How ready is performance management for a total technological takeover?
Technology has invaded, if not taken over, almost every aspect of your workers’ lives, leading to expectations of similar developments in the workplace and Human Resources (HR). Performance management strikes many as a particularly ripe area for technological advancement.
After all, in a world where people have become accustomed to giving and receiving instant feedback on a regular basis, annual paper-based reviews seem like a throwback to a different time. By incorporating technology, employers can make the evaluation process more objective, transparent, and credible while managing performance more constructively year-round.
Technology vs. Tradition
Few employers question the need for effective performance management these days. It’s widely recognized to play a critical role in motivating and retaining high performers, aligning individual employees’ goals with organizational objectives, and increasing productivity.
But it’s also widely recognized that the traditional approach to performance management—the annual performance appraisal—has lost its shine. As early as 2013, Heather R. Huhman reports, on Entrepreneur.com, research showed that only half of HR professionals thought annual performance reviews were an accurate appraisal of an employee’s performance. At that point, 49% of HR professionals already believed their performance review process needed to be reevaluated.
Why have annual reviews fallen out of favor? According to a 2016 McKinsey & Company report, “[m]anagers and staff alike too often view [it] as time consuming, excessively subjective, demotivating, and ultimately unhelpful. In these cases, it does little to improve the performance of employees. It may even undermine their performance as they struggle with ratings, worry about compensation, and try to make sense of performance feedback.”
Beyond that, annual reviews simply aren’t suited to today’s fast-paced work environment. Indeed, a 2017 Accenture Strategy survey found that only 34% of leaders believe current performance management approaches are highly effective at helping employees rapidly adapt to change. “For employees to reach their highest potential, they need to receive timely feedback,” Huhman says.
Realizing that an annual “grade” doesn’t cut it anymore, employers are increasingly shifting to continuous performance management.
“Facilitating a culture of continuous feedback means everyone knows where they stand on a regular basis,” writes Jenna Puckett on Recruiter.com. “Annual or semiannual feedback is not frequent enough, and it provides very little in the way of transparency or actual direction. Underperformers will assume their performance is fine and not try to improve; great performers who desire frequent feedback will become uncertain and disengaged.”
Employers can leverage technology to collect more objective performance data on a real-time basis. “Better data back up a shift in emphasis from backward-looking evaluations to fact-based performance and development discussions, which are becoming frequent and as-needed rather than annual events,” the McKinsey report says.
A technology-based performance management system can touch on many of the most vital HR areas—from goal setting to career development—to boost productivity, optimize compensation, and improve retention.
Setting goals for employees has become much more complicated than in the past, especially for employers that are reluctant to let go of their traditional annual approach.
“[A]nnual goal-setting can’t keep pace with the modern world,” Puckett cautions. “A goal that was created in January may not be relevant six or even three months later … [Moreover, if] employees hit personal targets that aren’t aligned with the overarching aspirations of the company, then at least some of the moving parts of your business are moving in separate directions.”
With performance management software, you can set overarching goals for the organization and then align individual goals with them. This is sometimes referred to as “cascading goals”—for example, the sales representatives must meet their goals so the sales directors can meet their goals and so on up the ladder to the organizational goals. Cascading goals that have multiple owners also create shared accountability and allow employees to clearly see how their goals fit into companywide objectives. Employers can use companywide automated applications to establish such goals.
Managers can use performance management technology to easily monitor employees’ progress toward their goals, immediately reinforce progress, or offer coaching when necessary to bolster performance and get back on track to meet deadlines. “Timely feedback is extremely important because it ensures employees receive feedback when they need it and can make changes accordingly,” Huhman says.
Technology also lets managers track progress toward organizational goals and identify competency gaps that require attention. For example, departments with high turnover might need some leadership training.
Performance management software isn’t the only kind of technology that can facilitate employee monitoring. Bank of America, for example, had its call center workers wear sensors that tracked location, tone of voice, body language, and communication patterns. Thanks to the sensors, it learned that workers who took breaks at the same time as coworkers were happier and completed their calls 23% faster than those who went on break on a staggered schedule. Changing the break times led to about $15 million in annual savings, Accenture Strategy reports.
One of the more apparent signs of the recent embrace of continuous performance management is the spread of employee coaching in the workplace. “Without great and frequent coaching,” the McKinsey report observes, “it’s difficult to set goals flexibly and often, to help employees stretch their jobs, or to give people greater responsibility and autonomy while demanding more expertise and judgment from them.”
The human touch is essential for effective coaching, but technology can guide managers, many of whom are still struggling with how to tackle this new responsibility. Software can open the door to a wealth of material and advice on a wide range of performance-related issues, such as office communications, interpersonal skills, and sales techniques.
“New approaches … can provide a foundation for meaningful performance and development conversations with managers that can occur on a far more frequent and informal basis,” says an article on Saba’s Talent Talk blog. “And odds are those conversations will have real relevance in terms of discussing an employee’s growth, capabilities, engagement with coworkers, and willingness to take initiative.”
In tomorrow’s Advisor we’ll take a further look at technology and performance management including how to develop evaluation reports, determining compensation, facilitating reporting and compliance, and more.