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HR Best Practices
HR Best Practices

Performance Management

Through our daily work with over 1300 organisations, we see many examples of innovative thinking in HR. In this series of 14 best practices we define true “best practices” in HR nowadays. In this fourteenth and last case study of this series we will focus on Performance Management with an example of a Top Employer within the Technology Industry.

Like many of the HR practices put in place before the digital transformation, the traditional performance evaluation may feel outdated. The current trend is to make the whole process feel ‘lighter’ to focus on continuous feedback throughout the year.

Performance Management in the Technology Industry

In 2014 and 2015, this Top Employer (Global, 90,000 employees) carried out an audit of its performance management practice based on internal research and external benchmarking. The company found that its formal performance management process was taking up 210,000 hours of company time on ‘non-value-added’ administrative activities. Meanwhile, engagement survey scores regarding performance management were poor and the user satisfaction survey around the performance management process showed a negative result at -27 NPS. Added to that, the supporting tools did not appear to be user friendly: in 2015, only 25% of interim reviews and 10% of development plans were being documented in the system, meaning that a change was clearly needed.

Qualitatively, the employer found that its managers and employees (around 40% of whom are millennials) wanted to move away from annual performance reviews and instead have more regular, informal discussions. Driving the practice of ongoing performance feedback all year around, ‘real conversations in real time’ would be key to a successful performance process. To revolutionise its performance management process, the company developed a practice of ‘continuous performance management’, shifting its culture towards ongoing performance feedback all year around – “real conversations in real time.” This means dialogues where managers and employees do not have to wait for annual cycles to have these critical discussions. The company believes quality conversations all year around are key to building understanding, alignment and trust. To make the culture shift happen, the Top Employer introduced a set of tangible behaviours that describe ‘how the company gets things done,’ which gives managers and teams guidance for making decisions and driving top quality work.

In a bold move, the firm eliminated its annual and mid-year performance review cycle, replacing it with a recommendation for “continuous dialogue” between managers and team members. These dialogues can be weekly, biweekly, monthly and at a minimum quarterly, and focused on professional development, goals, performance feedback and work environment. While goal setting still happens, this has also become a continuous process rather than an annual event. Employees are asked to review and refresh their goals on a regular basis.

Eliminating the formal performance reviews meant that the Top Employer needed new criteria to replace performance ratings and bands, to make the link between performance and compensation, as well as training and development. With this in mind, the company introduced a system where management teams identify and nominate top talent once per year (between April and July), supported by an online tool and management team discussions. HR partners facilitate this process, playing a coaching role to make sure the discussions are fair and objective. 

These roundtable discussions focus on development opportunities for standout employees, as well as for those colleagues selected for succession plans. Standout employees are deemed to be those who demonstrate high performance, solve problems and are ready to assume more responsibilities. Once identified, these top performers are invited into an exclusive, one-year development programme.

 

To improve the supporting tooling for a continuous performance management practice, the Top Employer revamped its information systems. It created a custom-built mobile app that allows managers and employees to summarise the outcomes of their continuous dialogues focusing on three dimensions: Goals, Development and Working Conditions. The same solution is available on the company’s HR portal with enhanced features and options. The new approach was piloted globally in 2016 and was fully deployed in 2017. To measure success, the Top Employer introduced a quarterly survey to assess the effectiveness of the culture it intends to drive as an opportunity for employees to provide anonymous and confidential feedback on their experiences. The survey also helps managers gauge the effectiveness of their dialogue skills. Everyone is invited to participate in the survey on a quarterly basis to help identify trends and potential improvements.

Given the scale of the programme and the recent deployment, the project is too new to be able to judge the impact. Nevertheless, the company believes the results are positive so far, and it intends to use this flexible process as a part of its employer branding activities. In terms of lessons learned, the company believes communication is crucial. It recommends starting communication and change management well in advance (at least six months before going live) and striving for ‘organic change’, avoiding theoretical information and preferring real-life testimonials and examples of the benefits of the new approach. Even if leaders are already well prepared for this type of dialogue with their employees, the employer also recommends giving local HR teams the option of retraining leaders from scratch, such as providing workshops to better understand the expectations of the employees coming out of the quarterly survey. 

Our Conclusion

For Top Employers, the need to evolve performance management is extremely clear. We are happy to see Top Employers start to reduce the administrative burden, make their performance processes feel more flexible and communicate a positive message that “everyone has talent,” which serves to make the formal moments in the talent and performance cycle feel less intimidating for employees. We consider our Top Employer example above to be a best practice because the firm has thoroughly adapted its performance management practice based on clear data, considering internal as well as external dynamics.

This type of transformation is technically possible in any large company, but the challenge is to retain the link between performance, talent management and compensation, which requires a certain degree of formalisation. The right solution, therefore, cannot be bought off the shelf. It is a long-term effort that requires customisation to the reality of each organisation, which cannot be done overnight.

Given that performance management tends to be a globally standard process in large companies, the cost for implementation at local level is not large. It is mainly a question of time investment to train people on the new way of managing performance. Aside from the cost and time, the ultimate challenge is to build a culture of open communication between managers and their team members, which is a complex, longstanding transformation effort.

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Curious about the previous topic we've discussed in this series of case studies? Gain more insights on Compensation and Benefits