Agility is now key to the process. With the business climate becoming more competitive, uncertain and volatile, agility suits companies who find objectives changing in the short term, whether through commercial or organizational pressures
The way we look at Performance Management is changing. The need to measure and understand employee performance and motivation remains high, but it is the way that we go about this that is evolving. Retention and development of talent remain major concerns for organizations and a recent report, outlining the findings of the global HR Best Practices Survey by the Top Employers Institute, found them responding by promoting a clearly defined performance culture in their business. 95% of global organizations now include a description of their desired Performance Management culture when defining their process. Central to this is the need for an organizational culture that promotes transparency, open dialogue, collaboration and agility.
The expectations of key talent and high potential employees are also changing. They no longer want to be rated and ranked in an annual or twice yearly performance review but instead are more concerned with their development. In place of a passive process over which they have little influence, they now seek immediate input with real time feedback, enabling them to understand how their performance matches expectation and also allowing opportunities to adjust performance if necessary. This means that Performance Management itself is no longer an event but has developed into an ongoing process of continuous dialogue between the employee and their manager. In 91% of organizations, managers are instructed and trained to provide employees with open and constructive feedback on their performance. Employees now look to their managers for regular coaching and mentoring to support the feedback and to help them develop.
Agility is now key to the process. With the business climate becoming more competitive, uncertain and volatile, agility suits companies who find objectives changing in the short term, whether through commercial or organizational pressures. The same is true for individual goals, so it is no surprise to find the goal setting process also evolving. Pre-determined annual goals are making way for a more flexible approach in which goals can be replaced or re-aligned during the year if they are no longer deemed relevant. There is more employee involvement too, as within 88% of the Top Employers they play an active role in providing input for their own goals.
If key talent is to have greater autonomy in setting their own objectives then they need to know what is expected of them. The onus is now on leaders to clearly articulate the wider corporate vision, giving each employee insight into how their contributions impact the bigger picture, and how they relate to those of other employees. There is now also greater transparency between managers and their teams, with managers' performance objectives being visible to their direct reports in 87% of participating companies.
The previous system of annual ratings and rankings is becoming flawed for companies that see effectiveness and potential in a different way, whilst it can also encourage unhealthy internal competition. A single rating ignores the wider, more nuanced set of interactions, influence and capabilities that help to define an individual's contribution to the business. There is a shift towards redefining performance as impact - particularly the impact an employee has on a team or internal network - and looking at how this contributes to the performance of others and helping the organization achieve objectives.
This is particularly noticeable at Microsoft, whose changing approach was featured in a case study as part of the Top Employers' Performance Management Report. To help them shift Performance Management from an evaluation process to a development opportunity they have focused on looking not at individual activity but at what that activity produced with the three key elements being individual accomplishment, contributions made to others' success and how others' knowledge and experience is leveraged to produce results.
One significant change has been the weakening of the link between Performance Management and compensation; with only just over 10% of global Top Employers considering salary increases an important objective of the process. This helps to underline how the approach to Performance Management is changing. A focus on rankings encourages a rigid link with individual rewards and therefore a heavy focus in individual performance, which would work against the broader approach of using the process to foster development, improvement and collaboration.
Today's high potential employees are part of a workforce that is becoming more connected and collaborative, within businesses whose leaders are actively trying to encourage engagement and retention. They are looking for a performance management process that supports them in having a clear path for career development whilst recognizing the impact they have and the influence they bring to the wider corporate mission. The rewards for business are to be found in having a more developed, engaged and productive workforce.
The above insights, from a report on Performance Management trends, are based on the findings of the Top Employers HR Best Practices Survey. Their global HR Best Practices Survey assesses an organisation’s HR environment in the areas of: strategy, policy implementation, monitoring and communication of employee conditions, and development.