This summer, consultancy firm Accenture joined Netflix, Microsoft, Adobe and Deloitte in ditching annual performance reviews. Does this spell the end for this cornerstone of traditional performance management?
A survey recently conducted by Deloitte found that 58% of executives questioned believe that their current performance management approach does not drive employee engagement or contribute to high performance - so clearly there is opportunity for improvement. According to Hannah Priest, behavioural psychologist at Mind Gym, the key to an effective performance management system isn't the process you chose, but "in encouraging the right behaviours to build a high-performance culture."
This means that whether you stick with annual performance reviews or consider some alternatives, the important element to ensure optimum levels of engagement and productivity is your approach.
Priest argues that the six conditions necessary for an effective performance management system are:
Purpose: conveying to employees that their work counts and is noticed.
Challenge: setting performance-enhancing goals that are aligned and achievable - but just out of reach.
Attention: communicating that performance is noted and appreciated. "Employees who think their manager always knows what they are up to and how they are doing are far more likely to feel appreciated and raise their game," says Priest.
Growth: instilling a belief that goals can be achieved and performance can be improved.
Recognition: based on clear criteria and focussed on the employee.
Choice: ensuring that employees have a strong sense of their autonomy within the organisation, and are empowered to make choices that align with wider goals, but allow them to contribute according to their individual strengths.
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One approach now being adopted by many companies is an ongoing performance review process comprising of check-ins throughout the year, involving consistent feedback (and follow ups), goal-setting and self-reviews as opposed to the traditional once-a-year review.
"Basic psychology tells us that if you're going to reinforce or punish some behaviour, you want to do it as soon after the behaviour happened as possible," says Mark C. Frame, associate professor in the Middle Tennessee State University Department of Psychology. "Waiting a month is not a good idea and waiting a year is definitely not a good idea."
This approach will also ensure that your rankings are kept up-to-date throughout the year, and will allow you to effectively deal with any performance-related issues as they arise.
Whichever approach is right for you, there's no doubt that an effective and well thought out performance management system is essential to keep your organisation both streamlined and on track.