5 Performance Management Trends for 2017
Taking a look at the latest performance management trends and how you can adapt your processes for maximum productivity
2016 was an exciting year for performance management. Continuous performance management has continued to shake up rigid, traditional HR processes and flexibility is becoming ever-important, especially given the preferences and motivations of Generation Y. Millennials are changing the way we do business, meaning the future of performance management is set to see significant changes in 2017. Companies who acknowledge this and embrace these new changes will be the ones to flourish and succeed in the years to come.
Here is a summary of the most important performance management trends that HR experts believe will become established practices in 2017.
Annual performance reviews will continue to fall out of favour
As predicted at the beginning of the 2016, yearly reviews are increasingly being phased out in favour of continuous performance management. Organisations all over the world are recognising that increased communication and interaction results in heightened productivity and performance, reducing turnover as a result. Throughout the year, more and more companies have been making the shift and introducing regular one-to-ones or ‘check-ins’ with their staff and instigating real-time feedback.
A notable example of a company making the switch to continuous performance management is Ryan, the global tax firm. It has recently been placing an emphasis on work-life integration and transparency of communication. This keeps employee goals aligned with company objectives, encouraging a heightened degree of trust within the organisation.
When conversations between manager and employee are frequent and unintimidating, employees are better able to open up and engage in genuine, productive communication. Use of technology, including performance management software, can apply much-needed structure to these regular employee discussions as well as capturing the outcomes and action points.
Personal development will become as important as performance goals
As 2017 progresses, performance management systems will need to place a more of an emphasis on personal and career development. Millennials will constitute nearly 50% of the active workforce by 2020, so we need to be mindful of what motivates them and keeps them productive. The answer to this appears to be training, development and improvement, making it the most valuable benefit employers can provide.
Generation Y want their companies to help them grow. In fact, 87% of them state that “professional or career growth and development opportunities” is a critical aspect of what they look for in a job, as opposed to the 69% of non-millennials, making it a huge driver of employee engagement. One company that is using this to its advantage is Yelp, who make employee development their key priority. The company hires hundreds of young account executives each year, but they are regularly pursued by rivals. For this reason. James Balagot, Head of Learning & Development, says their organisation provides daily learning opportunities, mentorship and advancement prospects to defend against attrition. Other notable examples of companies investing in this area are Salesforce, Pandora, Adobe and Facebook.
On a related note, a recently published performance management research study from the CIPD found that for complex roles or tasks, personal development objectives focused on learning and behaviour will do more to help employees focus and perform well than SMART performance goals. At Clear Review, we advocate a flexible approach to goal setting whereby employees agree with their manager what the right balance of performance goals and development objectives is for them.
Employee autonomy will become a huge perk
Independence and autonomy will become critical to employees — and a perk that performance management systems cannot ignore. In order to get the most out of our workforce, managers should coach and support, rather than micromanage. As such, we predict that more companies will place employees in the driving seat and give them greater control over their own goals, personal development, careers and even their hours.
Companies like Deloitte make employees responsible for arranging their regular one-to-ones with their manager, reducing the burden on managers to keep track of who they need to check-in with.
Walmart made headlines this year with its decision to give workers more power over their schedules. Employees now have more certainty over their hours and Walmart is able to improve staffing levels during peak shopping times. This flexible nature can also be seen in companies such as Microsoft and Sweaty Betty, who now offer flexitime to their workforces.
Use of ‘traditional’ performance ratings will decline further
During 2016, more and more organisations eliminated annual performance ratings. According to the CEB, 49% of HR leaders have eliminated or are considering eliminating performance ratings. Yet, research from the CEB also found that removing performance ratings can result in a decrease in employee performance. Unfortunately the media at large widely misrepresented this study, stating that companies who eliminate performance ratings were somehow doomed to failure and should reinstate them.
But it should be pointed out that CEB doesn’t recommend reinstating ratings or annual appraisals. Rather it suggests that companies who choose not to use ratings should have a reliable system in place to ensure employees are receiving valuable, constructive feedback, from both their manager and peers, on a regular basis. GE are a great example of an organisation who have successfully achieved this, and their employee satisfaction has increased since dropping ratings and most of their managers say they are able to differentiate performance for pay purposes without ratings.
A point worth noting is that some organisations who have eliminated ratings are still measuring performance for reward or talent management purposes. Microsoft famously got rid of annual appraisals and performance ratings, but managers still assess each team member’s ‘impact’ on the team, business and customer on an annual basis to help determine reward. This process is, however, completely separate from their performance management discussions which take place 3-4 times a year. Similarly, Deloitte have replaced their performance ratings with four future-focused questions.
New performance management software tools will be rapidly adopted
As the CEB found in their research, when you eliminate appraisals or ratings and don’t establish a structured framework for ongoing performance management to replace them, you are left with a vacuum where little communication takes place between managers and their team members. Where this is the case, the company is bound to suffer.
For this reason, organisations are looking for software tools to help ensure that employees receive ongoing performance feedback. Yet, as Josh Bersin points out in his Predictions for 2017, the trend towards a more agile, continuous, feedback-based approach to performance management has “left the incumbent HR software providers flat-footed” and “the big software vendors…do not have the software yet”.
As a result, Bersin predicts that organisations will rapidly adopt a new generation of performance management tools such as our own Clear Review software. Such tools enable employees to receive and request feedback in real-time, send automated email reminders to ensure employees and their managers check-in with each other regularly, provide online agendas for effective one-to-one conversations and give HR and senior management visibility of whether regular performance discussions are taking place. These tools also enable agile objectives and shorter-term priorities to be agreed and monitored, as opposed to traditional performance management software which typically ties organisations into an annual goal setting cycle.