60.7% of employees believe that their performance is more likely to improve if they discuss it more frequently than once a year. A whopping 81.6% of managers believe employee performance will improve if they meet more than once a year.

These are a few glaring statistics compiled by the Quantum Workplace Institute, which point to the imminent overhaul of performance management. The industry has taken to reimagining what the process can do for their businesses. Be it feedback mechanisms, dialogue methods or review frequencies, it is time to reinvent the wheel. The need simmers from a slew of people-performance challenges that includes both people and process. These challenges are impacting organizational performance, and companies simply cannot afford this in today’s ultra-competitive age. 

We know that change is unpleasant, so what has propelled corporations to spearhead change? The current processes are not aligned to the fluidic and fast-changing business expectations. In a PwC survey that assessed the current and future state of performance management, 30% of respondents pointed to process impediments as a hindrance, while 49% attributed the failure to People impediments. Current PM Systems focus only on outcomes, pretty much ignoring the behavioral markers that drive people performance. Objectivity is also lacking.  The result is a lack of flexibility and a misfit with business. 

The industry seems to be more or less on the same page as to what is the objective of performance management. In the PwC survey, 93% mentioned that “Supporting the delivery of business objectives’ was the key objective. Other allied objectives were ‘supporting career progression decisions’ (57%) and ‘recognizing individual contribution’ (55%). However, beyond this angle, the performance outlook seems to be in a state of flux. It is unfortunate to note that only 12% stated that their current performance management system was highly effective in achieving its stated objectives.The reasons being, as outlined, both process and people. 

People impediments: Both the manager and employee are to blame. One on hand, the inability to have difficult conversations, ‘unstated’ expectations that are not formally articulated, and manager biases hamper effective performance evaluations.At the employee end, employees tend to unilaterally link performance with pay, leading to the destruction of morale (8%) and interpersonal team issues (12%). 

Process-wise, disparities exist: Many organizations are today maintaining two separate processes: one to evaluate individuals on behavioral elements and another on quantifiable metrics. The process as a whole is not geared towards long-term outcomes, nor does it help reinforce specific values or behaviors

Clearly, the performance management process lacks effectiveness and is at a crossroads. 

Organizations approach to Change

Business leaders are realizing the need to revamp performance management, and are prioritizing it. 

52% of the respondents have made changes or are planning to make changes to their existing performance management system. The aim being to make the process fair and transparent (78%), introduce ongoing feedback (72%) and create an outcome-focussed process (70%).With the strong thrust for change, one can thus expect some bold approaches to creep in going ahead. For example, the IT/ITeS sector is discarding the forced distribution model and adopting a process of continuous check-ins. 

One concern is that many organizations may look at change from a perspective of purely structural changes, and attempt to solve a people problem with process solutions. This will only thwart the effectiveness of change. Here are a few guidelines to effect change: 

People changes: Evaluate whether technology can be harnessed to bring in objectivity in evaluating behaviors. Train managers to have performance conversations, create an open culture that encourages teams to engage in open performance dialogue. Promote transparency and unbiasedness. 

Process changes: Relook at the frequency of objective setting/basis of objective setting. Transfer the process ownership to managers, empower and enable them by improving the design. Move away from the paradigm that pay is the most important outcome of performance management, and inculcate career growth and development as equally important goals. 

The Role of Human Resources

Human Resources is the custodian of the performance management process. While line managers must play out their ownership in the implementation aspect, it is the HR professional who must put on an innovation-thinking cap and evaluate and reevaluate the process. Look at the organization-wide people implications and you shall get your answers to move in the right direction. The future of performance management lies in these principles: 

Excellence in Process design: HR professionals must understand the business direction the organization is taking and marry it with the performance process. Design system, objective setting methodologies, evaluation scales etc. to balance both the short term and the long term. For employees to own up the organization, it is important to set goals taking their professional plans into consideration. A good performance design is not just one that measures and evaluates, but one that listens to the voice of the employee. Most importantly, design a transparent process and system free of bureaucracy, with an emphasis on conversations that understand and engage. It is also important to simplify the process and make the interface intuitive, to spur early adoption by line managers. 

Maintain a mentoring mindset: Performance management will benefit with a clear “coaching angle”. This means that the process must encourage developing employee skills in line with their career objectives and the organization’s business objectives. Also, assess both performance and potential. After all, you want people to take on today, as well as be ready for tomorrow. Propagate the developmental agenda, move away from mere performance measurement

Ensure objectivity and bias free evaluation: HR must enable an objective process rating allocation. For example, incorporating 360-degree feedback mechanism is a great way to minimize bias. Alternatively, managers can be trained to understand how biases creep in and they should be skilled to make objective performance decisions. 

Strive to enhance the quality of the performance-review discussion: The review discussion is the outcome of all background work- the system, the evaluation etc. It directly deals with the people challenge of performance management, as mentioned above. HR must foster a great employee-manager dialogue by prepping for it beforehand. Train managers to handle difficult conversations and communicate goals clearly. Coach employees and make them understand that the process is as much about career growth and learning, as about pay. 

Tie in performance management with the overall people value chain: HR must ensure that performance management is not operating in a silo. The design and deployment should be such that it “talks to” other people agendas- Learning, Hiring, Career growth and so on. For example, conceptualize a performance portal that is linked to your learning management system. This will ensure information flow across HR processes, and make performance management more effective. 

The need of the hour is to create a performance ‘experience’ rather than a mere ‘process’. Organizations and HR, in particular, must exert due diligence to study the impact of an inadequate process on each stakeholder and be ready to course correct. The time is now to make the most of your people, by aligning them with the business objectives. And an effective performance management process is your answer to achieve it.