Navigating Performance Management Challenges: A Manager's Guide

During performance reviews, managers are not asked what they think of team members, but rather what they would do with them.

Don't get stuck in the past. Plunge into the future. Opportunities await there.

This redesign is an attempt to reclaim the additional hours spent on performance management. This left a lot to be desired for engagement strategies.

The company soon realized that while people judge others inconsistently, they are more open about their own feelings and intentions.

This was done using evaluation statements such as: Given what I know about this person's performance, I would always want him on my team. (This can be used to measure the person's ability to work well with others.)

So IceHrm shifted its approach to performance management from evaluating performance to deciding to take action. Today the company focuses on recognizing, seeing and promoting performance.

This forward-thinking approach is a break from the norm. Yet 80% of companies today emphasize the past in their performance management systems, according to research in Employee Relations.

Today, managers face many challenges in the area of performance management. It highlights the need for a change in thinking, a shift from performance management to performance development.

Such a rethink is necessary as the obstacles resulting from the Covid-19 pandemic continue to exist and the hybrid form of work is becoming increasingly important.

Truisms like “management in passing” and “under the watchful eye of management” are losing their luster, especially in the digital age.

What is performance management?

According to "Performance Management" by Herman Aguinis, it is a continuous process of identifying, measuring and developing the performance of individuals and teams and aligning the performance with the strategic goals of the organization.

This definition has two main components:

1. Continuous Process: Performance management is an ongoing process. It is a continuum of activities including goal setting, coaching and feedback.
2. Alignment with strategic goals: Performance management requires that individuals' efforts be aligned with corporate strategy and goals. This makes the individual's contribution to the company more clear.

Costs of poor performance management

Poorly managed performance management can demoralize your employees and harm your business. The costs of poor management are high:

1.Employee turnover

If the system is perceived as unfair and biased, employees may quit. Likewise, those who remain can resort to “silent dismissals”. This is the case when employees are content with minimal work efficiency without making additional efforts.

2.Use of misleading information

Without a standardized system in place, Aguinis said, there are numerous opportunities to falsify information about an employee's performance.

3.Waste of time and money

Poor performance management is a waste of resources. Such waste is even more serious in systems that focus on manual intervention.

4.Unjustified demands on the resources of managers and employees

Bad systems can be avoided due to competing tasks. Aguinis points out that sometimes managers simply decide to "avoid the system altogether." And employees may feel “increasingly overloaded.”

5.Burnout and job dissatisfaction

When there are no valid and fair reviews, employees can feel burned out. They can become increasingly irritable, according to an article by G. T. Gabris and D. M. Ihrke in "Public Personnel Management."

6.Increased risk of litigation

Any perception of unfairness in performance management can prompt employees to seek legal redress. To mitigate compliance risks, Adobe recommends due diligence on regulations or laws, sanctions for non-compliance, compliance status, risk assessments, and obligations.

7.Bad reputation

The opinion of dissatisfied employees or those who have quit due to poor performance management can lower the company's Net Promoter Score. This can damage the company's image and reduce its brand value.

Performance management needs to be reconsidered

A changing business context following the Covid-19 pandemic and the push towards remote working requires a move away from traditional approaches. Therefore, a change from “past-oriented performance management” to “future-oriented performance development” is necessary.

Peter Cappelli and Anna Tavis believe such a change is necessary because:

1. Today's tight labor market creates pressure to keep employees happy and prepare them for advancement.
2. The rapidly changing business environment requires agility, which calls for regular reviews with employees.
3. Prioritizing improvements over accountability encourages teamwork.

Additionally, Gallup suggests that the new approach should be "more collaborative, adaptive and individualized, depending on local conditions." Gallup identifies three key characteristics of modernized performance management:

1. Agile, collaborative goals that adapt to changing conditions
2. Ongoing conversations, timely recognition and informal dialogue on a weekly basis
3. Quarterly progress reviews with accountability and incentive adjustments

How can managers overcome obstacles to performance management

Overcoming obstacles to performance management today requires going beyond the norm. It requires agility, innovation and a strong focus on employee development.

1.Going beyond SMART goals

Most managers are familiar with the SMART checklist of goals—specific, measurable, achievable, realistic, and time-bound—but that's not enough, as the

Harvard Business Review Guide on Performance Management shows: "A goal can be SMART "without being important, challenging or congruent with the strategy of the unit or company"

• Aligned with the organizational strategy and for the benefit of the company
• Specific and measurable
• limited in time, with clear deadlines
• Achievable but challenging
• Future-oriented
• Tailored to the individual
• Documented but not forgotten

2. Combating Bias

Research from McKinsey & Company shows that 60% of respondents who viewed the performance management system as fair also found it effective.

The company believes that systems are perceived as fair if they do three things:

• Transparently linking employee goals to business priorities while maintaining a strong element of flexibility
• Investing in the coaching skills of managers to help them make better decisions about day-to-day fairness
• Reward outstanding performance for some functions while managing converging performance for others

Research in the American Sociological Review shows that gender bias in performance reviews is widespread. In many cases, the bias influences how managers evaluate their employees.

This results in women having to meet "a higher bar than their male counterparts in order to advance professionally." The bias also affects men - those who do not show initiative are viewed as "too soft."

The authors suggest ways to eliminate gender bias in performance reviews: Tie reviews to performance, provide transparency, and hold managers accountable for reviews. Using consistent criteria for all employees can also help.

3.Refine performance appraisals

Employees want to be compared to themselves and not to others, according to a study by Jinseok Chun, Joel Brockner and David De Cremer.

They show that "employees consider temporal comparison ratings to be fairer than social comparison ratings."

4.Rely more on data

Performance reviews based on data can become fairer, more objective and more meaningful. According to the MIT Sloan Management Review, next-generation performance management depends on "digital monitoring and tracking platforms to provide real-time analytical insights."

Similarly, the Harvard Business Review article advises identifying KPIs for performance and using the right data to measure them.

5.Commit to a continuous feedback culture

Performance management should be an ongoing process and not just an end-of-year exercise. The MIT Sloan Management Review advises that leaders need to “define the feedback experience for their employees.” This helps build consensus about what high performance means.

A study in the Journal of Applied Social Psychology shows that effective feedback is important. The researchers found that respondents who received "effective feedback" were satisfied with the performance management system, even with poorer performance ratings.

6.Coach, not command

In a McKinsey & Company survey, less than 30 percent of respondents said their managers were good coaches. Managers as coaches are enablers because they help employees do their best work.

The firm suggests that companies invest in the skills of managers to help them become more agile.

Coaching is about "asking questions that help people find the answers that are right for them," suggests executive coach Ed Batista.

7.Recognize potential

To ensure the continuity of organizational processes, succession planning is key. Managers need to focus on using talent management systems to create a “talent inventory.” This can be created based on the information available in performance management systems about skills, competencies and past performance.

8.Introspective to avoid the “set-up-to-fail” syndrome

Employees' poor performance is often blamed on their superiors. This is called the "set-up-to-fail" syndrome, explained by Jean-François Manzoni and Jean-Louis Barsoux in the Harvard Business Review.

The authors explain how the syndrome occurs:

1. You start with a positive relationship.
2. Something - a missed deadline, a lost customer - makes you question the employee's performance. They start monitoring him in detail.
3. Since the employee suspects that you no longer trust him, he begins to doubt himself. He no longer gives his best, reacts mechanically to your controls and avoids making decisions.
4. They see his new behavior as additional evidence of his mediocrity and tighten the screws even tighter.

To avoid this, the authors suggest setting expectations for new employees early on. And to loosen the reins when they master their tasks. Leaders must regularly question their own assumptions.

9.Create a supportive culture

A supportive performance management culture establishes the desirable characteristics and behaviors that are considered high performers.

How to identify and bridge performance gaps

A performance gap is the difference between the actual and potential performance levels of an individual, unit, or organization. Under-performance can leave much to be desired and is a sign of an unmotivated workforce or inefficient use of resources.

You can bridge performance gaps by taking the following steps:

STEP 1: Determine the cause

Get to the root causes of lower productivity levels and under-performance by reviewing past records and conducting surveys. Identify patterns of under-performance compared to expected results.

STEP 2: Conduct a skills gap analysis

Determine the gap between employees' current competency levels and the level they need to perform better. This makes it possible to determine which skills, behaviors or knowledge gaps are the cause of inadequate performance. Take a data-driven approach to complete the analysis.

STEP 3: Close gaps

This includes several measures such as:

1. Training and development: developing the desired skills of employees
2. Reward and recognition: motivate employees to perform better. This can help reinforce behaviors that further organizational goals.
3. Reinforce expectations: Role expectations should be clearly and consistently defined. All employees in a function and their superiors must be clear about what performance means. Deviations can lead to mismatches.
4. Cultivate a high-performance culture: A lack of accountability and transparency cannot be tolerated. The standards of behavior that constitute high performance should be clearly articulated, communicated, and reinforced.

STEP 4: Monitor efforts

Calculate the business value of the high performance that comes from closing gaps. Monitor progress toward this target value by tracking performance metrics and gathering feedback from employees and managers.

Elements of an ideal performance management system

There are some features of a performance management system that can increase the likelihood of its success, according to Herman Aguinis in "Performance Management." Managers need to take these into account when developing strategies:

Strategic congruence

There should be alignment between the goals of the individual, the unit and the organization.

Congruence of context

The system should take into account the context in which the company operates - the business and cultural environment.

Aguinis cites the examples of Japan and the United States. In Japan, companies focus on measuring behavior and results, while in the US the focus is more on results.

Thoroughness

This can be understood in four dimensions, suggests Aguinis:

1. All employees should be evaluated
2. All key job areas should be assessed (including behaviors and results)
3. The assessment should cover performance throughout the assessment period, not just the few weeks or months before the assessment.
4. Feedback should be given on both positive aspects of performance and aspects of performance that require improvement.

Practicability

The system must be practical and not excessively demanding on resources and time. It should be tailored to the needs of the organization.

Meaningfulness

“The standards and assessments conducted for each job function must be viewed as important and relevant,” recommends Aguinis. In addition, the evaluation must only cover the functions that the employee has under his or her control. And the assessments must be carried out at regular intervals.

Specificity

This includes being clear about what is expected of employees and how they can meet those expectations.

Reliability

This means that the measurements of performance are “consistent” and “error-free.”

Validity

This means that the assessment should only be made for relevant performance aspects.

Acceptance and fairness

Assessing the perceived fairness of a system requires employee feedback. Aguinis suggests doing this along four dimensions: distributive justice, procedural justice, interpersonal justice, and informational justice.

Inclusivity

This includes giving a voice to stakeholders who may be affected by the results of the performance review.

J.D. Elicker, P.E. Levy and R.J. Hall argue in an article in the Journal of Management that inclusive systems can reduce employee resistance and improve performance.

Openness

Assessments should be continuous. There should be two-way communication. And it should be clearly stated what desirable performance is.

Correctability

This is about dealing with subjective bias in assessments. An appeals process must be established to address complaints.

Ethical principles

The examiners must put personal biases aside. And all information must be treated confidentially.

Linking performance management to company goals

Individual goals that conflict with corporate goals and strategy can prove disastrous for both employees and the company. For employees, this can lead to unpredictability, lack of recognition and lack of goals. The company, on the other hand, may lose its competitive advantage and its resilience to uncertainties. Aligning performance management with company goals is therefore essential.

1.Align systems with strategy

The research firm advises companies to use performance management as more than just a performance measurement tool. It must also serve to align employee behavior with company goals.

2.Prioritize goals

Performance management should focus on a few key objectives. These should be transparent and clear. The path to achieving these goals should be determined.

3.Align employee metrics with goals

Gartner believes that successful companies "employ tracking mechanisms that align employee metrics with future goals, track task completion and the success of metrics, measure the impact of that success, and reward those employees who drive the right results in the right way." ".

Better manage performance through technology

Technology can help you track, improve and scale performance management
IceHrm, a provider of HR technology solutions for growing companies, presents managers with a refreshing approach to performance management:

1. Continuous Feedback: This allows companies to set up feedback as an ongoing process. In this way, companies can regularly reinforce desired behaviors among their employees and correct their efforts in a timely manner.
2. OKR and Goal Settings: This can help track employee efforts towards measurable results. This way, both employees and managers can clearly see expectations and know how to meet them. Companies can also align individual, team and department goals with those of the company.
3. Performance Development: The 9-grid matrix and bell curve built into IceHrm can help managers identify employee performance levels. You can accordingly define development paths, reward and recognize desired performance and assign appropriate tasks to employees.
4. 360-degree feedback: This facilitates a well-rounded performance review that is more likely to be accepted and perceived as fair by employees.
5. Personal conversations: Here both managers and employees can exchange their feedback. The meetings also provide the opportunity for ongoing coaching.

Embrace the future of performance management with IceHrm's cutting-edge solutions, fostering a culture of growth and development.