Talent

Why Performance Management Is Shifting from Individuals to Teams

Work has changed and with that comes a need for a change in performance management.teams
Gone are the days when most employees worked on an assembly line, carefully completing their individual tasks with little interaction with others. Today, teams are the building blocks of companies—departments are organized around particular functions, and working groups of employees form business units.
This is why performance management is shifting away from once-a-year performance reviews of individuals. Instead, companies are starting to use evaluation systems that put teams front and center.
Here’s how and why HR needs to start evaluating teams rather than individuals.

The Individual Performance Review Is Dying

Annual performance reviews are falling out of favor across industries. General Electric, Google, Cargill, and Accenture are among the companies that have instituted alternatives to the annual performance review.
Some of the reasons for this shift include:

  • The speed of business. Business today requires agility and constant course-correction. Companies need to act quickly to implement new ideas and react to changing conditions. Annual performance reviews are too infrequent and fail to keep pace with today’s fast-paced approach to business.
  • Demand for continuous feedback. Annual reviews don’t meet the demand for regular feedback. Forty-two percent of Millennials, who are now the biggest demographic in the workforce, want weekly feedback on their performance. Once a year just doesn’t cut it.
  • Bias inherent in the review process. Recent research shows reviews are not impartial and objective; more than 60% of a rater’s judgment of an employee is a reflection of the person doing the rating, not the person getting reviewed.
  • Calls for more transparency. Just as they want more feedback, Millennials want more collaboration—88% say they prefer a collaborative work culture to a competitive one. Transparency and openness support collaboration, while closed-door reviews drive competition.

No wonder traditional performance reviews have been called “dinosaurs,” “dead,” and “a last-century practice.” The individual performance review is dying. It just doesn’t meet organizational and employee needs for open communication, constant feedback, and flexibility.
And as performance reviews go out of fashion, so do rating scales that rank employees based on their performance in order to determine compensation. According to the Harvard Business Review, GE, the pioneer of a “rank and yank” system of evaluation where low performers were let go, quietly dropped the practice in 2005.
Old ways of managing performance simply don’t work anymore.

The Rise of the Team-Based Review

Rising from the ashes of the traditional performance review is a new approach: team-based reviews.
In recent decades, teams have become central to how organizations get work done. The modern company has functional teams and cross-functional teams, teams created for specific projects, teams based on geographies, and teams based on skill sets.
These teams constantly change as projects wrap up and new projects begin; and they often interact and work with other teams across an organization. For instance, a customer service team works with a marketing department to ensure customers’ most frequent questions are answered on the website.
This is true across all industries. Retail companies like Sears and Gap were among the first companies to reconsider the performance review. Customer service has become more sophisticated, requiring frontline and back-office employees to work together closely. Traditional performance reviews don’t acknowledge this reality or foster an environment of collaboration.

How to Evaluate Teams

As teams become more important, it also becomes more important to evaluate their work. This is an emerging area of HR, so expect to hear more about it in the future. To begin, start by setting team goals and by interviewing team members after a project has finished or a goal has been accomplished.

Set Team Goals

Just as your company would set goals for individual performance, set goals for team performance. Clearly defining the goals for a team makes it easy to evaluate the team’s success.
There are other benefits to team goals, including:

  • More investment in the team. Each person becomes more invested in the success of the entire team, rather than being solely concerned with the success of their individual contribution to the team.
  • More innovation. Team goals tend to be more flexible and less prescriptive than individual employee goals, opening up the possibility for your employees to find more innovative ways of working together and meeting their goals.

Interview Team Members

Conduct evaluation interviews with the team as a group and with individual team members. The purpose of these interviews is to provide an opportunity for team members to give constructive feedback in an informal setting. The interviews shouldn’t feel like formal interviews, per se, but rather casual conversations to determine what worked well and what didn’t work so well.

How to Use Teams to Evaluate Individuals

In a company where an employee serves on many teams—a team in their department, a cross-functional project-based team, different teams on different worksites—their manager will not be able to observe much of their work.
Collective feedback, solicited from an employee’s team members, can provide much more valuable insight into an employee’s strengths, weaknesses, and contributions. Collective feedback reduces the element of bias inherent in the one-on-one review; if most of Jane’s colleagues suggest Jane work on X, it’s likely that Jane really should address X.

Look for the Insights Only Colleagues Can Offer

Colleagues can provide fuller insight into the role an employee plays than managers can—for instance, an employee’s sacrifice for the greater good. Say Paul, a project manager, set aside his team’s own project—missing their deadline—to help a colleague leading a project of greater strategic importance to the company.
A manager may not realize the project manager’s lack of execution on their own project resulted in the successful and timely completion of a more important project—unless they asked others.

Use Systems to Collect Continuous Feedback

Use systems to collect feedback continuously rather than sporadically. Performance management software solutions can allow peers and managers to conduct project-based reviews on an ad hoc basis, outside of quarterly or yearly performance reviews.
This approach creates the opportunity for a performance improvement plan (PIP) that can be implemented to help employees stay on track. These tools allow employee information to follow the employee from project to project, providing a comprehensive picture of an employee’s performance. This kind of continuous review allows for real-time feedback and correction for negative behaviors before they become a bigger issue.
The individual performance review is dying. The team-based review is quickly replacing it, as an agile approach to employee evaluation matches the team-based nature of work today.

Chris Lennon is Vice President of Product Management at BirdDogHR. Lennon is an active participant in the talent management community bringing over 18 years of experience to BirdDogHR. He has presented at numerous industry events and has been quoted as an industry expert in leading publications like Talent Management magazine, CLO magazine, New Talent Times, TLNT, and HR Bartender.