For many decades, annual performance reviews have been a ubiquitous fixture incorporated globally. Furthermore, many companies followed the vitality model of performance reviews popularized by GE and its former Chief-in-Charge, Jack Welch. This model was also known as the “rank-and-yank” system because it involved ranking employees and firing unproductive ones.
A few years ago, GE moved away from this rigid and annual performance review system. A lot of other companies – including high-profile ones like Accenture, Microsoft, and Adobe – followed suit. But doing away with performance reviews doesn’t mean that these companies no longer feel the need to measure employees’ performance.
Far from it.
Thousands of companies worldwide are investing more time and resources in performance management. They are moving away from annual, one-off reviews and adopting more flexible systems to measure and manage employees’ performance. In these systems, the priority is on providing frequent feedback to employees, inspiring them to put their best foot forward every day, and crossing out the numerical rating system that often creates a toxic culture of “bite or get bitten.”
Here’s why so many companies are adopting and implementing performance management programs – and why you should too!
What Gets Measured Gets Done
The idea of “what gets measured gets done” is a fundamental operating principle in the business world. This adage provides the foundational underpinning for the idea of key performance indicators (KPIs). Organizations identify and measure KPIs because they provide a “numerical snapshot” that enables the leadership to see what’s happening in the firm and to make decisions that can improve results, whether those results are related to employees’ performance, or the firm’s profitability, or ROI.
A performance management system enables company leaders to set top-level strategic objectives for the workforce and identify the day-to-day activities employees will need to perform to meet those objectives. Managers and leaders, usually in conjunction with the HR department, create performance-related KPIs and targets to assess whether employees are performing the right activities and achieving their objectives.
These metrics and targets enable team managers, department heads, and ultimately, the C-Suite to understand whether the team and employee performance are aligned with organizational goals. And by continually tracking these numbers and regularly engaging with their workforce, they can assess the company’s progress in meeting its targets and goals. Equally important, they can identify instances of underperformance, see how it is affecting the firm’s ability to achieve its objectives, and then take appropriate action to address the underlying problems.
A Goal Without a Plan is Only a Dream
A common misconception is that performance management is about employee micromanagement, which Gartner defines as: “a pattern of manager behavior marked by excessive supervision and control of employees’ work and processes, as well as a limited delegation of tasks or decisions to staff.” Micromanaging bosses control every step of their workers’ daily workflows and avoid giving them decision-making power, which not only annoys workers but has been proven to adversely affect their performance and workplace engagement.
Performance management enables managers to avoid these undesirable outcomes because they can avoid micromanagement. They can focus on the organization’s strategy and goals and show their people how they can help meet these goals. By establishing a performance management program, leaders can set clear expectations for the workforce so everyone clearly understands what is expected of them.
Performance KPIs along with transparent milestones allow workers to understand exactly what they need to do on a daily, weekly, quarterly, or annual basis. Regular feedback from managers enables them to stay on track. They can also identify performance gaps and act quickly – with or without their manager’s help – if they have gone off the expected path.
Well-designed performance management programs tie employee objectives and KPIs to the organization’s objectives and KPIs, which enables all employees to understand how they contributed to the organization’s overall performance and what they need to contribute in the future to help the organization continue to meet its goals.
A Great Place to Work
Many companies and their leaders don’t realize that performance management also has a credible and crucial impact on their employer brands and employer branding initiatives. An employer brand is the total of the perceptions of current and future employees of the company. Positive perceptions strengthen the employer brand and create a reputation that it is a great place to work. Negative perceptions do the exact opposite.
An ongoing, fair, and transparent performance management system allows for both rewards and repercussions. Employees know exactly what they can expect to get if they do well and what they stand to lose if they don’t do well (or well enough). Employees appreciate cultures where fairness, transparency, and recognition are valued and are more likely to stay with the company. This then will improve the company’s employee retention rates and reduce churn. Such cultures also become visible outside the organization, strengthening its reputation as a desirable place to work. These companies are more likely to attract talented and skilled future employees who will contribute to the organization’s growth and success.
Performance management is a good way to detect knowledge or skills gaps in the workforce. Managers can then implement appropriate training and development strategies or programs to plug these gaps and bring laggards up to speed with the company’s requirements. Ultimately, training and development can strengthen the employer’s brand.
Conclusion
Your organization doesn’t have to be a multi-billion dollar behemoth to implement an effective performance management program. As long as you are committed to performing routine performance reviews, implementing instant feedback loops, and engaging in honest dialog with employees, you will see a positive impact on your workforce and the organization’s competitiveness and growth. Contact Ergode if you need support setting up or overhauling your performance management system to create a strong employer brand.
