Continuous performance management : why what and how
Over the past few years, there has been a major shift in the way companies manage employee performance.
Continuous performance management
From the previous model, which focused on employee evaluation once a year, the trend is now towards continuous performance management with regular discussions on employee development and performance coaching. The trend started in big software and consulting companies with companies like Adobe, Google, Deloitte etc. They have switched to continuous performance management but is now catching up with other sectors and smaller companies as well.
Why has this change been made?
To understand why this change happened, look at the types of companies that started it all. Companies like Google, Adobe, Deloitte are very different in terms of how they operate, the nature of their work, and what they value, compared to the monsters of the previous era like GE, where the earlier evaluation process and the bell curve were popularized. These companies realized that the ranking and bell curve process did not add much value to them, and instead created more problems.
The economic context and industry also play a very important role in dictating the type of performance management system a company uses. For example, when human capital is rich, the focus is on which people to let go, keep, and reward. While there is a shortage of talent, growing people2 are becoming a growing problem. Today, the market in most countries is dominated by software, services, brands and R&D companies, all of which compete for the greatest talent. Hence, this trend towards continuous performance management is growing.
Through research in new fields such as positive psychology, behavioral science, development mindset, etc., we increasingly realize that clarity, purpose, and a sense of growth help people achieve results, and companies are increasingly using the insights from this new research in your management practice performance. ¹
Today, in the VUCA world, annual goals and reviews are no longer relevant, roles are becoming more complex and distinct, and there is more emphasis on teamwork and collaboration than on individual results. Companies and employees also expect more from each other. With these changes, companies are realizing that their traditional ways of managing performance have become obsolete.
Most companies have eliminated forced rankings and the bell curve.
The annual inspection still exists but is now supplemented with regular inspections, 1: 1 ratings, feedback and even quarterly or semi-annual reviews.
There has been a shift towards a more inspiring, flexible and transparent goal setting process like OKR.
Many companies have moved away from assigning a single grade or grade to employees to a system with pseudo grades, multiple scores, or no grades.
The payroll talks were separated from the growth and development talks to focus on employee development.
Mckinsey’s reports ³ ⁴ say that most companies have not noticed the positive impact of these changes and are constantly experimenting with new ideas and concepts.
Employees continue to perceive this process as biased and unfair. Managers still view performance management as a bureaucratic proofreading exercise.
How to implement continuous performance management practices in your organization?
Make it continuous
The main difference between the process from the previous era and the new one is that you are looking at performance continuously and not at one-time exercise throughout the year .
For this to work, you need to build an organizational practice of regular (at least monthly) meaningful 1: 1 conversation between manager and employees. Without it, you won’t change much in the process. Online reports are good, but they cannot replace personal coaching, feedback, and development interviews.
Building an organizational practice of 1: 1 meetings is not easy. Here are some practical tips on how to make your employee managers the habit of regular 1: 1 meetings with their team: The Enigma of 1-on-1 Meetings and How Behavioral Economics Can Help
Prepare your managers for this
While the frequency of conversations between manager and employee is important, the quality of conversations has a much greater impact. Managers know the most about their team members, but most of them lack the skills and knowledge needed to hold meaningful conversations, as well as the confidence and skills needed to judge them fairly. Therefore, investing in managerial abilities is essential to effective performance management.
In addition to the manager training that most companies do, consider micro-learning interventions such as Whispers on Google to enable and encourage managers to have more meaningful conversations.
