Based on several recent articles in various management journals, human resources, and total reward publications, there are a growing number of organizations that have decided to eliminate performance management appraisal processes or revamp the process by placing greater weight on top performing skills and achievement toward team goals. As business, human resource and compensation consultants, and SAAS human resources technology developers and advocates, we are keeping a close eye on the Pay for Performance “Pass or Fail” saga and the potential evolution toward more effective performance management systems and processes that will drive higher levels of organization and individual results.
Dan Pontefract, a Forbes / Leadership contributor who focuses on collaboration, leadership, engagement and purpose at work wrote a short article on Performance Management Appraisals’ effectiveness from 2000 to 2015. Dan references three research reports on performance management: one in 2000 conducted by the Society for Human Resource Management (SHRM), the second in 2012 commissioned by Towers-Watson, and the third in 2014 with SHRM checking to see if any progress had been made in performance management effectiveness since its 2000 survey study.
Mr. Pontefract shared an insightful statement from the SHRM 2000 report Executive Summary. “Stronger executive support for performance management and increased employee participation in development activities is needed in order for performance management systems to truly become a tool to help attract and retain talent.” Dan mentions in his article that leaders did not support performance management appraisal systems as an effective management tool.
The article continues with Mr. Pontefract’s furthering his case by sharing insight from a Towers-Watson 2012 Global Workforce Study entitled “Engagement at Risk: Driving Strong Performance in a Volatile Global Environment”. Dan stated in his article that based on the study results, only 44 percent of organizations do an effective job of using technology to deliver the performance management process itself. He laments that a decade of technology improvements and additional management feedback systems should have allowed enough time and change for more effective performance management processes.
Dan provides insight on SHRM’s 2014 research report – HR Professionals’ Perceptions About Performance Management Effectiveness. He quotes a disturbing report outcome statement, “More than one-half (53 percent) gave their organizations a grade between C+ to B and one-fifth (21 percent) chose a C, and only 2 percent gave an A in performance management to their organizations.”
At the end of Dan’s article, he states, “After 15 years of survey after survey, and research report after research report, we’re no further ahead with respect to improving the performance management process, program or behavioral model in our organizations. “ He concludes his article by offering some key parting thoughts that should be considered when designing and implementing a performance management appraisal system that is enhanced by technology for greater efficiency and productivity.
- “Performance management isn’t a score. It’s a frequent, ongoing coaching conversation.”
- “Performance management isn’t an annual meeting. It’s a development opportunity that occurs as necessary.”
- “Performance management isn’t bound by technology. It’s a behavioral attribute that puts the employee at the center of his or her growth.”
- “Performance management isn’t a hammer. It’s an opportunity to use all the tools in the toolbox.”
- “Performance management isn’t managing performance. It’s the leader’s responsibility to help build up and then release the enhanced performance of an employee.”
Performance management is becoming more than the annual sit-down session between the employee and their supervisor. The following content represents some policy language from the University of New Hampshire’s Performance Management handbook.
“ONGOING FEEDBACK AND PERFORMANCE MANAGEMENT”
Benefits of Providing Ongoing Feedback & Coaching
“During the year, you are responsible for coaching and mentoring your employees to assist them in reaching their goals and achieving optimal performance. Ongoing feedback and coaching are used to communicate about and correct performance deficiencies, to reinforce appropriate behavior, to teach the employee new skills, to motivate high performance, and to mentor employees so they understand their role in the Department and University.”
- “Regular feedback and coaching will make your job as a supervisor/manager easier when employees build their skills and independence.”
- “Feedback and coaching also increases productivity, the quality of work and the effectiveness of the work group.”
- “Employees’ motivation and initiative is increased with effective feedback and coaching.”
- “Creativity and innovation in problem solving increases with effective feedback and coaching.”
- “Feedback and coaching can prevent problems from occurring.”
WorldatWork released an article in their weekly newsline titled, “North American Employers Give Pay-for-Performance Programs Low Marks.” This statement supports findings from a recent Willis Towers Watson survey. The WorldatWork article included the following quote, “Employers continue to make significant investments of time and money in their traditional pay-for-performance programs, primarily annual merit pay increases and annual incentives,” said WorldatWork member Laura Sejen, global practice leader for rewards at Willis Towers Watson, in a press statement. “Unfortunately, these reward programs are falling short in the eyes of many employers.”
Based on the survey report, only 20% of the North American companies reported merit pay as “effective” at driving higher levels of individual performance, and 32% believe that their merit pay programs are effective with differentiating pay based on individual performance.
The performance management processes are not making passing grades and the survey report indicates that organizations are making changes to improve the effectiveness of their performance management programs by
1) adopting more forward-looking performance goals,
2) placing greater emphasis on demonstrated knowledge and skills required for employee’s roles,
3) applying greater weighting to the critical roles,
4) aligning company goals with top performing employees , and
5) rewarding achievement of team goals.
The emphasis on performance management improvement has become a noticeable initiative with WorldatWork and its total rewards members. WorldatWork is hosting a performance management practices forum to raise the visibility and bar of performance management.