What's Next for Performance Management?
Over the past two years, the COVID-19 pandemic forced organizations to re-examine and update business processes of all kinds. The same has been true of performance management.
In fact, one-third of organizations have redesigned performance management within the past two years, according to our research (Fig. 1).
In what ways are practices changing? We identified three important differences in how performance management is being conducted today compared to 2019.
Greater Clarity and Transparency
Compared to 2019, organizations provided much more clarity and transparency around goals, feedback and pay practices to employees in 2021.
- Nearly 50% of organizations encouraged employees to update their goals regularly in 2021, compared to 35% in 2019.
- Forty-eight percent of organizations provided clarity to employees on what they need to succeed in the future in 2021, compared to 37% in 2019.
- Fifty-four percent encouraged greater openness in peer feedback in 2021 versus 34% in 2019
- Over 40% of employees said their company promoted pay transparency in 2021, compared to barely 20% in 2019.
These findings are critical for a few reasons.
Clarity about the future helps ease anxiety. Research shows that 47% of employees feel anxious due to their lack of clarity about post-pandemic work. Clarity around the future can help alleviate anxiety and have a positive impact on productivity and engagement.
Employees want a sense of clear purpose from work. Recent findings reveal that 70% of employees feel their sense of purpose is defined by their work. Organizations can help employees by providing clarity into their performance, helping them understand the impact and value of their work.
Lack of transparency around pay and feedback can reinforce racial and gender biases. Open and honest feedback can help combat bias and promote transparency in a virtual work environment. Similarly, transparency around pay and rewards, if they are fair and equitable, can boost employee morale, improve retention and help manage employee stress during a crisis.
For example, CHG Software in Salt Lake City decided to ditch their traditional annual performance review for frontline workers once the pandemic hit. Instead, the company asked leaders to give “in-the-moment” feedback to provide greater clarity around current performance and what they can do to improve future performance.
Related Article: Designing Performance Management to Work for Hybrid Work
More Frequent Check-ins, But Less Coaching
2021 also saw managers check in more frequently with employees, both with structured formal conversations and informal quick check-ins (Fig. 2).
Many companies adopted frequent check-ins to help combat some of the ambiguity arising from the pandemic.
For example, managers at Shapiro Negotiations Institute in Baltimore traditionally conducted formal reviews once a year. Once the pandemic hit in 2020, the firm's managers began checking in with workers weekly. The Debt Relief Company in New York City encouraged more frequent and regular check-ins between managers and employees.
While no doubt a step in the right direction, organizations can do more. Data from our research showed that about 70% of employees desired more daily or weekly check-ins.
Additionally, while the quantity of check-ins is important, the quality is just as important if not more so. For check-ins to be helpful, employees need to understand not just what they should focus on, but also how they should improve and develop. Our data indicates this may not be happening.
Addressing Employee Needs and Wants with a Digital Workplace
The workplace is getting more and more digital – both in how we work and where we work
Maintaining a Human-Centered Approach During Digital Transformation
When it comes to digital transformation - people drive change, not technology
The Evolution of Employee Recognition
Leveraging the power of appreciation to improve the employee experience
How to Build a More Innovative and Resilient Workplace Culture
What would happen if every member of your team came to work focused on finding solutions and creating better results?
Specifically, we found that employees had fewer development conversations with managers, coaches and mentors than they did in 2019. As highlighted in our study, "The Immediate Future of Coaching: Making Coaching More Scalable, Inclusive and Affordable," frequent coaching conversations can help:
- Fulfill the need for human connection and engagement in an increasingly remote workforce.
- Offer personalized development and meet the diverse development needs of many employees.
- Enable individual behavior changes at scale.
Related Article: The Dos and Don'ts of Remote Performance Reviews
Manager Behaviors Sliding Back to Pre-pandemic Levels
In 2020, we conducted a study into manager practices that revealed managers were enabling employees' sense of autonomy, opening up to new information and removing barriers for their employees at a much greater level than before the pandemic.
In 2021, they fell back into old habits and were back to the same level as 2019 (Fig. 3).
We also saw a decline in practices that speak to a manager’s adaptability, flexibility, and outcome-based outlook:
- Sixty-four percent of managers focused on the outcome of their employee’s work instead of the hours “spent in the seat” in 2021, compared to 74% in 2020.
- Fifty-five percent of employees said their managers supported nontraditional work schedules in 2021, compared to 68% in 2020.
One of the ways companies can address the erosion of these behaviors is by providing managers with the right tools and systems to help them adopt better practices.
Behavioral Learning Center Inc., a healthcare organization, adopted a new tool that allows managers to assess and provide continuous feedback to their employees in a flexible and frictionless manner. Managers can complete evaluations and on-field assessments using smartphone apps, and initiate feedback as soon as a project is complete.
After implementing the tool for real-time feedback, the company witnessed a marked increase in employee engagement, with voluntary turnover decreasing by 30%.
Next Steps for Performance Management
As companies figure out their long-term work models, performance management will need to keep evolving to meet the unique challenges of the workforce. There are a few things leaders can do as they begin to adjust their existing practices:
- Keep the needs of employees top of mind. As stated earlier, a large majority of employees desire more frequent check-ins. Clearly, companies can do more to encourage conversations and provide opportunities for connection.
- Don’t forget managers. Manager burnout is a growing issue. While middle management is always under pressure during ordinary times, it has come under even more duress during the pandemic. It’s important that companies track and address manager burnout.
- Be mindful of bias. Recency bias and proximity bias are likely to surface more in a virtual environment, since managers are no longer relying on physical presence as an indicator who is working the hardest. This issue will increase as some employees return to the office while others don’t.
For those interested in more resources and in learning about the research we have conducted to date, check out our publications at RedThread Research.
Learn how you can join our contributor community.
About the Authors
Priyanka Mehrotra is a senior analyst at RedThread Research, where she studies human capital management and people analytics.
Stacia Sherman Garr is co-founder and principal analyst at RedThread Research and a thought leader on talent management, leadership, diversity and inclusion, people analytics and HR technology.