Performance Management Executive Brief: How to Escape the Cycle of Frustration
Performance Management
How to escape the cycle of frustration
Why is dissatisfaction with performance management persistent?
Despite how frequently organizations attempt to improve their performance management processes, dissatisfaction with PM remains a perennial issue.
In an i4cp study, 60% of respondents said leaders in their organizations don’t have the skills to conduct performance management effectively, and 47% said performance management fails to inspire employees. In one study, only 2% of CHROs said their performance management system works
What Leaders Should Do
- Look beyond performance management ratings.
- Foster a culture of continuous performance feedback.
- Equip managers to:
- deliver effective feedback
- manage to outcomes (as opposed to activity)
- deliver effective feedback
- Build trust in the process.
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Look beyond performance management ratings.
What’s the best rating system? Should ratings be done away with? These are common questions, and the answer is: it depends. For some organizations, it makes sense to have a scaled rating system. For others, having no ratings at all is the best strategy.
Regardless, our research findings show that a focus on classification is a distraction from—not a solution for—establishing an effective performance management approach.
Changing the rating system doesn’t impact market performance, but a culture of performance feedback does.
Our research has found that companies in the top third of performance feedback culture (PFC) have twice the net profit margin, ROI, ROA, and ROE compared to those in the bottom third.
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Foster a culture of continuous performance feedback.
A successful performance feedback culture increases trust—and in turn, productivity. Research shows it requires goal clarity, accountability and autonomy, with leaders managing both business outcomes and employee outcomes to achieve this.
Managers must translate goals into actions, which is especially challenging and critical with geographically distributed teams.
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Equip and incentivize managers to
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help people set clear goals
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manage to outcomes (as opposed to activity)
- deliver effective feedback
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Don’t make the mistake of throwing more training at managers without incentivizing them and making it easy to deliver effective feedback.
If managers are held accountable for employee outcomes as well as business metrics, and they are given tools to prevent feeling overwhelmed, such as i4cp’s manager’s 1-1 meeting guide and performance feedback conversation made easy cards, training can focus on practice and feedback, rather than the delivery of content.
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Build trust in the process.
Trust is difficult to gain and easy to lose. Some of the most significant ways to build trust in the performance management process are:
- Work to eradicate bias from the process.
- Use i4cp’s Bias Audit Worksheet to get up to speed.
- Don’t discuss compensation during performance reviews. Instead, discuss the employee’s development and well-being.
- Even in pay-for-performance cultures, i4cp members find people may be distracted from developmental feedback because they anticipate pay discussions.
- High-performance organizations are more likely to focus on development (60%) than low-performance organizations (39%).
- High-performance organizations are more than twice as likely as low-performance organizations to focus on well-being during this process.
- Expect managers to check in with their direct reports at least every two weeks.
- Organizations where this happens are statistically likely to have higher levels of trust.
- In those discussions, give employees autonomy by managing to outcomes over activities, goal clarity and agreed-to accountability.
- Simplify the process.
- Overly complex processes lead to inconsistencies and lack of trust.
The bottom line? If you’re thinking about changing your performance management process, think again.
Performance management experts have told i4cp it takes three full performance management cycles for a new PM process to take hold, so consider carefully whether changing the organization’s process is likely to pay off within the desired timeframe. There’s less risk and more reward from investing efforts in simplifying existing processes, building trust in them, and strengthening feedback culture.
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