The anatomy of a pragmatic (but lovely) Performance Review

May, 2017

PivotDepending on the type of company you belong to, performance reviews can be smashed out every quarter, held annually, scrapped altogether or organically evolved from regular staff-management catch ups. They are the lifeblood of employee development, compensation allocation and promotions. Which understandably makes them rather nerve-racking for employees. They can also be a difficult operation for HR teams and management to nail. With all the subjectivity involved, accurately dissecting an individual’s performance can sometimes feel akin to brain surgery.

Are performance reviews dead?

In past blogs we’ve discussed how some companies are purging numerical performance ratings and transitioning to the more ‘hip’ methodology of informal feedback throughout the year. This doesn’t mean the death of performance reviews. CEB Global reported that after an initial, positive reaction from employees after abolishing formal ratings, employee engagement drops by 6%. Top performers’ satisfaction with pay differentiation decreases by 8% because managers have trouble explaining how pay decisions are made and linked to individual contributions, and manager conversation quality declines by 14%. To us this indicates that data, structure and processes are still important when it comes to evaluating employees’ performance.

Although the shorter, more laid-back evaluations are being praised as less stressful and more relevant by employees, there are ways HR teams and managers can still ensure this doesn’t undermine the effectiveness of their remuneration framework.

So how can we produce and deliver accurate, useful and clear-cut performance reviews that aren’t nail-biting for employees to sit through?

Formal or informal, there is a certain universal order when it comes to bringing a performance review to life, and it involves using both your brain and your heart. The art of performance management comprises goal-setting, measuring progress and providing feedback. These processes need to be data-driven and pragmatic, yet communicated with individuals benevolently and encouragingly.

The brain part: The bones of a great performance review

1.    Definition of business as usual activities

Agree on what is “business as usual” activity, which are typically the standards expected in a role, that if not met would be considered grounds for poor performance discussions.

2.    Realistic goals connected to business strategy

Document realistic and achievable goals which can show a connection to the business strategy – this removes any element of misunderstanding about what you as a manager and the organisation sees as important.

3.    Above and below the line behaviours

Agree on above the line and below the line behaviour – if anything, it helps when you have to have the hard conversations… ”remember we agreed that this wasn’t acceptable…”

4.    Recording processes

And of course it makes it much easier if all of this is written down for easy reference at your regular catch-ups. How regular is regular? This depends on the role and it may not be appropriate to ‘legislate’ this across the business, instead coach where appropriate on an increase in regularity where necessary. A role focusing on daily and monthly tasks often needs more regular check-ins than one focusing on longer term goals.

The heart part: The characteristics of a performance review that drives growth

1.    Everybody understands the organisational goals

Performance management is a means to implement organisational strategy by letting staff know what is vital in the organisation, setting accountability for behaviour and results, and helping to improve performance.

2.    Establishing a culture of open communication backed up by an inspiring management style

This is a stepping stone to conveying the fact that a review process is a constructive activity that benefits the company, but most of all it advances the individual’s career.

3.    Rewards align with organisational goals

Ensure that the ways in which employees are recognised and rewarded for high performance are closely aligned with organisational values and objectives.

4.    Encouragement (not punishment!) for low-performing staff

If there are staff members that complete the performance review process and discover that their performance is not up to the mark, this shouldn’t be cause for worry. They should know that opportunities for improvement through training and development exist within the organisation and that they’re still valued as contributing members of the larger team.

Once these fundamental requirements for a performance management process are in place, clever use of technology and software can supplement the benefits.

If you would like help with diagnosing issues for your performance review process, here are some handy resources we can prescribe:

Give your performance evaluations some love

May, 2017

PivotPerformance evaluations are getting a hard time lately. Businesses are calling them ‘irrelevant’, ‘dated’ and ‘stressful’ and dumping them altogether. But are these businesses really better off without them?

Last year CEB Global reported that at most companies, employee performance drops by around 10% when ratings are removed because of breakdowns in managers’ ability to manage and a fall in employee engagement.

Perhaps it’s time to kiss and make up with performance evaluations?

Our friends over at Betterteam think so. They just published a useful Beginner’s Guide to performance evaluations to help HR and management improve the way they conduct performance evaluations.

Betterteam identified one of the main issues with businesses no longer being attracted to performance reviews is that they don’t address the modern workplace very well. For example:

  • An employee usually works with many leaders in the company, so it is doesn’t always make sense to only have one leader assessing their performance.
  • Quarterly or annual appraisals don’t deal with issues when they happen. It’s hard for employees to gauge how well they are performing and how they can improve throughout the quarter/year if they aren’t given continual feedback.

How can we modernise evaluations?

For performance reviews to truly deliver value to employees, company leaders and the company itself, it’s not enough to simply switch a few of the evaluation mechanics around, you must consider the big picture.

Performance management is the ‘big picture’ above performance reviews that involves continuously setting goals, reviewing progress and giving ongoing feedback. Nailing performance management will trickle down to help restore the integrity of performance reviews, whatever way you decide to run them.

In the longer term future Betterteam suggests using innovations like artificial intelligence (AI) will help to alleviate some of the human biases that naturally creep into the processes.

Aligning performance and compensation seems like a given, but it is actually more complicated than first meets the eye.

Emphasising personal performance as the only incentive measurement can encourage behaviour that makes the individual look good, but is ultimately detrimental for the company. Another issue with this sort of culture, is if the company doesn’t actually have enough money to give someone a raise or bonus, even if they perform exceptionally.

Betterteam encourages businesses to adopt the more modern approach of associating compensation with company-wide measurements of success. These tactics also tie in with the importance of continual feedback, rather than just quarterly or annually, to help keep employees focused on achieving company goals and aligned with best practice strategies to achieving these.

It is important to understand that you shouldn’t treat performance reviews like a static, unchanging process. As you grow and change as a business, it needs to grow and change along with it, to complement the company structure and culture.

Modern tools are available to help HR teams calculate and track these actions, including Pivot’s Remuneration Ally and Performance Ally.

Does your performance review process need a little lovin’? To help it flourish and positively affect employees and your company, download our eBook, ‘Why the death of performance reviews has been greatly exaggerated’.

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