A performance management strategy that’s in tune with the modern workforce has the potential to be a secret weapon for positive employee experience to help your organization win the war for talent – driving employee engagement, promotions and succession decisions.
For example, if you’re hoping to retain more Millennial and Gen Z talent, continuous feedback with mentorship opportunities is likely to be much more effective than an annual performance review.
According to John Smith, director of SMB solutions within global business applications for the technology solutions company Quisitive, many companies of different sizes are struggling to come up with a cohesive performance management system.
“I think there isn’t necessarily a correct way to do performance management. There isn’t a guidebook that says, ‘This is how you should do it to ensure success.’ And because of that, people have had very bad experiences with performance management and it colors what they want to do with it going forward,” he said in a new episode of HRMorning’s “Voices of HR” podcast, “Why Annual Reviews Are Not Enough: Iteratively Build a Continuous Performance Management Strategy That Works.”
Smith said that your company will fit into one of four categories, and it’s up to you to determine which one of these you are – and which of these you want to be:
- No performance management system
- An annual appraisal process
- Performance rating/appraisal check-ins with employees throughout the year, taking note of their goals and aspirations, or
- Instead of ratings or appraisals, let managers and employees collaboratively guide performance improvement goals.
Getting value out of performance management
If an employee survey reveals that most of them don’t like the way they’re being evaluated, coming up with a change strategy and getting leadership buy-in is next. “Having a vision for what you want to achieve is really important, creating that vision, sharing that vision and getting the buy-in from your management team is an absolutely critical first step,” Smith said.
He added that even small changes to how you handle performance management can have a big impact. So setting a short-term goal for quarterly check-ins, for instance, doesn’t have to mean wholesale changes like creating new rating scales or redefining objective structure.
Smith recommended evaluating the effectiveness of the changes after two years.
In addition, he advised de-coupling discussions about performance from discussions about compensation (e.g., merit pay increases) because employees need to understand that compensation is also tied to market equity and internal equity and not just performance.