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Over the past few years, you may have noticed an increasing number of companies announce they’re getting rid of their old performance management processes and replacing them with more agile solutions. In light of this, you might be asking yourself what the reasons are behind this major shift. Is this something you should take into account for your own people processes?
Accenture, Adobe, Deloitte, Gap, and Microsoft are just a few of the big names that have upgraded their performance management processes to include real-time feedback. Below we’ve listed six reasons why traditional HR processes need a revamp.
1. Stack ranking is out
By now it’s been proven that stack ranking is not an effective way of measuring performance. Despite its popularity during the 80s, 90s, and early 2000s, companies began to realize that it corrupts teamwork by pitting employees against each other and encouraging office politics.
Though there was mounting evidence against the system, it was only when GE (who pioneered the system) decided to move away from it that the signal was clear for all. According to the Institute for Corporate Productivity, the number of companies practicing stack ranking plummeted from 49% in 2009 to 14% in 2011.
Instead of relying on a process that pits people against one another, think of processes you can develop that will empower them and put them in the driver’s seat of their careers.
2. Annual performance reviews are no longer effective
The annual performance review doesn’t necessarily brood negativity as stack ranking does. However, it is increasingly becoming a thing of the past. In today’s rapidly changing work environment employees need to become more agile and able to adapt quickly, which means they need to receive advice and training regularly.
When performance reviews only take place once a year, people aren’t getting enough input on their skills and areas for improvement. It’s no surprise that 95% of managers are unhappy with the way performance reviews are conducted in their companies.
Furthermore, evidence has proven that the stress caused by annual performance reviews triggers our body’s natural "fight or flight" reaction, turning what should be a learning experience, into a moment of anxiety for people.
After having spent a year without receiving any feedback, it’s no wonder people don’t know what to expect during the annual review, other than relying on their gut instinct of their performance.
Instead of discussing performance once a year, make time for more frequent check-ins. This could be in the form of a bi-annual or quarterly review, or simply regular conversations between managers and their direct reports.
3. The need for better data and greater transparency
Conducting an assessment only once a year is not only less effective but also leads to inaccuracy. According to a study by CEB, 90% of HR leaders question the accuracy of the information received during the annual performance review. Not only that, but research shows that two-thirds of performance management systems misidentify top performers because their setup makes them highly subjective.
This is due to, in the words of Marcus Buckingham, the idiosyncratic rater effect. This means that when someone rates you, the rating often says more about them than about you. Motivation, for example, is an abstract concept. If your manager rates you on how motivated you are at work it’s based on what they consider to be high and low amounts of motivation.
Studies show that the idiosyncratic rater effect can also result in bias against women and minorities, resulting in low-performance reviews and ultimately unequal promotions and pay.
That’s why it’s increasingly important to use a performance management process that helps you gather data you can turn into insights on teams, helping them to continuously improve. At the same time, ensure you educate team members on unconscious bias to help them complete reviews in a more objective manner.
4. Modern workforce
The skills that companies are now looking for in an employee have changed. In the fast-paced modern business world, professional skills have an average life of 2 ½ to 5 years. This means that employees must constantly be learning to keep up with new trends. Even more than technical ability, companies are looking for creative young talent with high learning desire and capacity.
Even with the best employees who can learn quickly, they will need regular input to know where to put their focus. This means managers will need to spend more time on coaching, as well as growing a strong culture of feedback within the company.
5. Millennials and real-time feedback
Millennials have gained the reputation of looking for meaningful work, and changing jobs much more frequently than previous generations. This is not necessarily a bad thing. They are more likely than the generations before them to have advanced degrees and, having grown up with social media, they are always hungry for more information.
This means they’ve become accustomed to getting answers instantly. They are hungry for more training and opportunities for development and have no qualms asking for it. In a survey by TriNet and Wakefield Research, 85% of millennials reported they would feel more confident if they could have more frequent performance conversations with their manager.
It’s important for this new generation of workers to feel empowered in the workplace, and that companies are preparing them to become the next generation of leaders. This involves ensuring they have ample opportunities for growth, supported by the regular exchange of different types of feedback and 1:1s with their managers.
6. Recognition and motivation
Employees want to be recognized for their efforts. Showing appreciation for a job well done goes a long way. A survey demonstrated 83% of employees found timely recognition to be more fulfilling than financial rewards or gifts. Furthermore, several HR experts are now finding that focusing on improving an employee’s strengths, rather than weaknesses, boosts motivation.
To make strengths-based training work, managers must have more frequent discussions with employees to help them pinpoint and develop these skills. Managers who know their employees’ strengths are 71% more likely to have employees who are energized and engaged.
Start gathering real-time feedback
Empower your team — and your business — through a culture of feedback. By enabling real-time feedback, you'll reduce friction, increase productivity, and create a culture of employee engagement.
But feedback isn't always easy. With BetterUp, your teams can be better equipped to give and receive feedback. Consider ways to provide access to personalized coaching to help your employees — and your organization — thrive.
Madeline is a writer, communicator, and storyteller who is passionate about using words to help drive positive change. She holds a bachelor's in English Creative Writing and Communication Studies and lives in Denver, Colorado. In her spare time, she's usually somewhere outside (preferably in the mountains) — and enjoys poetry and fiction.