The world of work is changing too quickly and too much for many established ways of working and processes to remain relevant. If you’re considering changing the performance management approach of your organisation to keep up, you’re not alone. Macro trends affecting the ways of working and the workforce of the future are leading many organisations to leave behind the traditional methods of performance management.
Employees are working far more collaboratively than they have in the past, cross-functional teams and flat organisational structures typify how we work today. Contemporary workspaces are increasingly being designed to facilitate greater interaction and collaboration. If success in your organisation depends on high levels of collaboration, performance appraisals based on performance rankings or forced distribution are unlikely to be the best tool for evaluating employee contribution and making promotion decisions.
Demographic shifts are also creating a more diverse and multigenerational workforce. This is giving rise to new performance management challenges, since baby boomers, Gen X, Gen Y and Millennials have very different expectations around performance management, feedback and communication.
These are just two examples of the trends which are so significant to cause you to take fresh look at performance management:
What other organisations are doing
As organisations rethink performance management – and I think they need to – many are focusing on improving the employee experience and driving shifts in culture. Some are moving away from ratings, yearly reviews, and forced distribution.
Instead, they’re experimenting with a range of new approaches. These include focusing on employee strengths as opportunities for growth, paying closer attention to employee feedback about what’s not working (in real time), rethinking how decisions are made about rewards and in some cases, dropping ratings altogether.
The perils of following the market
A word of warning: reshaping performance management offers exciting opportunities to make changes for the better, but it’s critical that changes meet the unique needs of your organisation. Although the organisations who have moved away from outdated performance management approaches report noticeable improvements in employee engagement as well as manager satisfaction with the process, it is still too early to say whether these positive effects will remain longer-term.
Resist copying the approaches of market leaders or competitors. Any decisions to change performance management processes need to be based on compelling data and not just in reaction to the movement of other companies in your industry.
Where to begin
Step one is to conduct a comprehensive internal analysis that studies the drivers of change: look at the quantitative data, such as attrition rates, employee engagement scores, workforce demographics, and historical employee data.
Using workforce analytics, look at correlations of past performance management and reward data with employee engagement scores and business outcomes. Apply quantitative data along with qualitative insights from surveys and focus groups that poll leadership and employees for their opinions.
Then, it’s time for the external analysis. What’s the competition doing? What do future talent trends look like in your company’s markets? What is the employee value proposition that will attract talent? What are new entrants to the industry doing?
Armed with the information from your internal and external analyses, it’s time to ensure the changes are the right ones for your organisation. Validate the intent of your performance management processes. Engage with stakeholders. Undertake evidence-based decision-making. And, above all, design for the culture that you want, irrespective of the current limitations.
The way forward
The good news is that after years of dormancy, performance management is being forced, possibly kicking and screaming, to the top of the agenda. Senior stakeholders realise that performance management is a key lever to achieve the desired behaviours in the organisation.
While there‘s no silver bullet when it comes to addressing performance management issues and making the right changes, there is a right way to experiment to find the best way forward for your organisation – and whatever that may be, it’s important to start shaping tomorrow’s workforce today.
Written by Ilaria Gregotti, partner, KPMG People & Change
She has extensive experience in Change Management, Organisational Design and Talent Management. In addition, Ilaria is the global lead for KPMG’s Talent Management and Change Management client solutions, developing thought leadership and new industry insights on these topics.
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