive into the business strategy and select the best methodology suited to the strategy. 

 Lack of continuous feedback mechanism: Instantaneous and objective feedback is a hallmark of high performance. A performance management system (PMS) which does not have adequate feedback mechanism loops is bound to fail in enabling the employee to improve. Hence, designing a PMS workflow and incorporating system features that seeks adequate feedback from all stakeholders, for example, 360 degrees feedback is a must. 

 Tedious and taxing user experience: Today’s employees desire a consumer-grade experience in their workflow. A single click or swipe should help them carry out their tasks in a self-sufficient manner with speed and accuracy. Hence, any technical glitches or snags in HRIS or PMS are sure to dissuade employees from using them. With employees experiencing the best of consumer grade technologies outside work, even a few technology errors can hamper the user experience in the long term. 

 Little or no linkage to learning: The aim of performance appraisals is to build desired current and future capabilities and behaviours. Intelligent developmental inputs must flow from the PMS into the LMS, so that employees can get intuitive learning recommendations on their devices. HR must tap into the power of Artificial Intelligence and Machine Learning to tie together HR systems in an intuitive manner to encourage continuous learning. 

 No coaching capability: Performance appraisals and discussions must be removed from the lens of reprimanding and must be viewed from the view of coaching & mentoring. For this, HR and L&D must invest in coaching-training and must encourage a coaching mindset etc. It also means that the PMS must be designed with coaching-mentoring features to encourage a consistent coaching and mentoring approach. 

 Lack of fairness and transparency: Today’s employees are enthused by purpose, and a lack of clarity on what ratings are given, why ratings are given, and to whom ratings are given, can create disengagement. Employees want to know where they stand and how they contribute to the company’s overall growth, and it is best to be fair and transparent while communicating elements like the performance construct, compensation philosophy, etc. 

 Telling versus conversing: This is the glue that brings together all the above components and makes performance appraisals work for people and organizations both. A directive leadership style, versus a dialogue-based interaction with one’s people is perhaps the biggest make or break factor for the success of performance appraisals. Organizations must create a culture of open dialogue, where discussions about performance goals, learning, coaching, mentoring etc become an acceptable way of life. 

The good news is that today’s technologies can support many of these performance management drivers. At the same time, HR must first build own capability to understand the nuances of business strategy and accordingly build a well-aligned performance management strategy. 

Building a high-performance organization is a process, people, and a culture change. It starts with investing in and curating the right performance processes and technologies. This takes time, effort, and monetary investment. 

“Not taking the time to define the process isn’t fair to the technology, manager, and most of all, the employee.”

But sustained high performance is not possible without the right mindset change. Leaders must move away from authoritative, directive leadership styles, and connect with employees from a place of empathy, honestly and integrity. Only when employees look up to their leaders with respect and connect, will they be enthused to outperform with happiness. The results of this new style of performance management include greater productivity and an improved bottom line*. 

This article is part of a series on preparing for a flexible future of work in partnership with Zimyo.