Performance reviews are a stressful event for both managers and employees. They can range from awkward conversations to pointless feedback to ugly HR nightmares.
And a bad review system doesn’t just hurt employee performance. It can have serious consequences for morale and turnover too.
Studies show that after a performance review one in five employees report being so upset they cried, while one in three immediately start looking for a new job.
In this tight labor market, employees have options. If they’re not getting adequate feedback and the right development, they’ll leave.
Successful companies take performance management seriously. But even they can make mistakes.
That’s why so many businesses are now relying on a talent management system to help them get the most from performance reviews.
What is a talent management system?
A talent management system is software that streamlines end-to-end employee development from recruiting to exit interviews. Although it includes applicant tracking, learning management and succession planning capabilities, the most popular feature is performance management, which helps companies give transparent, continuous feedback.
Some companies only use a talent management system for their top employees, while others use it for everyone at the organization. In either case, it can revolutionize the way businesses handle performance management and jump-start productivity.
Putting together a great review process, however, is no easy task. Here are five common performance review mistakes and how a talent management system can help eliminate them.
1. Not enough feedback
Too many companies still conduct performance reviews once a year. But this outdated system can lead to a lot of issues.
One example is the recency effect. If managers give feedback in December, they might focus on what happened in the past few months, rather than throughout the entire year. Problems or accomplishments from January or February might be glossed over or simply forgotten.
Although it may not be a conscious act on the manager’s part, this type of feedback can feel like a lack of recognition or opportunity to improve for employees. They want to understand how they’re doing, and they want to understand it more often.
In fact, 65% of employees want more feedback than they’re currently receiving.
A talent management system lets companies offer continuous feedback, which means consistent, meaningful discussions between managers and employees about performance.
While annual reviews put pressure on both the manager and employee, because they’re infrequent and need to cover a lot of ground, continuous feedback means check-in conversations are much shorter, more focused and less stressful for everyone involved.
Managers may have excuses that their open door policy is enough or that keeping track of multiple conversations is too difficult. And it’s true that continuous feedback can be confusing, especially if you’re using a mix of emails, chat apps and in-person conversations.
That’s why talent management systems have communication and collaboration tools for managers to organize and provide real-time feedback.
Software can remind managers when reviews are due and keep a history of all notes and action points from previous discussions. It also gives HR visibility into who’s getting feedback from whom and how those conversations are going.
Although it can take time to train managers and employees to feel comfortable giving and receiving continuous feedback, any system that offers more regular, specific feedback is a good thing.
2. Setting the wrong goals
During a review, managers discuss how employees are performing against some type of established goals.
But what if goals are ill-defined, overly broad, irrelevant or too static? Employees can feel like they’re being measured against the wrong yardstick.
For companies to have effective performance reviews, employees need to set the right goals, which should be:
- Related to their competencies and skills
- Broken down into actionable steps with defined benchmarks
- Aligned with the company mission, and
- Adjustable based on changes in performance or business demands.
With a talent management system, employees can record their competencies and skills and work with managers to set goals that are relevant to their specific background.
The software can also help organize goals into easy-to-manage steps, so that employees have a clear path to success. These steps might include learning new skills, essential tasks for a project or coordinating with someone outside the department. As employees complete these steps, they can check off their progress on benchmarks and get more guidance or recognition for their accomplishments.
Managers and employees can also use the talent management system to compare goals to company objectives. Helping employees understand how their work supports long-term business goals will give them a sense of purpose and increase their productivity.
If employees are under- or over-performing or if business needs have changed, the manager can work with them to adjust or update their goals at any time. The opportunity to pivot goals can not only help employees succeed, but can also make the business more agile and competitive.
3. Lack of objectivity
Performance reviews are only as good as the manager who gives them. If the reviewer isn’t prepared or objective, employees can feel unfairly judged.
To be effective, performance should be well-documented. Managers can’t rely solely on their memory when giving feedback.
Talent management systems offer a transparent way to set employee goals and benchmarks, track performance and record previous reviews. Managers can use intuitive dashboards and analytics to show key performance indicators and progress over time. The software also has compliance protocols for documentation, reporting and auditing. Features include version tracking and evidence collection, which means that performance reviews can’t be altered without people noticing.
Studies have shown that performance reviews are full of biases, and even if those biases aren’t conscious, they can cause all sorts of problems. In the worst cases, poorly conducted evaluations can turn into HR nightmares.
A talent management system can analyze whether managers have certain patterns in their feedback. Is the manager rating one demographic lower than others, or rating all of their employees higher than other managers? This type of data can be used to avoid claims of bias or discrimination.
4. Only one reviewer
Performance reviews also run into trouble when they come from only one source.
In the past, companies often had siloed departments where employees worked for and reported to a single manager. So it made sense for the manager to be the only one reviewing and giving feedback to an employee.
The modern workplace, however, now uses networks of employee teams to complete a variety of projects. There’s less hierarchy and more time spent interacting with coworkers and managers in other departments.
Consequently, direct managers may not have much daily interaction with that employee and shouldn’t be the only reviewer.
Feedback from multiple stakeholders – peers, subordinates and other managers – is becoming more commonplace. Because peers work side-by-side and build closer relationships, they can call out behavior that they see each day. And their comments are generally more positive and supportive, which can motivate employees and act as a form of social recognition.
A talent management system can capture feedback from multiple stakeholders through online forms or a mobile app and automatically add it to the employee’s profile. Companies can then decide how much weight to give different groups or specific reviewers, especially if there are outliers.
But overall, companies will have more sources of reference when it comes to employee performance, which means a more objective, thorough review process.
5. No coaching and training
Employees feel frustrated when they’re expected to perform at a certain level but not given the tools to reach it. Performance reviews where employees are told that they’re under-performing or not making progress may actually be an indication that the company lacks proper coaching and training.
Employee improvement needs to be supported with proper guidance and the ability to learn new skills. In fact, 87% of millennials, the largest generation currently in the workforce, say that professional development opportunities are imperative to their career.
Managers can use a talent management system to identify employee skill gaps and recommend specific training that’s needed. And the platform often includes learning management software that companies can use to deliver training.
Additionally, goal-setting may include actionable steps, but managers need to coach employees to help them actually get there. And the benefits of coaching aren’t just for employees. According to HR expert Josh Bersin, “Companies which provide high levels of development planning and coaching to their employees have a third less voluntary turnover and generate twice the revenue per employee of their peers.”
Talent management systems empower managers with automated coaching tools, links to on-demand coaching info and workflows to track coaching activities. Some software gives managers coaching recommendations based on direct feedback from engagement surveys. Others can identify which manager will be the best coach for an employee and monitors the coaching process based on self-assessments and work experience.
Performance reviews are a messy process, and it’s easy to make mistakes if you’re managing it on your own. That’s why leading companies are using technology to help. With a talent management system, companies can:
- Offer continuous feedback
- Set proper goals for employees
- Provide objective reviews
- Receive feedback from multiple stakeholders, and
- Deliver better coaching and training between reviews.
If you’re in the market for a solution, check out these reviews of the best talent management systems.