“Our approach to performance has negative value. It is a potpourri of nothingness,” says the head of HR at one manufacturing company. This struggle with the effectiveness of performance management is why HR leaders repeatedly change their approach, but many still fail to achieve an impact.
The 2019 Gartner Performance Management Benchmarking Survey showed that 81% of HR leaders are making changes to performance management. These changes often focus on addressing the most common complaints — that the process is too onerous and time-consuming — but Gartner research shows that this and other legacy approaches aren’t sufficient.
82% of HR leaders says performance management is not effective at achieving its primary objective
Eighty-two percent of HR leaders says performance management (PM) is not effective at achieving its primary objective, and only 38% say it’s keeping pace with business needs.
“To achieve more impact, HR leaders must identify and deliver the precise value that employees and their businesses need most from performance management today,” says Jeanine Prime, Vice President, Team Manager, Gartner. “Business needs are becoming increasingly diverse, and a one-size-fits-all approach offers little utility. HR leaders must embrace business-driven innovations in performance management while also maintaining core standards in key areas.”
Learn more: Performance management that delivers
Demands on performance management are growing
The challenge of improving PM is complicated by the fact that its outputs are used as inputs for a wide variety of purposes.
Today, organizations rely on PM to inform compensation, promotion and succession-planning decisions as well as to drive employee performance, development and engagement. Employees also look to PM to advance their careers and gain a line of sight to organizational priorities.
These demands make it hard for HR to diagnose what is truly wrong with the process and to prioritize solutions.
HR leaders also realize that the heavy burden of the process isn’t just impacting HR; employees and managers feel overburdened by PM as well. But research shows that trying to reduce this effort isn’t nearly as effective as increasing the utility of PM.
Focus on usefulness, not effort
Increasing utility has substantial positive effects on workforce performance, engagement and employee perceptions of PM’s fairness.
At organizations where PM utility is high vs those where it is low:
- Employee engagement, 14% higher
- Workforce performance, 24% higher
- Proportion of employees reporting that performance management is fair and accurate, 50% higher
- Proportion of high performers in the workforce, 7% higher.
To increase utility, redesign PM to deliver value in today’s complex business environment with three key interconnected strategies.
No. 1: Business-driven
Although the strategy of HR maintaining control is successful in maintaining quality standards throughout the organization, the centralized system led by HR struggles to keep up with the market intensity and, too often, does not increase the value of PM. To address this, communicate with the business to support tailoring PM and establish standards so it still provides the input for critical talent processes. Leaders must be sure to communicate the rationale for customizing and share the goals for PM consistently with all employees.
No. 2: Employee-owned
To ensure successful processes, transfer control over PM development to employees and encourage them to match the process with their needs. Allow employees to own the testing and final determination of practice designs for PM. Doing this creates new, employee-centric PM designs and addresses the diverse needs that, in turn, drive a 19% increase in utility.
Leading organizations consciously reframe the positions of various stakeholders in the process to allow active employee ownership of PM. They ensure that employees are not so much treated as consumers but rather as creators actively leading the design from ideation through execution. HR’s role is to shift from drivers to enablers of the design, lending their subject matter expertise and support to employees without biasing the final design.
No. 3: Work-centered
Although many companies emphasize collaboration in the priorities and competencies of employees, their PM systems are still largely designed to motivate individual performance.
“Ultimately, translating team interests into individual ones is the secret to overcoming these barriers,” says Prime. “Organizations must show employees that collaboration is a tool they can use to fulfill their individual goals.”
Communicate which actions, not just attributes, that employees must demonstrate to effectively collaborate. Help employees identify where their accountabilities intersect with others and construct a detailed plan for collaboration at the start of the performance cycle. Gartner research shows that when employees collaborate effectively, their individual performance increases by 20.6%.