The seven trends changing performance management forever

Some high profile companies, including General Electric, Adobe, Netflix and Intel recently announced that they were abandoning the traditional annual performance appraisal system, leading many to assert that performance management systems are heading towards extinction.

Anna Odendal, Principal Consultant for Mazars HR Advisory, argues however that the notion is merely evolving. “Performance management remains an integral function within any business, and finding ways of incorporating them more efficiently, is becoming increasingly important.”

”Companies are seeking continuous improvement of the process, rather than ditching it,” Odendal explains.

Odendal adds that, while the business sector’s perceptions around performance management are changing according to each company’s unique requirements, there are seven generic trends that stand out.

Frequency of performance dialogues

Once-a-year discussions are time-consuming and inefficient. Subsequently, many companies have implemented more regular performance dialogues.

General Electric provides a good case study for how this can change. The company has developed more frequent feedback via a performance management application.

The nature of performance dialogues

Performance dialogues are becoming more positive and constructive conversations for employees and managers, with a sharper focus on recognition, support, coaching to bolster performance, performance improvement, and development. 

Evidence of performance

Using reliable real-time evidence of performance has become essential for coaching and developing performance. Judgements of performance or the lack thereof should be based on evidence of work done or not done.

General Electric’s app, PD@GE, is again a good example of how this can be done. Employees can give or request feedback at any point via a feature called ‘Insights’, which isn’t limited to the immediate manager. 

Objectives, KPAs, KPIs and rating categories

Multiple key performance areas (KPAs) or ratings, as opposed to a single rating, are becoming important. There is also a move away from a proliferation of key performance indicators (KPIs) to a few really meaningful indicators which will serve to create focus for an employee.

The nature of performance ratings

The practice of one-dimensional, numerical ratings and stack-ranking also seems to have come to an end. Ranking unintentionally reinforces competition rather than collaboration. It also reduces employees to a single score.

The current trend is to focus on the extent to which an employee is performing against the requirements of his/her role. 

Distinguishing between employees

The top 5% of employees outperform average employees by 400%. It is generally regarded as important to distinguish between top, average and underperformers. With that said, identifying shades of differential performance among the majority of employees who do a good job, is becoming obsolete.

Performance and reward

Lastly, there seems to be a shift from a single rating on which annual bonuses or increases are directly tied, to a looser connection between performance and pay, as well as a better utilisation of variable compensation to recognise performance.

“These trends focus mostly on the design of performance management practices. It is however important to note that the successful implementation of these practices depends largely on the authenticity and the skill with which they are applied,” Odendal concludes.

Anna Odendal
Mazars HR Consulting Services