We all know the rule – do what you’ve always done and get what you’ve always gotten. That applies to most everything; performance management is no exception.
You would think that with more than 50 years as a business practice, at least some of us would have cracked the code on effective performance management. Well … some of us have … unfortunately, a very few. Only 25 percent of the organizations participating in Brandon Hall Group’s 2014 Performance Management Study are high-performing when it comes to performance management. Everyone else is average at best and another quarter of those are just plain poor.
If I were a CHRO or Chief Talent Officer or CEO reading this, I’d ask the obvious: 1) so what makes an organization high-performing in performance management? And 2) so, what if I am … what difference does it really make?
Our October 2014 Performance Management study, participated in by more than 200 global companies, revealed 10 leading practices of today’s high-impact performance management. These practices look decidedly different than those of the past. Let’s take a look at the side-by-side comparison:
| Today’s Leading Practice PM | Traditional PM Practices |
| Create a PM strategy in alignment with your business strategy ensuring cascaded goals. | PM strategies are rare and those that exist are not necessarily intentionally aligned with business strategy via cascaded goals. |
| Institutionalize PM as an ongoing process – not an annual activity with a beginning and an end. | PM is an annual check-the-box activity with a clearly defined start and end date. |
| Adopt an approach to PM that focuses on developing employees’ strengths. | Focus on evaluating employees’ weaknesses – tell them to fix them or move out of the organization. |
| De-couple performance discussions with compensation discussions. | At the same time performance appraisal discussions are held so are compensation increases revealed; in fact, this is the only reason employees tolerate showing up to the performance appraisal discussion – to learn what their pay increases will be. |
| Engage peers and subordinates in providing performance feedback. | PM is a top-down process; only the employee’s manager provides input on what the employee’s performance has looked like over the last year. |
| Review and revise goals regularly to keep aligned with changing business priorities. | Employee performance goals are typically defined early in the evaluation cycle and changing them often takes an act of magic. |
| Hold managers accountable for acting as coaches to develop employees’ strengths. | Accountability – what’s that? Managers are not held accountable to develop their employees and are certainly not incented or rewarded for doing so. |
| Catch employees’ performing well (or not so well) and provide immediate, on-the-fly feedback (and do this regularly!). | Managers provide feedback to employees on their performance one time per year – if they are lucky – during the annual performance appraisal discussion. |
| Define and execute on targeted individual development plans (IDPs) enabled with performance support tools. | IDPs are defined in an ad hoc fashion and even when defined are not intentionally executed upon. |
| Define a select few metrics to measure the impact of performance management and monitor those metrics regularly to create the conduit for making continuous improvement changes and creating a culture of perpetual high-performance. | Measurement of business impact of talent processes is not well understood and, even if it is, too many metrics are defined and not a single one is tracked over time for the purpose of making continuous improvement. |
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Source: Brandon Hall Group 2014 State of PM Study, n = 223 |
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So what difference does it really make if an organization’s performance management aligns with the 10 leading practices revealed in our 2014 Performance Management study? What real business difference does it make the answer is simple, and downright compelling: BETTER BUSINESS RESULTS.
Take a look at what our survey data said:
| The Business Impact of Leading Practice Performance Management | ||
| The Metric |
High-Performing Companies |
Everyone Else |
| Customer Retention | Increased by 1 to 20% or more |
Stayed the same in very few cases and in most cases decreased significantly |
| Revenue | ||
| Engagement | ||
| Source: Brandon Hall Group 2014 State of PM Study, n = 223 | ||
If you like what you see regarding business impact (and who wouldn’t?), I would highly recommend commencing the transformation of your Performance Management process by putting up positive signs of being committed and compelled to move the process from traditional to modern-day. You should expect that the transformation will be a journey but, like breaking any bad habit, getting started is a key to success. In talking with the CEOs and other business leaders at high-performance companies, here are five critical actions they have executed on:
- Teach your managers to be effective development coaches.
- Eliminate forced distribution.
- Engage executives in performance management.
- Hold leaders accountable for developing employees’ strengths.
- Automate performance management and integrate it with other talent processes.
Taken together, all five actions will jump-start the effectiveness and business impact of your performance management.
Despite its ongoing flawed approaches, performance management is requisite to business success. I cannot imagine an organization doing a good job of managing its talent without gathering information about how well their employees are performing their jobs. And, I cannot imagine organizations holding on to the traditional approach to performance management and expecting to achieve and accelerate their business results.
What other actions are you taking at your organization to transform the business impact of performance management? What other fresh ideas do you have to improve the effectiveness of this old-time business practice?
Until next time…
–Laci Loew, Vice President and Principal Analyst,
Talent Management Practice, Brandon Hall Group
