Ineffective Performance Management Practices

Do away with these processes for a happier, more productive workplace

Performance management is integral to your organisation. When used effectively, performance management systems can maintain focus on key priorities, motivate employees and improve their engagement levels. However, many traditional performance management processes waste  valuable time and effort, frustrate both employees and management and add very little value.

We can point to a number of statistics that reflect the inefficiency of many modern performance management systems. Forbes claims only 55% of employees believe performance management appraisals are effective. Corporate research and advisory firm CEB states only 4% of HR managers think their systems are efficient at measuring performance, with a remarkable 83% claiming their performance management system requires a complete makeover.

It’s also worth noting that for a performance management system to be worthwhile, it needs to inspire and motivate employees to work better, rather than damaging their confidence and self esteem. With this in mind, it’s concerning to read in a recent Adobe study that a third of women and half of all men have admitted to crying after a performance review. Following a review, 37% look for a new job and 20% simply quit outright.

Clearly, something needs to change. Companies need to readdress their current performance management processes and learn what works and what doesn’t. A smart place to begin is to look to existing HR trends and latest research to guide your decisions. So, if you are like the 67% of organisations planning to make changes to your performance management strategy, we have summarised the five most ineffective performance management processes for your company to ditch in the coming year.

1. Annual performance appraisals

For those keeping up with performance management trends, you’ll know that rarely a day goes by without a company declaring they’re ditching annual performance reviews. A number of articles have been published declaring them to be dead and buried, yet some companies are still clinging to them as part of their existing system. This is disheartening, considering how little value they offer to modern businesses who require frequent, reliable feedback.

Yearly performance appraisals are so dreaded that they have been rather succinctly referred to as an “annual ritual of fear and loathing”. Organisations wishing to save valuable time should take note of time-consuming they actually are. Deloitte found annual reviews consumed almost two million hours of its management time. Adobe also found managers spent an average of 17 hours per review, but employees felt they had no impact on how they performed.

Companies such as Deloitte and Adobe have benefitted massively by incorporating continuous performance management, which involves monthly check-ins. This allows managers and employees to cultivate better relationships, while providing regular opportunities for the give-and-take of feedback. These feedback sessions also ensure employees have a firm idea of what their SMART objectives are and what they’re working towards. By implementing continuous performance management, Adobe reduced voluntary turnover by 30% in a very competitive, talented environment.

For those of you new to continuous performance management but eager to incorporate it as soon as possible, we have free one-on-one discussion templates to help guide effective conversations.

2. Performance ratings and stack ranking

Human beings are not numbers. When you try to reduce an employee to one, you begin to run into problems. From a psychological point of view, performance ratings prompt a ‘fight or flight’ response in the brain, which is hardly an effective way of inspiring great performance.

Performance ratings have been criticised on a number of levels. Many believe them to be subjective and inconsistent. Performance scores can be very arbitrary, as managers are often attempting to quantify qualitative measures, such as demonstration of values. Ultimately, this causes high turnover and employee disengagement.

Some companies go a step further and use ratings as a means to pit employees against each other. The belief is that this will encourage healthy competition and motivation, when in reality, the opposite is true. This process is called stack ranking or forced distribution. Employees are marked on a bell curve. About 10% of employees are labelled as ‘top performers’ and a set number of low performers are fired or put on performance improvement measures, which has given the process the nickname ‘rank and yank’.

61% of employees believe ratings and rankings prompt their managers to ‘play favourites’. It also keeps employees in a perpetual state of worry. If they don’t perform consistently at a high level, they risk losing their job or bonus, which often results in employee burnout. Most forward-thinking managers are opposed to this old-fashioned manner of monitoring performance, but surprisingly, not all modern companies are moving with the times. In fact, Uber has recently revealed that they utilise stack ranking, meaning that for one employee to get ahead, another has to fail. This is ultimately terrible for morale and an unforgivable performance management tactic.

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3. 360-degree feedback systems

360-degree feedback systems involve soliciting the anonymous opinions and feedback of peers in order to evaluate the performance of an employee. If you utilise this process as part of your performance management system, you might want to begin questioning its effectiveness. Anonymous 360-degree feedback systems can provoke severe employee backlash, including feelings of resentment, frustration and anger. Such a system can also be expensive and time-consuming.

Forbes has pointed out that  360-degree feedback can all too often focus on weaknesses over strengths. Another source asserts that the whole process can be compromised by subjectivity, as employees sometimes find it hard to overcome personal opinions, prejudices and emotions. Organisations would be better served by encouraging regular, real-time feedback from named colleagues throughout the year.

4. Top down objective setting

When it comes to SMART objectives, it’s time that management relinquished control and empowered employees to determine their own objectives. Employees are simply much more likely — and more motivated — to complete objectives set by themselves. For this reason, goal setting should be more of a collaborative effort, with the employee owning the process.

Allow them to pinpoint their strengths and skills, give them context as to their role and the goals of the company and team, and then allow them to suggest their own objectives. Of course, the manager should always be involved in a supportive and coaching capacity, and he or she must sign off on the objectives in order to ensure they’re appropriate.

5. Inflexible working

Like annual reviews, rigid 9-5 working is dying out. Our knowledge of employee productivity and motivation is advancing — and rapidly developing technology means that flexible working is feasible and, generally, optimal.

Flexibility has been listed as the number one workplace perk. This is what millennials are seeking for their careers, so incorporating workplace flexibility will do wonders for your company culture, reputation and recruitment efforts. Not only this, but it has been reported that flexible work hours lead to happier, more productive employees. This is also true of remote workers. Embrace change and advances in the workplace, and your company will be set to succeed in the years to come.

To find out how Clear Review can improve the efficiency of your company with our performance management software system, get in touch and book a personal demo now.

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