Performance Management Process in the Age of Real-time Feedback
Technology provides straightforward solutions to many business problems. Do you need an internal team communication tool? Get an enterprise messenger. Want to track work? Get a task manager.
Unfortunately, performance management isn’t one of those problems. There are tools that make it easier, but no technology has been able to seamlessly replace the human element in performance reviews. It’s a unique and formidable challenge that teams of all sizes, all around the world face.
Organizations spend millions of dollars every year to fine-tune their performance management systems. According to an estimate by CEB, a company of 10,000 employees on average spends $35 million on performance reviews. Another survey by Saba states that 58% of companies believe that their existing review process isn’t an efficient use of time.
Money isn’t the problem here. In an age of instant gratification, Agile flows, and shortened employee tenures (Median tenure in startups is 2 years according to US Bureau of Labor Statistics), the traditional 5-step annual appraisal model has started to feel redundant. But real-time feedback alone can fully replace it either. So what’s the solution?
Re-imaging the traditional performance management process
There have been innovations in certain aspects but most organizations continue to follow the traditional performance management process that includes the following 5 steps:
- Planning – Setting expectations and goals
- Monitoring – Observing employee performance
- Reviewing – Measuring actual performance against preset goals
- Rating – Communicating the performance evaluation
- Rewarding – Providing feedback and rewards that are consistent with the performance
Strictly adhering to this cycle can cause problems in modern teams. If you notice red flags during the monitoring stage, should you wait for the rating stage to give formal feedback? How valuable is informal feedback? Can it be consolidated? How to rate something so complex as a person’s overall performance? These questions give sleepless nights to many managers.
There isn’t one size fits all performance management process. It differs vastly based on your industry and company culture. It’s a worthwhile endeavor to create your own performance management process because it provides a deeper understanding of your team. Still, you don’t have to start from a blank slate. There are some core principles that will help you create an unbiased and effective performance management process.
Unlike the traditional process, these six steps don’t always occur linearly. You’ll most likely be involved in one or more of them simultaneously.
1. Set goals and expectations
The first step remains unchanged because it lays the foundation for every single performance management approach – setting goals and expectations. This is more than just telling your team what you want from them.
The most important aspect is clarity. Vague goals have uncertain outcomes. Increasing the website conversion rate by 10% is much more concrete than Improving website performance. Listen to any concerns that your team will have at this stage and get their buy-in. Explain how their performance goals will impact the broader company strategy. It’s important to strike the right balance between challenging your team and boosting their confidence.
It’s also important to set expectations along with the goals. Tell your team about the rewards of hitting the goals and the consequences of missing them.
2. Provide and ask for continuous feedback
Create a culture in your team where everyone craves feedback. From Warren Buffet to Sheryl Sandberg, leading culture pundits of our age have called feedback a gift. Real-time feedback is more powerful because the context is fresh in memory. It is also more actionable and less prone to biases.
Other than the timing, there are two more critical elements of real-time feedback:
- Coaching – Coach people on how to give tangible and impersonal feedback. Personal statements are never constructive. Use a respectful tone and refrain from giving feedback when aggravated.
- Consolidation – Feedback is just air if not consolidated. Unlike formal reviews, real-time feedback can be given/received at any time. Work tracking tools that allow task-based feedback are great at consolidating real-time feedback into dynamic reports.
Feedback is most powerful when it’s a two-way street. Encourage the team to give frequent feedback regardless of organizational hierarchies.
3. Encourage self-appraisals
There are two apparent advantages of self-appraisal – 1) They help managers gain access to more data points. 2) They coach the team in consolidating and marketing their accomplishments.
No one knows your accomplishments better than you. The same is also true for failures. When the team themselves keep track of their accomplishments, they’ll never miss important details. By critiquing their failures, they will get better at drawing insights from challenges.
Here are two important tips for self-appraisals:
- Don’t be humble about your accomplishments. This is your moment to shine. However, ensure that all achievements can be tracked and their impact is visible.
- Don’t sugarcoat your failures. Own them with the same panache as your accomplishments.
Self-appraisal shouldn’t be a one-time thing that only occurs before formal appraisals. Tracking achievements in quantifiable terms and recording failures should be a regular part of all roles.
4. Analyze all data points
A popular criticism of the performance management process is that it takes a lot of time. Of course, it should. It’s one of the most important tasks of management. It’s much better to invest time in giving informed feedback than dealing with the repercussions of hasty reviews.
The root problem is the quality of reviews, not the time they take. Prior to the formal performance appraisal, look at all the data points that will help you make the decision – real-time task-based feedback, self-appraisals, peer feedback, predefined goals, etc.). Ideally, you shouldn’t be doing this for more than 5-10 people. If you are, your organization probably requires another layer of management.
5. Reward and communicate
After you have looked at all the feedback, consolidate it into a report. As a manager, you’ll always have the last word on the performance of your team. Therefore, if your opinion differs from the employee’s self-appraisal, be prepared to explain why. The goal is to back each claim in your report with factual information.
Based on preset goals and expectations, suggest the right set of rewards. Some organizations don’t like to mix performance appraisals with annual rewards/increments. There is no harm in that if such expectations are already set in the beginning. However, I believe that performance evaluations lose their sheen if you take rewards out of the equation.
When you present the report to your teammate, take the time to answer their questions. If they weren’t able to meet any of the goals, provide specific steps that they can take to do better.
6. Introspect and optimize
You have communicated the appraisal to the employee and addressed their questions. However, the cycle isn’t complete yet. It’s now time to evaluate the performance appraisal process itself.
In our previous post, 6 Signs You’ve Messed up Your Team’s Performance Appraisal, we discussed specific signs that call for introspection. Look for these signs in your process and take action to avoid them in the future. For example, if you surprised your teammate with the appraisal, try to understand why.
Like all cyclical business processes, performance management has the tendency to cause more harm than good if it’s not optimized frequently.