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Management

Bonus time: Five ways to get your performance reviews right

Performance management systems have generally struggled to keep up with changes in the ways in which work is carried out

PUBLISHED : Friday, 30 December, 2016, 12:04pm
UPDATED : Friday, 30 December, 2016, 8:44pm

As bonus time for many draws near, many managers and staff reflect on their performance reviews. Companies spend millions every year going through the elaborate ritual of strengths and weaknesses, development opportunities and forced ranking – but do the results reflect the process?

Accenture conducted a survey of 2,100 business leaders and employees in organisations across North and South America, Europe and Asia Pacific.

It found while 94 per cent of managers are convinced performance management improves business performance, only 34 per cent of all respondents believe their current approaches effectively support the objectives of the business.

In fact, almost nine out of 10 employees said their performance would improve if their company’s performance management improved. From developing and growing employees (just 40 per cent) and retaining staff (28 per cent) to engaging and motivating them (40 per cent) and making fair decisions about their bonuses, pay increases and promotions (36 per cent), faith in current approaches is alarmingly low.

Employees are rightfully suspicious — and can become unmotivated — when performance management is a ‘black box’ where both inputs and outputs are obscure and inconsistent

The problem is performance management systems have generally struggled to keep up with changes in ways in which work is carried out. Just as consumers demand personalised experiences, employees are expecting to be evaluated and encouraged in more personalised ways.

The ‘one-size-fits-all’ approach, often the de facto solution for banks and insurers in Hong Kong, seems to be having a strongly negative impact on performance management – three out of four respondents said if the needs of the workforce of the future are to be met, personalisation for individuals or groups is mandatory.

Ratings and rankings too came in for heavy criticism. Sixty per cent of respondents said using them creates a negative experience for everyone except the few at the top.

But scrapping them is not necessarily the solution. A high proportion of leaders (92 per cent) and employees (89 per cent) alike believe traditional rankings and ratings should have some role in determining rewards.

The insight here is some sort of evaluation guidance and standards is important, as long as sufficient attention is given to employee uniqueness.

The insight here is some sort of evaluation guidance and standards is important, as long as sufficient attention is given to employee uniqueness

This will require new behaviour from leaders who, with a much less prescriptive set of guidelines, must have intimate knowledge of the impact of each individual and then translate that into rewards.

Another problem with many current performance management systems is they are characterised by top-down control, and focus on assessment of the past rather than development for the future.

Employees, to an increasing degree, expect their work to be framed around opportunity and active participation, with real-time feedback and ample motivation and development opportunities.

Five steps to improvement

So what’s to be done? The research suggests five major changes will result in improved performance for employees as well as the business:

• Develop people through constructive conversations and coaching. Performance management is not just the formal assessment of performance.

• Create a culture of openness and transparency. Employees are rightfully suspicious — and can become unmotivated — when performance management is a ‘black box’ where both inputs and outputs are obscure and inconsistent.

• Personalise performance management. Some organisations are increasingly customising coaching and feedback, the goal-setting process and types of rewards and compensation, all based on the needs of individual employees or workforce segments.

• Move people decisions closer to the people. Many leading companies are eliminating ratings. This moves further towards business-led decisions, placing more decision-making power in the hands of leaders — or, sometimes, in the hands of employees themselves.

• Clearly define high performance and then track toward that vision. Sixty-five per cent of respondents (56 per cent of leaders, 73 per cent of employees) feel performance management does not adequately identify what high performance is and, correspondingly, who the high-potential employees are.

Performance management must do better. Achieving better business agility and responsiveness depends on continuously aligning employee performance with business goals. This will play an increased part in the decision making of prospective recruits.

Andrew Woolf is the global human capital lead for Accenture Financial Services

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