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Performance Reviews’ Less Than Favorable Reputation Can Be Fixed

9/30/2015-

by Clif Boutelle, SIOP Public Relations

SIOP Members Propose Performance Management Strategy That Redirects Attention to Day-to-Day Workplace Behaviors

Annual performance reviews and ratings have been one of the most talked about business stories of the year. There is ample evidence that managers and employees alike dread them and consider them time-consuming and ineffective in boosting engagement and performance.

It’s a hot discussion point for many companies and will be one of the featured topics at SIOP’s upcoming Leading Edge Consortium October 2-3 in Boston. Titled “Building a High-Performance Organization: A Fresh Look at Performance Management,” the LEC will bring together leaders in the field of performance management to explore the future of performance reviews and what, if anything, will replace them.

Most performance systems have absolutely no impact on performances, said Elaine Pulakos, LEC Chair and president of PDRI, a CEB company, which specializes in performance management consulting.

“Organizations have invested a lot of time and money in systems that don’t provide accurate data, and that’s a problem,” she added.

This dissatisfaction has led a growing number of organizations to take a hard look at their current performance management systems and institute changes. The list includes Adobe, Eli Lilly, Expedia, FedEx, Gap, Kelly Services, Cargill, Microsoft, and Motorola. This summer, General Electric, considered a leader in management processes, announced that it too was looking at making changes in the ways it conducts reviews.

CEB studies show that 95% of managers are dissatisfied with their performance management systems and 90% of HR managers report their performance management systems do not yield accurate information. Nearly 60% of employees consider reviews a waste of time and 56% say they do not receive feedback on what to improve. Other studies report similar results, leading many experts to believe changes to traditional reviews are in order.

In a recent article in “Industrial and Organizational Psychology: Perspectives on Science and Practice.Rose Mueller-Hanson and PDRI-CEB colleagues Pulakos and Neta Moye, along with Sharon Arad of Cargill, offered their views on how broken performance management review systems might be fixed.

“The problem is that formal performance management systems have become increasingly bureaucratic and disconnected from day-to-day work and the behaviors they were initially designed to promote, such as communicating clear expectations, setting objectives, and providing quality feedback,” they said.

Instead of reinventing formal performance evaluation systems, Mueller-Hanson says effective reviews should focus on driving critical performance behaviors that have been shown to increase engagement and performance. She cautions that review systems should be kept simple.

“The more complex the rating scale, the more time-consuming and cumbersome it is to use, without providing commensurate value,” she said. “Too often, these are overengineered.”

Careful consideration needs to be given to the purpose of the review, she explained, and the rating scale needs to be aligned to that purpose, whether it is for job improvement, promotion, or compensation.  A well-designed rating scale may not be a one-size-fits-all scale; it should be customized to fit how management wants to help the employee.

To be effective, performance reviews need to shift from year-end conversations to focusing on actions that matter every day by providing feedback in real-time helping and developing employees through experience.  A good review should emphasize the employee’s strengths and build upon them. It can be demoralizing for a review to feel like a one-way evaluation rather than a two-way dialogue, Mueller-Hanson said.

Goal-setting is important but needs to be flexible depending upon the type of work performed.  Job objectives need to be meaningful and maintain their relevance throughout the year. Goals set at the beginning of the year may become sidelined due to new projects that occur during the year, and an employee should not be penalized at yearend because a goal is not fulfilled, she added.

“There should be a focus on driving the behaviors that matter most and what needs to be done in context with the individual employee’s job, otherwise there won’t be any improvement” Mueller-Hanson said.

Pulakos and colleagues have proposed a five-step process that can help organizations achieve this change while increasing satisfaction for both employees and managers. The first step is to evaluate the current plan, including existing employee surveys and other details related to current practice, to assess the effectiveness of the plan. Also needed is a deep understanding of the organization’s values, culture, and strategic priorities. Then the system should be streamlined by removing burdensome, low-value steps.

Next comes the difficult step of motivating change in the mindsets and behavior of all employees, starting with the organization’s leaders. Effective performance management can only occur if there is a shared belief of how the changes will be of value and result in increased performance and engagement.

“This could be the hardest step to implement,” admitted Mueller-Hanson.

An important aspect of motivating change is communicating to employees how the changes will benefit them, in other words the “what’s in it for me” aspect of change. This, according to the authors, is what wins over individual hearts and minds, creating the attention, ownership, and positive attitude that is required for meaningful behavior change.

The fourth step is embedding the change in the organization’s structure. The authors advocate on-the-job learning intervention by providing purpose, structure, and guidance, and learning from experience. Research has shown that on-the-job experiential learning is more effective than other learning methods for driving complex behavior change because work tasks inherently contain several critical and strong learning drivers.

The final phase is to evaluate how the changes are working, especially if they are becoming part of the company’s culture. It is important to monitor attitudes and perceptions of value over time rather than just one evaluation period. Managers and employees need to know how effective they are in engaging in the performance management behaviors that matter.

One company that has successfully implemented these recommendations to revamp its performance management system is Minneapolis-based Cargill, a world-wide provider of food, agriculture, financial, and industrial products. Cargill’s experience with new performance management strategies is cited in the article.

Internal surveys at Cargill showed a major disconnect between the existing performance management process and daily work. Also, managers were reluctant to provide candid feedback to employees and viewed performance management as an administrative drill. So, in 2010 Cargill began to reform its performance management system by increasing employees’ alignment with organizational strategy and goals by focusing on work that affected business results.

A year later most employees were having ongoing discussions with managers about their work, including constructive feedback.  Also, most employees said they felt more valued as a result of the conversations.

Follow-up surveys are also generating positive reaction from managers and employees with respect to engagement-related factors, such as satisfaction with the quality and frequency of feedback and perceptions about the value of performance management at Cargill.

The changes in mindset and behavior that are needed for performance management reform are not trivial and will not happen overnight, the authors wrote. In fact, multiple performance management cycles may be needed to achieve improved individual and organizational performance. However, once the right performance management behaviors are solidified they will result in what people want from work.

Mueller-Hanson said the proposed steps are not new. There have been decades of research in what motivates employees and effective organizational structure; however, they are not reinforced in many performance management systems.

“In fact, we’ve seen examples where organizational processes unintentionally work against these principles,” she said.

Given the amounts of resources organizations spend on formal training with very little evidence of effectiveness, the authors advocate a system that provides employees with informal, real-time feedback specifically related to their jobs that is fair, accurate, and helpful will be beneficial to both managers and employees. Done correctly, the changes will result in more satisfied and productive employees, something every organization wants.

Contact: Rose Mueller-Hanson at 571-234-9507 or email at rose.hanson@pdri.com.