Performance management systems still a major drag for HR leaders

Fewer than one-fifth of HR leaders believe that performance management is effective at achieving its primary objective, according to a report from Gartner (registration). Though companies have been prioritising performance management improvements for years, 81 percent of HR leaders are still making changes and experimenting with their organisation’s efforts, according to the report. Most efforts to fix the issues are centred on reducing effort with the survey claiming that two-thirds of HR leaders focused on making processes either easier or less time consuming. However, reducing the effort managers and employees must put into the systems has significant negative effects.

Organisations that reduce effort usually do so by instituting fewer documentation requirements, eliminating ratings and reducing the number of formal steps. Taken together, these decisions can cause workforce performance to decline by more than 16 percent — and diminish employee perceptions that it is all worth the time and effort. The research claims that rather than reducing effort, organisations should focus on increasing the usefulness, or utility, of their initiatives.

[nbz-inline-newsletter]

“One of the reasons performance management initiatives are failing is the increasing demands placed on the outputs of the process,” said Jeanine Prime, vice president in the Gartner HR practice. “Today, organisations are relying on performance management efforts to inform compensation, promotion and succession planning decisions, as well as to drive employee performance, development and engagement. Organisations that maximise utility by closely aligning performance management with employee and business needs realised a 24 percent boost in workforce performance and had a 7 percent higher proportion of high performers in their workforces.”

In addition, organisations with higher performance management utility report 14 percent higher engagement among employees and a 50 percent higher proportion of employees reporting that the measures are fair and accurate.

To increase their performance management utility, organisations should focus on three strategies:

Customising for the business

To create a performance management process with higher utility, HR must enable the business to customise to meet its needs. To identify customisable opportunities, HR should consider the level of risk involved in customisation, including the impact on other talent processes or potential for bias. HR should then consult with the business to determine which practices need to remain standardised and to support tailoring other practices, while ensuring performance management still provides the input for critical talent processes.

Aligning with employee needs

Employees need to have ownership over performance management design so they can align the process with their needs. Organisations can enable effective employee ownership of the design by reframing the roles of different stakeholders in the process:

• HR should shift from owners to consultants, providing expertise in talent management and project facilitation.
• Employees should not be treated as consumers of the process, but as designers of performance management from ideation through rollout.
• Senior leadership should become enablers who actively embrace performance management as an employee-led initiative and provide visible support without biasing the design.

Adapting to collaborative work

Efforts to use performance management to improve the effectiveness of collaboration typically fail as employees don’t see a clear individual benefit to effective collaboration and/or they don’t understand what specific actions they need to take to collaborate effectively.

Organisations can overcome these barriers by appealing to employees’ own self-interest, first by showing employees that collaboration is a tool they can use to achieve their individual goals. Next, leaders should communicate which actions, not just attributes, employees must demonstrate to collaborate effectively. And finally, HR should ensure the process helps employees identify specific individuals they must collaborate with and recognises employees for effective collaboration.

“Employees were four times more likely to say performance management was worth the time and effort required when they judged its utility to be high rather than low,” added Jeanine Prime. “When employees can see the value, they’re willing to put in the work regardless of how much is required.”