Is the Performance Management Process Broken?

Each year millions of companies across the county go through the process of reviewing employee performance, ranking their employees against their peers then communicating their strengths, weaknesses in face-to-face discussions as a way to motivate staff and presumably to improve productivity.   The question is should this process continue or is it such a failure that this key management tool should be discarded and a new way of evaluating performance be developed?

Using our employee engagement survey tool as the backdrop to this question the data suggests that the process is not broken but the way the process is administered and communicated needs to be fine-tuned to better reflect the current workforce.

What is a Performance Review?

First of all, let us define what a performance review is and why it is such an important tool in managements toolbox.    The performance review is a mechanism to document an employee skill level based upon a clear understanding of the duties and responsibilities of the job and the results expected.  The performance review is a unique way for management to motivate and maximize performance and productivity, as well as outline career goals and expectations.  It also facilitates a ranking mechanism for management and is an excellent way to provide succession planning services.

What is the Manager’s Role in the Process?

The manager’s role in the process is to properly set the stage to ensure the success of the discussion as well as encourage employee motivation and engagement for the future.  The manager must discuss the job, standards and expectation and summarize their subordinate’s strengths and weaknesses by providing specific examples of successes and challenges in their performance.  Highlighting these areas in generalities will not support the specific areas for improvement that the employee faces nor will it support the overall rating.  In our survey data our respondents indicate that they want a timely review, that is layered with specifics and offers them a path to improve.  The respondents also indicate that they want to seek agreement with their manager on the performance improvements desired and work in an environment where the company will support their professional development.  Where managers fail is that they are not prepared for the discussion, do not provide specifics and are unwilling to hold their direct reports accountable.  Successful managers also need to let their employees know that they have a responsibility in the performance process as well.

What is the Employee’s Role in the Process?

The employees need to come prepared with a self-review so that they can provide honest feedback about their performance.  They should also be prepared to express their short term and long term goals and what they expect from their manager over the next performance review cycle.  If there are any ambiguities with respect to the job, standards or expectations they should be addressed during the performance review discussion.  Finally, if improvement is necessary both the manager and the employee should come to a mutual agreement on what is expected in the future.

Where Does the Process Fail?

The process will often fall short when several key principles are not adhered to by the manager and they include the manger not being honest about their employee’s strengths and weaknesses.  It is often easier to just gloss over the employee’s substandard performance than it is to address the challenges and work with the employee to make them successful.  The survey data suggests that it is easier for managers not to hold people accountable.  Also, managers will often not tie pay and performance but rather take the approach that all employees should receive the essentially the same merit increase regardless of performance.  Once again this may be the easiest path; however, it does not recognize contribution and excellence on the job.  The merit increase program administered through an effective compensation strategy can motivate those employees that are high potentials and successful.

Key to a successful performance review process are managers being honest and prepared and recognizing the differences in the performance of their subordinates.  Employees need to have an attitude that is open to improvement and learning in order to further develop their skill-set.

What is a Key Indicators Report in Human Resources?

As we move into the fourth quarter one idea for the Human Resources department is to provide an annual Key Indicators Report to the leadership team.  This report would summarize the Human Resource activities over the past year along with establishing goals and objectives for the organization for the next 12 months.  In essence, this is a performance review on the function.  What would the sections of the Key Indicators Report include?

Benefits Plans

Each year HR departments examine the benefit plans to ensure that they are at market and are meeting the needs of the employees and their eligible dependents.  This section of the report would include the costs associated the each benefit and the changes that were implemented.  Typically the benefits offered by the company are often one of the key drivers of retention.  With a detailed analysis of the plans offered, along with the expenses associated with each plan, management can be in a better position to determine if the benefits are in alignment with the company’s long term strategy.  Additional examples would include the dollars associated with the 401(k) employer match and soft benefits such as a gym membership or an EAP.

Compensation

Pay and rewards are key elements for also retaining staff.  Each year HR department evaluate the salary ranges, job descriptions, pay and incentive plans.  As part of a Key Indicators Report this section would evaluate the merit increase program to determine if those employees that receive the highest performance ratings are also receiving the largest percent increases.  A simple matrix evaluating pay and performance can be created to summarize the performance process correlating that with pay.  Additional examples to include in this section with be a summary of any changes to the incentive plans, any modifications to the performance review document or process as well as examining the merit increase program to project future labor expense.

Talent Management

Turnover is very expensive for companies today; particularly in a tight job market.  As part of the Key Indicators Report this section would evaluate the number of employment requisitions filled over the past 12 months and the source for finding talent, any associated expenses filling positions as part of a search process and the use of temporary services.  This evaluation will also assist management in finding how many days it takes to replace a position and identify if there are any trends in with respect to turnover.

Leadership Development

Employee development is critical in today’s job market and this section of the report should include the training programs offered by the company, the number of employees that participated in company-sponsored training programs and the outcomes as a result of allowing employees to participate in professional development. Employees who enjoy their job and are satisfied with their career are more engaged and aligned with the business.  Engaged employees who believe that the company is willing to invest in their development will also remain at the organization longer which can result in less turnover.  Elements of this section of the report would include an analysis of the programs offered, the costs associated with the training and the needs analysis that was conducted in order to determine what programs would be of benefit to the staff.

Finally, the report should be presented to the leadership team in person to stress the importance of the Human Resources function over the past fiscal year as well as looking to the future.  This opportunity to review past accomplishments can also lead into a discussion of the future budget, programs and additional headcount to support the needs of the organization.

What are the Key Traits Displayed by Engaged Employees?

Top-performing organizations understand that employee engagement with the business is a key driver of business success. Satisfied and engaged employees are productive and customer focused.  Engaged employees care about the future of the company and are willing to invest time, energy and effort to support the strategic direction and vision of the company.  Engaged employees tend to produce greater results, have higher productivity, and remain with the company longer.  As a result, organizations possessing high levels of satisfaction and engagement are more likely to be financially successful.  Based upon our employee survey data outlined below are the key attributes that engaged employees demonstrate.

Demonstrate Satisfaction with their Career

Satisfaction with one’s career is a key driver of an engaged employee.   Employees who enjoy their job, are satisfied with their career progression, successfully contribute to the success of the company and are more engaged and aligned with the business.  Engaged employees will also remain at the organization longer which can result in less turnover.  This directly impacts the bottom line.

Are Decision Makers

The ability to make decisions and be held accountable for those decisions builds trust between the employee and the leaders of the company.  Challenging employees to take risks empowers and engages staff.  Building trust between management and staff allows for those closest to the customer to make decisions that are based upon the current reality and typically results in more satisfied customers.  Engaged employees are “take charge” individuals and are willing to take calculated risks.

Possess Excellent Communication Skills

The leaders of the organization need to be able to communicate the vision, values and mission of the company.  Their efforts in sharing the strategy result in an informed employee base that understanding the successes and future challenges that the company may face.  Leaders also need to listen to the employees and process the information in such a way that allows for all employees to contribute to success of the company.

Problem Solvers

Engaged employees examines problems and working with the team is able to provide a solution either independently or as part of a team.  Engaged employees encourage a team approach to problem solving as a way to better support the customer.  They will also seek out problems and view them as an opportunity and a challenge.

Finally, engaged employees are committed to their organization’s goals and values, they are motivated to contribute to organizational success, and are able at the same time to further enhance their own sense of purpose.

Why do Employers Believe that Employee Engagement is Critical to their Success?

With the improvement in HR metrics comes increased competition, additional data and more information available to employees.  The engagement of employees and the reduction of turnover is very important for companies today and in the future.  An engaged workforce will assist companies in remaining competitive and productive.  Key elements of employee engagement are found in three main drivers of success.  These include:

Strong Employee/Management Relations:  An important driver of employee engagement is the individual employee’s relationship to their manger.  Is their manager supportive, an effective coach, honest and represents the high ethical values of the organization?   A manager that embodies these key elements will be a partner with the employee and secure their engagement.

Effective Communication:  Understanding how the company operates and the strategy for the future will allow the employee to become more engaged in the success of the organization by understanding where the company wants to be in the future.  Effective communication includes sharing the business plan and strategy, new products, financial performance and the vision for the future.

Job Satisfaction:  When employees at different levels in the organization enjoy the job and view their role at the company as challenging and contributing to the success of the company engaged employees are more included to give 110%, look for new ideas and be more creative.

Clearly, employee engagement is an important tool for the leaders of companies today to embrace and support.

Every Day is a Performance Review?

As managers of the HR function many of us know that is difficult to have performance management conversations with employees that are struggling in their job.  We want everyone to be successful and will often do everything we can to coach and mentor employees.  These difficult performance conversations are a key responsibility and role Human Resources plays to support management and improve company productivity and performance.  Outlined below are four steps that the HR leader needs to take to support the corporate team and as well act as a resource for the organization.

 

#1 Create Reasonable and Goal Oriented Objectives

 

Businesses are results driven and when we have a performance management discussion with an employee it is important to refer to the job description and goals and objectives that were arrived at the beginning of the performance process.  The job description should be detailed and the goals should be reasonable, attainable and agreed upon by all parties.  The purpose of documenting at the beginning of the process is that helps keep both you and your employee focused and on the right path. The more detailed and specific the job description and the goals and objectives the better the chance of all parties achieving the desired results.

 

#2 Performance Conversation and Discussion

 

 

It is important to remember that this is a conversation between colleagues and not a lecture. The performance discussion is designed to gather information and give advice. Listen to your employee, analyze their responses, refer to the job description, agreed upon goals and objectives and discuss performance deficiencies.  Always maintain a professional and business oriented discussion.  If you want to make sure that you are crafting a positive conversation, then as a manger you need to become aware of your communication style vis-à-vis your employees.  It is important to modify your style to accommodate the setting and purpose of the discussion and be an active listener.  You also need to take notes and attempt to come to a joint understanding of those areas where improvement is desired.

 

#3 Coaching and Training

 

 

One of the key elements in a performance discussion is the belief that the employee is receiving accurate information in a supportive environment. Managers need to make the most of whatever opportunities they have to increase their direct reports' trust at all levels and look for ways to support the struggling staff member. One of the best ways to improve performance is to increase the trust between you and your subordinate.  It is critical to coach the employee, be consistent and look for ways for the employee to be successful.  Occasionally, managers will offer additional training and provide training to improve sub-standard performance.  While additional training is very important is only one tool in a manager’s took kit.  Additional support includes meeting more often to provide immediate feedback with the employee as well as using a problem solving approach as the method to address performance issues.  As a manger and HR professional the idea that every day is a performance review should be the approach utilized.

 

#4 Agree Upon the Strategy

 

 

Because people have different development needs at different stages, managers are advised to discuss the performance plan and agree to the next steps for the future.  The performance plan is not designed as a way to manage a struggling performer out of the organization but rather to give them the tools to ensure their success.  As a manager, and HR leader it is important to be a good listener, be candid and honest and document the agreed upon strategy.

Finally, remember that you cannot “save” everyone. No matter what you do, there are those staff members that do have the skills or knowledge to be successful.  What you can do is give them the tools and time be successful.  Ultimately, it is up the employee to rise to the occasion.