A Buyer s Guide to Performance Management Systems

Transcription

1 A Buyer s Guide to Performance Management Systems

2 Rethinking Performance Management Performance Management: The Practice Everyone Loves to Hate Let s start with some real talk: Performance management is a topic that strikes fear into the hearts of most people in the HR field (not to mention managers and employees!). Most companies care about it, but few have figured out how to do it well. Research from CEB found that managers spend up to 200 hours per year on performance documentation, and a company of 10,000 spends an estimated $35 million a year to conduct reviews. Despite this huge investment of time and money, there is minimal return. Reviews don t drive engagement or performance and 95% of managers are dissatisfied with the way their companies conduct performance reviews. 1

3 Most of us have experienced the traditional approach to performance management: It s largely viewed as a one and done process that s primarily focused on documenting performance and driving compensation decisions. The typical process is for managers to grade an employee s performance over the past year and assign a pay increase tied to a certain scale. This approach means that performance management is generally focused on looking backwards to past performance. There s a real opportunity to transform performance management from a tactical, once-a-year chore to a strategic initiative that has a real impact on your company. Read on to learn how! Performance management by the numbers 58% 58% of executives believe that their current performance management approach drives neither employee engagement nor high performance ¹ 95% 95% of young high achievers were actively searching for other job opportunities and on average left their company after 28 months ² 87% When given the option to eliminate performance ratings, 87% of people wanted to keep them ³ 2X Companies that are deemed more skilled at performance management enjoy 2.1x revenue growth and 2x profit margins compared to other companies ⁴ [1] Performance management is broken [2] Why Top Young Are in a Nonstop Job Hunt [3] Let's Not Kill Performance Evaluations Yet [4] Realizing the Value of People Management 2

4 Creating a High-Performance Culture In contrast to thinking of performance management as a way to simply measure past performance, forward-thinking companies adopt the mindset of creating a high-performance culture on an ongoing basis. Companies that have had success in overhauling their process to drive a high-performance culture generally take a two-phase approach: 1 2 They separate performance measurement cycles from ongoing performance development. This gives HR leadership the data it needs to make compensation decisions, while optimizing for accelerated performance year-round. They embed growth and learning into company culture, championing a growth mindset and transitioning from programmatic L&D to a learning organization. Let s look at each of these pieces in a bit more detail. Many companies lump the measurement and development conversation into one, but this is highly problematic. In a performance evaluation, employees expect to hear whether they ve received a compensation adjustment or a bonus. The focus remains on this part of the conversation, despite the fact that development feedback is arguably more critical for business success. Describing Google s decision to separate evaluation and development conversations in his book, Work Rules, Laszlo Bock writes, intrinsic motivation is key to growth, but conventional performance management systems destroy that motivation. Almost everyone wants to improve. Traditional apprenticeship models are based on this notion But to introduce extrinsic motivations, such as the promise of promotion or a raise, and the willingness and ability of the apprentice to learn starts to shut down. 3

5 The true objective of performance management is to enable employees to do their best work in the future. Yes, documentation is required for compliance reasons. But the bottom line is to help employees get better. Your opportunity is to support a culture of learning and to put performance data into their hands. Your opportunity is to support a culture of learning and to put performance data into their hands. By creating a culture of learning, you encourage employees to adopt a growth mindset. Stanford psychologist Carol Dweck first introduced this concept in her book Mindset: The Psychology of Success. Dweck contrasts a growth mindset, the belief that skills can be cultivated through effort and challenges, with a fixed mindset, the belief that people s abilities are predetermined at birth. Most forward-thinking companies have adopted belief in the growth mindset, and research published in the Harvard Business Review found that growth-mindset firms have happier employees and a more innovative, risk-taking culture. Adopting the Employee-Owned Development Model Another shortcoming of the traditional approach to performance management is that there s no clear next step for anyone. put in considerable time and effort to conduct performance reviews and identify their direct reports strengths and weaknesses. But what comes next? What should employees do with the knowledge they gain during the review process? In most organizations, the onus falls entirely on the manager to identify and recommend development opportunities that are customized to each one of their direct reports. It s easy to see why this doesn t happen managers are already stretched thin by the process of conducting performance reviews and many don t have the time or knowledge to create customized development plans. 4

6 But there s hope! There s one party that does have the time and inclination to pursue development opportunities: the employee in question! At Zugata, we advocate for the employee-owned development model, where employees are empowered to own their development plans and these plans are independent of their eligibility to receive a promotion or raise. We believe that most people genuinely want to do their best; they just need a little support to help them understand which resources are available to them and what will best help them focus on their skill and knowledge gaps. (We ll cover this in more detail in Part 2: Performance Development if you d like to skip ahead to that section.) Reflecting the Way Modern Teams Work There s another shortcoming of the traditional approach to performance management we d like to address: It assumes there s a very structured approach to goals and team organization. The trouble here is that it doesn t reflect the modern way of working. Hierarchical structures and cascading goals don t suit the modern workplace, where pivoting is frequent and networked teams are the norm. How we work has changed, but the way we measure it hasn t. The performance measurement system you use needs to help you drive performance (not just measure it). It s time to evolve the process to be something more meaningful. The purpose of this Buyer s Guide is twofold: 1 To share a forward-thinking approach to performance management 2 To help you define how your performance management solution can create a high-performing culture at your organization Let s get started! 5

7 PART 1: Performance Measurement Performance measurement, to put it simply, is the practice of asking, How is this person doing so I can compensate them appropriately? As we mentioned earlier, many companies struggle with this aspect of performance management, and some have gone so far as to throw the review process out entirely. Let s be clear: At Zugata, we don t advocate this approach. You will always need to have a clearly defined, objective process in order to ensure fairness. However, rather than measuring skills, forward-thinking companies are looking at ways to measure employees impact. 6

8 The Essential Features for Performance Management There are many layers of complexity to this process, so let s take a look at the essential features to consider when evaluating performance measurement solutions. What are the features? Who benefits from it? Why do we need it? Out of the box templates HR/administrator Templates ensure consistency, mitigate bias, and make reviews more objective (see sidebar for more info on bias in the review process) Flexibility to customize templates HR/administrator Different teams have distinct needs. Flexibility built into the system keeps the admin and managers happy HR/administrator Having the ability to filter based on departments, levels, and other criteria lets you tailor reporting to your exact specifications HR/administrator Users only see what s relevant to them. Sensitive data is only accessible to those who need to see it HR/administrator No one likes to chase people down to get them to submit feedback. A system that automatically reminds people will take that on for you! Dossiers collect information on any given employee and present it in context so managers get a holistic view of their direct reports contributions and performance Providing flexibility around when managers request feedback on their direct reports helps ensure managers get information when it s most relevant and meaningful from the right people Reporting on the backend Robust roles & access controls Auto reminders Dossiers on direct reports Feedback about direct reports 7

9 What are the features? Who benefits from it? Why do we need it? Priorities often shift in the modern organization, but it s helpful for managers and employees to have a place where they record, update, and reflect on goals and goal progress Notes Some information that comes up during check-ins may not be feedback per se, but something that a manager or employee might want to refer back to at a later date Plug-in HR/administrator Gives everyone the ability to request or give feedback, take notes, and review goals all without leaving their inbox and interrupting their workflow Self-reflection template Provides a framework for meaningful manager/employee conversations that focus on the employee s strengths and impact HRIS Integration HR/admin Ensures that all employee data automatically remains up-to-date with your company s HRIS Goals BIAS IN THE REVIEW PROCESS There are a number of ways bias can play into the review process. Central Tendency Error refers to the fact that when given a five-point scale, people tend to rate everything (and everyone) in the middle. Another common bias is when a manager assesses an employee against their own skillset rather than the employee s true strengths and weaknesses. One study found that 62% of the variance in manager ratings could be accounted for by individual raters peculiarities of perception. Finally, recency bias means that managers tend to rate someone against how they performed recently rather than the full length of time they re being evaluated for. Look for a performance measurement solution that offers templates to help you mitigate these forms of bias. 8

10 PART 2: Performance Development Performance development is the practice of asking, How can we help people do their best? As we ve mentioned above, the traditional approach focuses this discussion around a fixed-cycle performance review. In the fast-paced modern workplace, this timeline just doesn t make sense. shouldn t have to wait until the next review cycle to learn what to focus on they should have the ability to get feedback and act upon it on an ongoing basis. Separating development goals from measurement and compensation conversations is a hallmark of high-performance cultures. When goals are tied to compensation, people will aim low to ensure they can meet them, or hesitate to reveal areas of weakness to their manager for fear that it will hurt their chances of receiving a raise. But when goals are part of a culture of growth, employees can aim as high as they want and honestly discuss weaknesses and skills gaps with their manager. 9

11 The Essential Features for Performance Development Let s look at how performance development solutions can help you create a culture of learning and growth. What Who Why are the features? benefits from it? do we need it? Distinct components of development and measurement/compensation Removing compensation from development conversations promotes a growth mindset (see sidebar for more info on this) Templates for feedback HR/administrator Structured framework helps ensure feedback is useful and actionable Private feedback Maintains emphasis on growth and development Cards prompt coworkers to give feedback that ties directly to the skills needed for an employee s role, their specific company culture, etc. These provide a clear picture of your strengths, areas to improve, and your progress over time Skills cards Personalized performance dashboards WHAT IS A GROWTH MINDSET? Stanford psychologist Dr. Carol Dweck has done extensive research on the growth mindset. It turns out that it s not just a state of mind. When people face a failure or challenge with a growth mindset, their brain is actually lighting up as it actively looks for solutions and searches for ways to process the error, learn from it, and correct it. (This is in contrast to the low brain activity displayed by people with a fixed mindset who attempt to avoid the problem altogether.) Through her research, Dweck has discovered that the right type of feedback can encourage a growth mindset. Rather than praising someone s intelligence or talent, she recommends praising their process the effort, strategy, or perseverance they display when attempting to solve a problem. 10

12 What are the features? Who benefits from it? Why do we need it? Recommended resources This removes the burden from managers to look for and suggest customized development opportunities and makes it easier for employees to take the next steps after receiving feedback Reciprocity & stickiness built into the system HR/administrator You have to give to get approach encourages participation and increases company-wide adoption Feedback requests sent automatically Frees up time and avoids those awkward Will you give me feedback? conversations. Also ensures that employees get feedback from the people they work with most closely Manual feedback and feedback requests Provides the opportunity for employees to give or ask for feedback from anyone, at any time Checks built into the system HR/administrator Ensures that employees don t get bombarded with requests and they never have to give feedback to the same person consecutively Aggregate, anonymized data reports Provide overview of a team s overall strengths and areas for improvement HOW DO YOU KEEP PERFORMANCE EVALUATIONS OBJECTIVE? When asked to rate an employee s skills, most reviewers are biased by their own skillset. According to research published in the Journal of Applied Psychology, these personal biases account for 62% of the variance in ratings, and actual skills account for only 21% of variance. So what s the key to better feedback? Ask about feelings and intentions, since people tend to be much more consistent when answering these types of questions. Examples include, Given what I know of this person s performance, I would give them the highest possible compensation increase or This person is ready for a promotion today. 11

13 PUTTING IT ALL TOGETHER: Building Your Own High-Performance Culture You ve seen the numbers on traditional performance reviews and why they re so unsatisfactory. You re familiar with the research on evaluations and realize the shortcomings of many of the existing systems. And you understand the importance of encouraging learning and growth and having those pursuits separated from employee compensation and other performance measurement practices. In other words, you now have the tools you need to create a high-performing culture at your organization. 12

14 We realize this is a lot of information to digest, so in this section, we ll provide you with a framework to show you how these different best practices can be implemented in your organization. We recommend thinking about measurement and development in four main categories: Evaluations measure individual employee performance overall, and we recommend conducting these on a semi-annual basis. Goals help employees focus on a few activities that will have ongoing impact. We recommend setting these on a quarterly basis at the beginning of each quarter. Check-ins promote dialogue around an employee s progress on their goals, and we recommend holding these on a quarterly basis at the end of each quarter. Development is supported by feedback from the coworkers an employee works with most closely, and we recommend collecting and sharing this feedback on an ongoing basis. Q1 Q2 Q3 Q4 Evaluations Goals Check-ins Development 13

15 Performance Management Software Features Checklist Ready to shop for your next performance management solution? This checklist outlines the essential features to look out for. We ve gone ahead and filled out the portion about Zugata for you, but we encourage you to print out a copy and bring it along to your conversations with vendors. If you d like to discuss anything with us in greater detail, don t hesitate to get in touch! 14

16 Performance Measurement Features Checklist Performance Measurement Features Templates Ensure consistency, mitigate bias, and make reviews more objective Customizable questions and feedback modules Adapts to individual manager and team needs Backend reporting Ability to slice and dice data depending on your specifications Robust roles & access controls Ensures users only see what s relevant to them Auto reminders Removes burden from HR to follow up or request participation Dossiers Collect and present employee information in a holistic format Zugata Manager-requested feedback Gives managers the chance to gather relevant,timely info from those who work closest with their direct reports Goals Record and track employees progress toward objectives Notes Collect and store information that may not easily fit into other categories Plug-in Allows people to request or give feedback, take notes, and review goals without leaving their inbox Self-reflection template Provide framework for manager/employee conversations that focus on strengths and impact Copyright 2017 Zugata Inc. Notes

17 Performance Development Features Checklist Performance Development Features Separate performance development and performance management/ compensation components Zugata Encourages ambitious goal-setting, promotes growth mindset Templates for feedback Provides structure, mitigates bias Private feedback for employees Focus on development, removes growth from compensation discussions Skills cards Ensures feedback is useful, consistent, and tied to skills needed to perform job Personalized performance dashboards Shows employees where their strengths are and where to focus their efforts Recommended resources Removes burden from managers to find development resources; helps employees own their development Reciprocity & stickiness built into system Increases adoption and regular use Automatic feedback requests Saves time and increases adoption and regular use Checks built into the system Avoids repetitive feedback, maintains employee goodwill in feedback process Aggregate, anonymized data reports Helps managers see big picture of their team s strengths & weaknesses Copyright 2017 Zugata Inc. Notes

18 Zugata is Performance Management Software for high-performance cultures Zugata is Performance Management Software for high-performance cultures. It is the only solution that enables both performance evaluation and performance development, driving performance forward and impacting your company s bottom line. Our robust platform accelerates employee performance by using sophisticated algorithms to gather continuous feedback, enabling meaningful check-in conversations, and delivering personalized resources to help employees advance their skills. Over 1,000 companies like Lyft, Gusto, and Greenhouse use Zugata to accelerate employee performance. Join them and create a high-performance culture at your organization. Learn More Empowering employees to reach their potential Copyright 2017 Zugata Inc.