Business

Right performance management system can be a retention tool

Almost no one likes the performance management system at work, including employees, managers and HR.

Employees dislike infrequent feedback, the high-pressure focus on negative comments, ratings under 4 or 5, reviews given by untrained managers and too much subjectivity in ratings or comments.

Managers dread the time required, confronting problem performers, the disconnect with important work, rigid forms and barriers to paying high performers more.

HR really gets edgy when managers use the system to manipulate pay, submissions are chronically late, the total time and cost required is excessive and unjustified halo reviews damage legal defenses in terminations. What to do?

WorldatWork, the nation’s largest nonprofit total rewards association, published an extensive review of performance management trends in its Q2 2016 Journal. (I am a member of WordlatWork’s board.) HR experts, practitioners and consultants put forth their best current practices and strategies. Surprisingly, much of the action is with smaller employers (under 500 people) and manufacturers.

The big trends are 1) frequent conversations rather than annual reviews, 2) simplified or eliminated ratings scales, and 3) input from peers and others. In fact, most organizations using these trends have some combination of new techniques plus the best features of their former system.

Frequent conversations. Ongoing feedback strengthens relationships and promotes clarity. Sometimes these conversations are difficult, but frequency allows timely correction and coaching rather than delayed criticism. When managers talk monthly or quarterly with employees, everyone knows more about expectations, successes and hurdles. The conversation is less of a review and more of a check-in. There might be a simplified annual review and a year-end pay discussion as well.

Get rid of ratings. In general, top performers are offended by any rating below perfect. A debate over 4.6 versus 5.0 is not useful and may damage retention. Reviews are not good at delivering precision and repeatability in ratings, anyway. So, if we are irritating our best people, overrating our average performers and super-overrating poor performers to get them a raise, stop the madness!

Peer feedback. A less common but interesting option is peer feedback. Usually, peer feedback is ongoing in the form of kudos and applause for work well done. Software makes this easy to do and is readily available (such as SoundBoard). Targeted comments on specific dimensions such as company values, results achieved and leadership skills might be sought. When you seek constructive feedback from peers, everyone needs training in the how and why. The impact of good data is powerful.

So far, the experience with new approaches is good. They still take time, but improved linkage to company values, to the work required and to employee skill growth is significant. Traditional and annual systems are slightly better at identifying the poorest performers.

HR has driven most of this change. Successful users say you must get top leadership buy-in. Managers need training to understand the new processes and why the changes were made.

The right performance management system can be a competitive business advantage and retention tool. The wrong one can be, well, like the one you have right now.

Bruce Clarke, J.D., is CEO of CAI, helping more than 1,000 North Carolina employers maximize employee engagement and minimize employer liability. For more information, visit www.capital.org.

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