By Susan Hanold, VP of Talent Management and Strategic Advisory Services, and Sam Finley, VP of Talent Management Client Services, for ADP
Certainly, Shakespeare’s Hamlet was contemplating a question far more dire than performance reviews. But the black-and-white nature of his question is still an apt way to depict the current debate in many corporations about the value, frequency and validity of the process used to rate, rank and reward employees. The issue, in our view, is not black and white. It’s most definitely grey.
In fact, based on dozens of conversations with ADP® clients, we’d like to suggest that the question is not whether or not to review employees. (That’s an individual decision each company must make based on its unique corporate culture.) The question is: How will your organization revise its talent management strategy to accommodate the needs of today’s multi-faceted workforce?
HR leaders are keen to identify a “better,” more effective way to conduct performance reviews while preserving an ability to cultivate and retain their best talent. It’s no small issue. In fact, according to a recent Conference Executive Board (CEB) study, 84 percent of companies are re-examining their HR performance management systems due to frustration over what they characterize as a “lack of results” from their employees. They’re asking themselves: What does performance management mean? What value does performance management contribute to our company? What do “good” performance reviews look like?
Every week we engage in questions like this from HR leaders, so we used those conversations as an opportunity to form these seven recommendations.
- Examine why your organization conducts performance reviews. The business reasons for conducting performance reviews can vary greatly. For instance, one client – an oil and gas company – wanted a metric it could apply to help reduce headcount. They needed a process that would help them set goals and provide feedback so they could assess the contributions of their employees. Another client – a retail firm – is interested in cutting costs by automating the review process with new technology. They have a younger workforce that expects feedback more frequently and help defining a career path. The company realized it needed to improve its performance process to save time and act more quickly.
- Build a workforce plan that anticipates the need for future competencies. Some companies don’t have a workforce plan and can’t articulate their talent management strategy. We’d recommend that your organization build a workforce plan that estimates the talent impact of business growth and dynamics over the next two years. The sourcing for talent is very fast-paced and competitive. A comprehensive plan can help a company identify its talent needs. This, in turn, can help drive the development of a performance management plan to support that population.
- Consider moving from check-up to check-in. Some clients provide ongoing performance feedback in addition to conducting annual reviews that help drive pay for performance. Others have entirely removed ratings from their performance review process. Regardless of where your company might fall in the performance management spectrum, we see companies moving away from yearly review cycles because these practices are considered rigid and one directional. Organizations want more flexibility and are moving to more frequent check-in sessions that enable managers and employees to readjust goals through recurring conversations. According to CEB analysis, this approach can improve employee performance by up to 12 percent.
- The return of coaching. The desire to give and receive coaching in the workplace is experiencing a comeback. Thirty years ago, approaches to talent management encouraged frequent feedback and active coaching by mentoring managers. This trend is re-emerging as today’s multi-generational workforce prefers to not only receive feedback, but expect to be able to give it. To accommodate this resurrected trend, some clients are asking how they can train managers to be better coaches. For example, a trucking company client was interested in online coaching training that provided short, fun, engaging and memorable training sessions.
- Think about the impact on managers and employees. You might think that completely eliminating performance reviews would make managers jump for joy and employees breathe a sigh of relief. CEB research shows otherwise. Eliminating reviews makes it harder for managers to explain performance; inadvertently leads managers to shift the extra time they gain to other job-related tasks rather than informal feedback; dissatisfies top performers when managers can’t explain pay differentials, and, perhaps most interesting, reduces employee engagement because managers no longer set expectations or conduct development conversations that lead to rewards.
- Emphasize career development. Employees want to know that their individual contributions are having a positive impact on their company’s success. Given the preference of today’s workforce for feedback and development, you may want to consider establishing flexible performance goals and job descriptions that can be refined as the company adjusts to market dynamics. Our experience has shown that many people simply don’t know how to navigate their careers. Helping them see a path and feel like they’re part of the process can significantly reduce turnover and help you retain top talent.
- Consider the flip side. Performance reviews typically are used to communicate performance and pay results. HR organizations and employee managers use them to set expectations, gauge whether and how well an employee has met those expectations, and then appropriately reward him or her. But what if you have an employee who’s not contributing well to the organization? How do you have a conversation with him or her if you have no record of his or her performance? Put plainly, how do you manage low performers if you have no way of documenting their progress – or lack thereof? This is the risk you run when you completely eliminate performance reviews, so we’d caution organizations to carefully consider eliminating performance reviews entirely.
Every company needs to do what makes the most sense for its employees and organizational performance. But as companies grow and evolve, their workforce, talent and performance management strategy needs to do the same. As we witness a move away from “one-and-done” annual, compliance-based review systems, we see a new performance spectrum emerging that is flexible enough to address the needs of growing companies with varied workforces.