Why Are Companies Moving to Continuous Performance Management

Since the COVID-19 pan­dem­ic, con­tin­u­ous per­for­mance man­age­ment has expe­ri­enc­ed a new rev­o­lu­tion. Com­pa­nies are now re-eval­u­at­ing more than ever before on how they con­duct per­for­mance dis­cus­sions, their atti­tude toward Objec­tives and Key Results (OKRs) and how the annu­al appraisal process has impact­ed employ­ee engage­ment and com­pa­ny cul­ture.

Agile busi­ness­es around the world have come to recog­nise that the tra­di­tion­al annu­al appraisal has a lot of inher­ent flaws and is no longer viable in the mod­ern world. They are turn­ing instead to con­tin­u­ous per­for­mance man­age­ment (known to some as agile per­for­mance man­age­ment), a grow­ing trend in human cap­i­tal man­age­ment.

Below we'll explore what con­tin­u­ous per­for­mance man­age­ment is, why com­pa­nies are over­haul­ing their per­for­mance reviews and how con­tin­u­ous feed­back can add real val­ue to your bot­tom line. We'll also look at which con­tin­u­ous per­for­mance man­age­ment tools can be used to make the tran­si­tion smooth and effortless.

What Is Con­tin­u­ous Per­for­mance Man­age­ment — Explained

Con­tin­u­ous Per­for­mance Man­age­ment in a human resource (HR) man­age­ment con­text is defined as per­for­mance man­age­ment process­es that take place through­out the year on an ongo­ing basis. It is a con­tin­u­al, holis­tic process, as opposed to those based on a tra­di­tion­al, one-off annu­al appraisal.

As feed­back occurs more often, it becomes nat­ur­al for both the man­ag­er and the employ­ee to devel­op a healthy, trust­ing and authen­tic work­place relationship.

These process­es include near-term objec­tives and goal set­ting, reg­u­lar one-to-ones (or​"check-ins") and real-time feed­back.

Why Is Now the Time for Con­tin­u­ous Per­for­mance Management?

Man­age­ment thought lead­ers such as the CEB have long been advo­cat­ing that per­for­mance man­age­ment should be part of man­agers' every­day role and that once or twice-a-year appraisals are not enough to be an effec­tive use of time.

But it's no longer just aca­d­e­mics who think this. 95% of man­agers are not sat­is­fied with their organisation's annu­al per­for­mance man­age­ment process, and 75% of employ­ees see year­ly reviews as unfair. Anoth­er study has found that only 8% of com­pa­nies believe that their tra­di­tion­al per­for­mance man­age­ment process dri­ves busi­ness val­ue.

When look­ing for an alter­na­tive to annu­al appraisals, con­tin­u­ous per­for­mance man­age­ment is a solu­tion that com­ple­ments and sup­ports the pace of mod­ern business.

Aside from the fact that more and more com­pa­nies are turned off by the inef­fi­cien­cies and lim­i­ta­tions of their tra­di­tion­al per­for­mance man­age­ment process­es, there are many rea­sons why now is the best time to tran­si­tion to a more con­tin­u­ous process.

Mod­ern busi­nesses are fast-paced, and with the COVID-19 pan­dem­ic com­ing into the mix, com­pa­nies face unex­pect­ed pres­sures and obsta­cles dai­ly, and they need a per­for­mance man­age­ment sys­tem that accom­mo­dates this real­i­ty. Busi­ness­es need to be agile to thrive and com­pete. They need employ­ees who are empow­ered, con­nect­ed and able to take own­er­ship over their work. Con­tin­u­ous per­for­mance man­age­ment encour­ages this by pro­vid­ing instant com­mu­ni­ca­tion, strength­en­ing rela­tion­ships through trans­par­ent dia­logue and giv­ing employ­ees auton­o­my and inde­pen­dence — some­thing that great­ly appeals to the mod­ern Mil­len­ni­al work­force.

Who Has Adopt­ed Con­tin­u­ous Per­for­mance Management?

There are a num­ber of notable com­pa­nies who have decid­ed to adjust their per­for­mance review process to get the most out of their work­force. Below is a small selec­tion of con­tin­u­ous per­for­mance man­age­ment case stud­ies that have suc­cess­ful­ly made the tran­si­tion.

Adobe Inc

Adobe Inc was the first well-known organ­i­sa­tion to adopt con­tin­u­ous per­for­mance man­age­ment when they ditched their annu­al appraisal process back in 2012 in favour of​"check-ins" and fre­quent feed­back. Adobe worked hard to embed this new approach into their cul­ture, and that work has paid off with vol­un­tary turnover decreas­ing by 30% since they intro­duced check-ins.

Cargill Inc

US food pro­duc­er and dis­trib­u­tor Cargill also trans­formed their out­dat­ed per­for­mance man­age­ment process in 2012, launch­ing​"every­day per­for­mance man­age­ment" instead.

The com­pa­ny got rid of their annu­al review forms and per­for­mance rat­ings and instead encour­aged man­agers to have reg­u­lar, on-the-job con­ver­sa­tions and give fre­quent, con­struc­tive feed­back. They too have seen remark­able results with 70% of their employ­ees now indi­cat­ing they feel val­ued due to their ongo­ing per­for­mance dis­cus­sions with their man­ag­er — a mas­sive improvement.

More recent­ly a num­ber of lead­ing, glob­al organ­i­sa­tions have imple­ment­ed con­tin­u­ous per­for­mance man­age­ment, includ­ing Deloitte, Microsoft, IBM, Accen­ture and most famous­ly, Gen­er­al Elec­tric, who had pre­vi­ous­ly pio­neered annu­al appraisals and rank­ings.

What Are the Tan­gi­ble Busi­ness Ben­e­fits and Out­comes of Reg­u­lar Check-Ins?

There are many sta­tis­tics and case stud­ies to back up the effi­cien­cy of con­tin­u­ous feed­back and its impact on employ­ee per­for­mance, employ­ee devel­op­ment and retention.

Research has found that over 50% of com­pa­nies that review goals each month are in the top quar­tile in terms of finan­cial per­for­mance, where­as only 24% of com­pa­nies that re-eval­u­ate goals once a year made it into the same brack­et. It has also been shown that com­pa­nies who man­age objec­tives quar­ter­ly gen­er­ate 30% high­er returns than organ­i­sa­tions who address them annually.

Fre­quent feed­back is now being labelled the​"killer app" and has been shown to boost per­for­mance by up to 39%. A study by Gallup has also found that employ­ees whose man­agers hold reg­u­lar one-to-ones with them are almost three times as like­ly to be engaged. Fur­ther­more, as men­tioned pre­vi­ous­ly, after tran­si­tion­ing to agile per­for­mance man­age­ment, Adobe saw a remark­able 30% drop in vol­un­tary turnover.

Impor­tant­ly, more con­tin­u­ous per­for­mance reviews can actu­al­ly save your com­pa­ny time and mon­ey. Annu­al reviews take a sub­stan­tial invest­ment when it comes to man­age­ment hours and form-fil­l­ing. Because they try to accom­plish too much in one sit­ting and because they are so dread­ed by every­one involved, they end up being unpro­duc­tive and, ulti­mate­ly, a waste of time.

What Is Stop­ping Com­pa­nies From Using Con­tin­u­ous Per­for­mance Management?

Giv­en all the clear ben­e­fits of con­tin­u­ous per­for­mance man­age­ment, why haven't all com­pa­nies made the tran­si­tion? Why are some com­pa­nies still hold­ing onto their annu­al appraisals?

At Clear Review, we ran a poll to find out.

We dis­cov­ered 60% of our par­tic­i­pants were hold­ing back from con­tin­u­ous reviews because they were wor­ried about encour­ag­ing man­agers to have more mean­ing­ful con­ver­sa­tions. This is an under­stand­able con­cern — the last thing you want is to have more mean­ing­less meet­ings wast­ing time in your organ­i­sa­tion. This is why we rec­om­mend giv­ing man­agers appro­pri­ate train­ing and guid­ance, so they know how to con­duct one-on-ones effec­tive­ly. Man­agers can also be giv­en a one-on-one meet­ing tem­plate to ensure a pro­duc­tive coach­ing and feed­back session.

Is There Still a Place for Annu­al Per­for­mance Reviews?

Most organ­i­sa­tions that we speak to embrace the con­cept of con­tin­u­ous per­for­mance man­age­ment, but many ques­tion whether they should still be doing annu­al per­for­mance reviews. Our view is that annu­al reviews are, in most cas­es, an unnec­es­sary bureau­cra­cy.

Per­for­mance man­age­ment is ulti­mate­ly about sup­port­ing employ­ees to per­form to their high­est poten­tial, and this can­not be achieved through an annu­al per­for­mance review. Hav­ing reg­u­lar, future-focused check-ins and giv­ing fre­quent feed­back are proven to be the best way of improv­ing an employee's performance.

For some organ­i­sa­tions, this may leave the ques­tion of how they can col­late the per­for­mance and tal­ent data they need to make deci­sions about pay and pro­mo­tions. Organ­i­sa­tions like Deloitte have addressed this by peri­od­i­cal­ly ask­ing man­agers a small num­ber of per­for­mance and tal­ent-relat­ed ques­tions about each of their team mem­bers. If man­agers are hav­ing reg­u­lar check-ins with their staff and see­ing feed­back about them through­out the year, then they can answer these ques­tions with­out the need for a lengthy appraisal dis­cus­sion. We have adopt­ed this same process for our own Clear Review Per­for­mance Man­age­ment Soft­ware.

How to Imple­ment Con­tin­u­ous Per­for­mance Man­age­ment into Your Company

If you're look­ing for prac­ti­cal tips on how to tran­si­tion to con­tin­u­ous per­for­mance man­age­ment, we can help you with this organ­i­sa­tion­al change. It all starts with get­ting your lead­er­ship and man­age­ment team on the same page — they will need to under­stand and buy into the ben­e­fits offered by agile per­for­mance man­age­ment. The appro­pri­ate train­ing is also a neces­si­ty — man­agers need to know how to give effec­tive, moti­va­tion­al feed­back dur­ing employ­ee on-to-ones.

For a more in-depth, step-by-step process, we have a guide on how to imple­ment con­tin­u­ous per­for­mance man­age­ment.

What Is the Role of Con­tin­u­ous Per­for­mance Man­age­ment Software?

To be effec­tive, con­tin­u­ous per­for­mance man­age­ment needs to be col­lab­o­ra­tive, fre­quent and take place in real-time rather than ret­ro­spec­tive­ly. It also needs to be mon­i­tored to ensure it is being car­ried out effec­tive­ly. Con­tin­u­ous per­for­mance man­age­ment soft­ware aids this by enabling:

• feed­back to be giv­en "​in-the-moment" rather than delay­ing this until the next one-to-one

• action points from check-ins to be cap­tured and fol­lowed up, rather than being not­ed down in a book and for­got­ten about

• objec­tives to be set col­lab­o­ra­tive­ly. They also need to align with organ­i­sa­tion­al goals and be reg­u­lar­ly updated

• progress and obsta­cles to be cap­tured as they happen

• reminders to be sent auto­mat­i­cal­ly to those who have not had a check-in or giv­en feed­back recently

• HR to have vis­i­bil­i­ty of how often check-ins are tak­ing place across the organ­i­sa­tion and how fre­quent­ly feed­back is being given

• HR to col­late per­for­mance and tal­ent data with­out hav­ing to car­ry out for­mal per­for­mance appraisals.

Busi­ness is always chang­ing, and tech­nol­o­gy is always evolv­ing … but when was the last time you made a sig­nif­i­cant change to your per­for­mance man­age­ment sys­tem? Organ­i­sa­tion­al change might not be quick and sim­ple, but it is cer­tain­ly nec­es­sary to keep your busi­ness thriv­ing long into the future.

Take your first step today with Clear Review and book a free per­for­mance man­age­ment soft­ware demo with us today.

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Source: https://www.clearreview.com/resources/guides/continuous-performance-management

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