Performance Management Executive Brief: How to Escape the Cycle of Frustration
Performance Management
How to escape the cycle of frustration
Why is dissatisfaction with performance management persistent?
Despite how frequently organizations attempt to improve their performance management processes, dissatisfaction with PM remains a perennial issue.
In an i4cp study, 60% of respondents said leaders in their organizations don’t have the skills to conduct performance management effectively, and 47% said performance management fails to inspire employees. In one study, only 2% of CHROs said their performance management system works
What Leaders Should Do
- Look beyond performance management ratings.
- Foster a culture of continuous performance feedback.
- Equip managers to:
- deliver effective feedback
- manage to outcomes (as opposed to activity)
- deliver effective feedback
- Build trust in the process.
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Look beyond performance management ratings.
What’s the best rating system? Should ratings be done away with? These are common questions, and the answer is: it depends. For some organizations, it makes sense to have a scaled rating system. For others, having no ratings at all is the best strategy.
Regardless, our research findings show that a focus on classification is a distraction from—not a solution for—establishing an effective performance management approach.
Changing the rating system doesn’t impact market performance, but a culture of performance feedback does.
Our research has found that companies in the top third of performance feedback culture (PFC) have twice the net profit margin, ROI, ROA, and ROE compared to those in the bottom third.
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Foster a culture of continuous performance feedback.
A successful performance feedback culture increases trust—and in turn, productivity. Research shows it requires goal clarity, accountability and autonomy, with leaders managing both business outcomes and employee outcomes to achieve this.
Managers must translate goals into actions, which is especially challenging and critical with geographically distributed teams.
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Equip and incentivize managers to
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help people set clear goals
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manage to outcomes (as opposed to activity)
- deliver effective feedback
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Don’t make the mistake of throwing more training at managers without incentivizing them and making it easy to deliver effective feedback.
If managers are held accountable for employee outcomes as well as business metrics, and they are given tools to prevent feeling overwhelmed, such as i4cp’s manager’s 1-1 meeting guide and performance feedback conversation made easy cards, training can focus on practice and feedback, rather than the delivery of content.
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Build trust in the process.
Trust is difficult to gain and easy to lose. Some of the most significant ways to build trust in the performance management process are:
- Work to eradicate bias from the process.
- Use i4cp’s Bias Audit Worksheet to get up to speed.
- Don’t discuss compensation during performance reviews. Instead, discuss the employee’s development and well-being.
- Even in pay-for-performance cultures, i4cp members find people may be distracted from developmental feedback because they anticipate pay discussions.
- High-performance organizations are more likely to focus on development (60%) than low-performance organizations (39%).
- High-performance organizations are more than twice as likely as low-performance organizations to focus on well-being during this process.
- Expect managers to check in with their direct reports at least every two weeks.
- Organizations where this happens are statistically likely to have higher levels of trust.
- In those discussions, give employees autonomy by managing to outcomes over activities, goal clarity and agreed-to accountability.
- Simplify the process.
- Overly complex processes lead to inconsistencies and lack of trust.
The bottom line? If you’re thinking about changing your performance management process, think again.
Performance management experts have told i4cp it takes three full performance management cycles for a new PM process to take hold, so consider carefully whether changing the organization’s process is likely to pay off within the desired timeframe. There’s less risk and more reward from investing efforts in simplifying existing processes, building trust in them, and strengthening feedback culture.
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Kevin Martin is the chief research officer at the Institute for Corporate Productivity (i4cp); the leading research firm focused on discovering the people practices that drive high-performance.
In addition to guiding i4cp’s research agenda and deliverables, Kevin also advises corporate and human resources leadership teams on best- and next-practices in a broad range of topics that range from talent risk management and corporate culture, to human capital strategy and organizational agility. He also serves as executive sponsor of i4cp's distinguished Chief HR Officer Board.
Prior to i4cp, Kevin worked for several years at research firm Aberdeen Group where he built one of the industry’s leading human capital management (HCM) research practices and then held a variety of roles of increasing responsibility which included SVP of Research Operations with general management oversight of the company's 17 research practices, and SVP of International Operations where he led the firm’s expansion efforts in to Europe.
A highly sought-after international keynote speaker on all aspects of human resources and talent management, Kevin has been recognized as a “Top 100 HR Influencer” by HR Examiner. His and his team’s research have been cited in leading business media, including Forbes, The Wall Street Journal, Fast Company, Harvard Business Review, Inc. Magazine, Bloomberg, the Financial Times, CFO Magazine, CIO Applications, and on CNBC.
He is also an occasional contributor for the Financial Times.
Kevin currently serves on the advisory councils for the University of Dayton's school of business administration and school of engineering. He also serves on the board of advisors for Bullseye Engagement. From 2005 to 2014, Kevin served on the board of directors for Big Brothers Big Sisters of Central Massachusetts, which included a two-year term as board chairman (2009-2011). In 2006, Kevin was awarded the Commonwealth of Massachusetts's "Big Brother of the Year".
Kevin earned a Master of Business Administration degree from Boston University and a Bachelor of Science in Business Administration degree from the University of Dayton. He resides in Massachusetts with his wife (Laura) and their three sons.
Judy is responsible for creating a suite of practical, easy to use tools to help HR leaders implement next practices and drive organizational change.
As a learning strategist, Judy has helped many of the world’s most admired companies create collaborative digital learning experiences backed up by cognitive science and research on web behavior. Her consulting projects have earned over a dozen awards from across the learning, media, and marketing fields.
As First Vice President of Learning Technology for JP Morgan Chase, Judy served as the business owner of learning management systems to support 160,000 employees, six lines of business, and 34 stakeholder groups. During Bank One’s years as the top-rated bank in Training Magazine’s Training Top 100, Judy facilitated learning governance and measurement.