The Solution: Continuous Performance Management
So far in this eBook, we’ve looked at why annual appraisals don’t contribute to improved employee performance and engagement and we’ve explored five key principles of effective performance management. In this section, we’ll set out a practical framework for embedding these principles in your organisation based on Continuous Performance Management methodology.
Don’t throw the baby out with the bathwater
Before we look at our continuous performance management framework, it’s important to understand why having a defined framework is important. If appraisals are not providing value in terms of improving employee performance, it may be tempting to simply stop doing them and leave it at that. In fact some organisations have tried this and have left it up to their managers to have informal performance conversations with their staff and give them feedback on an ad-hoc basis.
However, studies have found that when you completely remove formal performance management processes, managers spend less time having meaningful performance conversations. This, on average, leads to a drop in employee performance of 10% and a 6% fall in employee engagement – clearly not a desirable outcome. So you’ll need a framework that sets expectations for performance management and provides a structure for objective setting, performance conversations and feedback.
Our Continuous Performance Management framework
Continuous performance management differs from traditional performance management in that it is an ongoing cycle of performance and development discussions and feedback, as opposed to a process that starts and ends each year. This is summarised in the diagram below:
Let’s take a closer look at the key components:
‘Near-term’ SMART Objectives
Rather than setting a large number of 12 month objectives at the start of each year, under the continuous approach, employees start off by agreeing a small number of ‘near-term’ SMART goals that they are going to be working on over next 1-4 months (although longer term objectives can still be set where appropriate). The objectives may be related to performance, personal development, or a combination of the two.
These goals are then reviewed periodically at ‘check-in’ meetings (see below). When objectives are completed, new objectives are discussed and agreed to ensure there is a sustained focus on key priorities. This cycle continues on an ongoing basis.
There are a number of advantages to this approach. Firstly, near-term objectives are achieved more quickly which improves employee motivation and builds momentum. Secondly, the objectives are less likely to become irrelevant over time as business needs change, which is a major flaw with annual objective setting. Thirdly, the onerous task of having to set a large number of objectives in one go, covering a whole year, is removed.
Setting objectives and reviewing them regularly makes sense from a bottom-line business perspective too. A study found that 50% of companies who review their goals each month are in the top quartile of financial performance, whereas only 24% of companies where goals are reviewed once a year are in that top bracket.
Regular ‘Check-in’ discussions
At the core of our continuous performance management framework are regular, meaningful performance and development conversations (‘Check-ins’) between employees and their managers.
Unlike annual appraisals, the focus of a check-in is the conversation, rather than completion of forms. Check-ins should ideally be future-focused and action oriented, rather than attempting to assess past performance.
Many organisations already encourage their staff to have informal one-to-one meetings. However, these one-to-ones tend to concentrate on day-to-day work. The purpose of a check-in is to step back from what is urgent and discuss what is important from a performance and development perspective. Exactly what is defined as important will vary from organisation to organisation but the most common things discussed at check-ins are:
- Progress against objectives
- Forthcoming priorities
- Strengths and achievements
- Personal development and career goals
- Values and behaviours
- Issues or concerns from either party
- Actions points to complete before the next check-in
Done right, check-ins are far less time consuming than annual appraisals so they can be conducted more frequently – typically every 1-3 months.
In section 2 we looked at how having regular feedback can dramatically improve employees’ performance. Yet research has found that employees, on average, don’t receive anywhere near enough feedback and in many cases, they only time they receive feedback is at their annual appraisal meeting.
There is nothing more demotivating than being told at an appraisal that you did something wrong several months ago! Even positive feedback loses its value if it is given a long time after the event.
So a key component of continuous performance management is to encourage your staff to give and request feedback in-the-moment, as events occur. When done this way, managers can avoid the dreaded ‘feedback sandwich’ where they wrap negative feedback behind a façade of positive feedback (which employees all too often see right through). If employees receive regular positive feedback, then they will be more receptive to receiving constructive feedback in an open and honest way when it needs to be given.
This kind of real-time feedback is much easier to achieve if you have a digital tool (such as our Clear Review software) which enables employees to give or request feedback instantly from their desktops or mobile phones. We’ll be looking at software in Part 6 of this eBook.
The purpose of having regular Check-in meetings and getting frequent feedback should be to improve and develop performance, rather than measuring it. This is because performance development and performance measurement do not sit well together. Employees are less likely to engage in honest conversations if they know that the outcome of that conversation might affect their pay, bonus or opportunities for promotion.
The need to separate out developmental discussions from pay and promotion decisions was reiterated by the Chartered Institute of Personnel and Development (CIPD) in their recent Performance Management research report:
We recommend that any single process or meeting focuses on one or the other of these, but not both. Introducing some clear water between assessments that inform pay and promotions and those that help employees improve should make performance management a far smoother, more productive and less fraught process.
In our Continuous Performance Management framework, we recommend having a separate process for measuring performance for pay and/or promotion purposes, that sits outside of regular Check-ins and feedback. We call this process Viewpoints and it involves asking managers to answer a small number of questions and/or performance ratings about each of their team members, typically once a year, although some organisations do it more frequently.
Our Clear Review software then compiles the answers and the organisation can then run reports to analyse the data to feed into pay, promotion or talent management decisions.
A similar approach is used by organisations such as Microsoft and General Electric who were among the forerunners of Continuous Performance Management.
In this third part of our eBook, we have explored the three key principles of Continuous Performance Management – Near-term’ Objectives, Regular Check-ins and Real-Time Feedback – and established that performance measurement, where this is needed, should be a separate process. In Part 4, we’ll be providing answers to the three most common questions and concerns relating to Continuous Performance Management: Ratings, Pay and employee/manager adoption.