Part I – The Current State of Performance Management

‘Performance Management’. These two words, when strung together, evoke a range of emotions no matter which role you play in it, be it the appraiser or the appraisee.

In most circumstances, it’s just another mandatory practice to go through every year; a much dreaded annual exercise to get over and done with. Studies by Deloitte have shown that only 8% of companies report that their performance management process drives high levels of value while 58% says it’s not an effective use of time.1

Only 8% of companies report that their performance management process drives high levels of value while 58% says it’s not an effective use of time1

Management research firm CEB found that 95% of managers are dissatisfied with the way their companies conduct performance reviews, and nearly 90% of HR leaders say the process doesn’t even yield accurate information. CEB also found that the average manager spends more than 200 hours a year on activities related to performance reviews—things like sitting in training sessions, filling out forms and delivering evaluations to employees. When you add up those hours, plus the cost of performance-management technology itself, CEB estimates that a company of about 10,000 employees spends roughly $35 million a year to conduct reviews.2

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As appraisers or managers, we struggle to remember goals set a year ago, much less what our employees have done over the last 12 months. And for employees, they’re put in the position of having to justify their performance against goals set 12 months ago, which have likely changed in the constantly evolving landscape of work.

Instead of looking at the big picture of how each employee is contributing to organisational success in the form of cascading goals, we reduce them to be measured against micro performance that focuses on the small stuff instead of the big picture. In the end, the dynamics of the review centres more on compliance and compensation than on any real development opportunity for the employee.

“Employees that do best in performance management systems tend to be the employees that are the most narcissistic and self-promoting,” said Brian Kropp, the HR practice leader for CEB. “Those aren’t necessarily the employees you need to be the best organisation going forward”.2

In the same light, appraiser bias also plays a part in the subjectivity of the appraisal, leading to skewed outcomes in the review. Called the “Halo and Horns Effect”, these errors can let your preference influence your perception of your employee without you realising it. The halo effect comes into play when the employee exhibits personally desirable traits unrelated to their goals and it influences you to think positively about them when evaluating them. And the horns effect does the reverse.3

With results like these, it’s no wonder that in 2015, large firms like Accenture, Deloitte, Adobe and GE made waves in the HR world when they announced that they were scrapping their traditional annual performance reviews. As quoted from Accenture’s press release and subsequent press interviews on the announcement, they referred to research that supported their decision. This included a lack of clear value, an overwhelming amount of time and energy used to support the process each year, and realisation that their annual performance review process was failing to drive the workforce performance they were looking for as an organisation.4

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So armed with such knowledge and information, stats and general sentiment, it is not surprising that the current state of performance management is, to put it mildly, not in the best of health.

In Part II we explore the future of Performance Management and look at how we can all play a part in changing the current landscape.

References:

  1. Performance Management is Broken. Deloitte University Press, 4 March 2014
  2. In big move, Accenture will get rid of annual performance reviews and rankings. Lillian Cunningham, July 2015
  3. Pearson Education, Introducing Human Resources Management, Sixth Edition
  4. 3 Things to know before eliminating performance evaluations. Chris Cancialosi, Aug 2015