Improving the Performance Review Process | Featured Article of the Month

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Improving the Performance Review Process

Is your organization getting the results it wants from its performance management system?

The answer is almost always no. Organizations struggle with the challenge of providing practical evaluation and reviews of employee performance that achieve visible improvements in people productivity and business results.

Although 78% of all organizations have a formal process in place to manage employee performance, few actually work. Most performance review processes range from annual ranking surveys of standard characteristics completed at the last minute by time-pressed managers and delivered reluctantly, quickly, and offhandedly to more enlightened “goal-based” commitments defined by the organizational leadership measured against milestones and deliverables. The current approach to employee performance management is generally a one-sided, prescriptive process that dampens rather than enhances productivity. As a result, most organizations produce on average 63% of their potential performance.

It is no wonder our productivity is sliding and engagement declining to new lows. The performance management process for organizations needs to change with a paradigm shift of co-creation.

We should start with a fundamental truth – employees most want meaningful work that creates value. It is the greatest desire of the workforce to create results that make a difference. Most engagement research studies indicate that the group of employees who are actively disengaged is only 7% to 10% of the entire organization. The truth is that employees want to perform.

The other side of the equation is that regardless of the brilliance of the strategy organizations achieve business results and create sustainable competitive advantage through the performance of their people. Nearly 85% of organizational execution is due to the efforts of people. Organizations want people to perform.

Performance management is a process that affects everyone in the organization. Organizations can achieve desired business results and maintain the desired culture through an effective performance management system. With a process that works well, employees find meaning in their work through understanding how they contribute to the organization’s goals, the expectations for their work, how they are doing, and how they can continue to grow and develop to add value to the business.

With both sides wanting the same result, how do we turn the equation around and enhance people performance?

When we step back to assess how performance management actually happens in most organizations today, two characteristics stand out – reluctance and directive.

There is an enormous level of reluctance throughout the organization to discuss and engage in their performance management system. Leaders are frustrated, managers and supervisors want to avoid the entire process, and employees do not understand what is to be gained. Executives want to see performance improvement yet rarely provide clear connections of what type of performance is needed to support the achieve of the organization’s strategy or the behavioral dimensions and competencies that will achieve the strategic objectives. Strategic planning is often an annual exercise that ends with a voluminous report that quickly becomes dusty in cabinet drawers. Seldom is strategy related to the behaviors and competencies needed to achieve results. Metrics may have become a part of the strategic language but they are typically restricted to outcomes rather than employee-related performance behaviors. Managers have not been provided with training support to have constructive performance conversations, properly evaluate the performance of their reports, or support interpretation for growth and improvement. For most managers, they feel harassed by the Human Resources Department to complete the annual performance review, deliver the results to their reports, and gain a signature from the employee that they have read their results and agree with them. Employees are apprehensive of the annual review as little feedback has been provided throughout the year so the performance perspective from their supervisor could be almost anything on the spectrum from poor to excellent often depending upon what was done lately. In addition, employees find that rankings vary across the organization depending upon how seriously the respective managers invested in the process.

Yes, many organizations have moved to goal-based performance plans and can proudly claim that they are investing in giving employees the needed direction to relate their work to what the organization needs to produce results. The challenge remains that managers and supervisors have rarely been provided the training to provide effective performance review discussions much less how to help employees set goals. In addition, goal-based planning does not generally include performance behaviors and competencies and, instead, focuses more on action and result metrics and meeting specific measurements.

As well, in most organizations the overall performance management process is characterized by being directive. In ranking surveys, the characteristics have been selected by management or from a packaged program. For goal-based systems, management generally details the strategic priorities, the initiatives for each division, and the goals needed to be realized by employees. Employees almost never have an input in the performance process. A directive approach is not conducive to building commitment and investment from employees.

Turning around the reluctance and directivity in organizational performance management systems starts with co-creation throughout the process. Co-creation is a variation of art and science that involves management and employees to design together the performance evaluation process from their own experiences. This direction is inclusive and results in a higher level of investment in the entire process. The outcome is significant performance improvements.

A performance management process that delivers what both the organization and employees want should involve the following attributes:

The leadership group should start the process by identifying the critical strategic priorities to focus the organization and defining the desired results. Selecting the strategic priorities should involve a survey of the workforce to determine key perspectives from the entire organization. Leaders can then focus on the key strategies most important to the organization’s success. Start with the end in mind and envision success.
With the strategic priorities and outcomes defined, leaders should then work with employees to describe success in terms of how those outcomes would be achieved. What are the performance priorities, behaviors and attitudes, and specific competencies that will drive results? A picture of performance can be customized to the organization’s strategy and culture to achieve alignment and focus at all levels. Behavioral descriptors can be particularly insightful for employees to up performance in knowing not just what needs to be done but how it needs to be done. Competencies shared throughout the organization can bring consistency and create a cohesive performance culture.
Based on the strategic priorities and desired outcomes defined by leadership, employees can then design performance plans that create the targeted results. Employee plans should include not only performance goals but also growth and development plans to build the critical competencies and behaviors.
An evaluation framework should be customized to the strategic priorities, performance behaviors and competencies. The review of an individual’s performance should be based not only on the perspective of the supervisor but should include a self-assessment by the employee and also a peer-to-peer survey. It is important that employees understands that performance excellence is based on not only the ability to produce results but also to work well with peers and teams. As Robbie Burns said, “it is a gift to see ourselves as others see us”. Multi-rater performance reviews provide rich insights and perspectives for each employee to work at their best. Evaluation reviews with the supervisor and employee should include interpretations of rankings, assessment of opportunities and challenges, and the creation of a development plan.
The annual performance evaluation session should also be supported by quarterly informal feedback sessions with the immediate supervisor to assess progress against the performance and development plan and ensure employees benefit from ongoing and constructive reviews. Further support for enhancing individual performance would also involve coaching from managers and supervisors as well as mentoring.
Most importantly, those involved in the performance management process would be trained to competently and confidently fulfill their part of the equation. Employees need training on goal-planning and interpreting and receiving feedback. Managers and supervisors would benefit from training in coaching for performance, providing effective feedback, and translating strategy to tactical actions for their teams. Leaders would gain from development of skills in maintaining strategic focus, empowering employees, supporting a performance culture, and managing change.

The framework outlined above will take more time – no question. But the time invested yields huge ongoing dividends. The value of a performance management system is not to proudly classify people as A, B, C, or D employees and cull the herd. The real benefit of a co-creative performance management process would be to motivate and inspire innovation and commitment throughout the organization for people to mobilize around the actions and behaviors to build a high-performing organization. The performance curve can be shifted to the right, the engagement needle can be moved up, and the dispersion of low- and high-performers can be narrowed with the right approach to performance management.

A performance culture is one that involves, invests, and motivates people to contribute their best work and grow to add further value to the strategic direction of the organization. Organizations that invest in a co-creative performance management process provide the environment that aligns employee performance to business strategy, create a growth culture, increase workforce productivity, and develop a leadership mindset throughout the organization.

Bottom line, the top 20% of organizations in terms of “best-in-class” performance management processes reap a net 24.3% people performance improvement as opposed to those in the bottom 30% (as measured by the Aberdeen Group).

Employees want to contribute in a meaningful way and organizations need competitive results. Bridge the gap and co-create a performance culture that can set apart the organization with a sustainable competitive advantage. Everyone wins.