Is This the End of the Road for Traditional Performance Management?

Tim Payne, Partner, Global Center for HR Transformation, KPMG in the UK

The year 2012 was when the knives really came out for the traditional annual performance process, and associated aspects such as the 9-box, and in particular forced ranking. Tellingly, a fair number of these knives were wielded by HR commentators and practitioners, rather than those outside the HR profession. Statements were made along the lines of “the annual appraisal demotivates employees.” Experience of our clients and within KPMG also suggests that the “classic” approach does not always have the effect intended. It’s a more than legitimate question to ask whether your performance management process is an exercise in compliance and form-filling, or a genuine tool to align performance to strategy and build engagement and motivation.

At the same time, there is a growing buzz about a different approach to performance management that involves various combinations of:

  • A “social” approach
  • A more time-flexible, project or customer-focused approach
  • A real-time emphasis on feedback and recognition
  • A nod toward the growing importance of internal/external online reputation.

Where is the buzz coming from?

A number of places. First, HR systems vendors – no product release is complete without integrated social features, and it is known that talent suites including performance management are the hottest of hot product sectors. They are reacting to a perceived shift in the workforce (Millennial, always on, on-line, collaborative, social, connected workforce), and taking advantage of huge expectation for consumer-standard user experience and the ability to share.

Second, some high-profile organizations have moved away from classic performance management, or announced they will. Facebook is the best known having implemented Rypple, which was then bought by Salesforce.com and rebranded as work.com. Work.com picks up most of the features listed above. You can get an overview of how Facebook is using work.com here. Motorola Solutions recently announced they are abandoning the annual appraisal.

Unsurprisingly, the early adopters seem to be the high-tech businesses where everyone is glued to a laptop and very into social networks.

Third, a legitimate concern in some organizations is that the annual appraisal process has become an exercise in process compliance rather than a genuine tool for driving better, more aligned performance, and more engaged and satisfied workers.

Four elements of the new approach to performance management:  [infographic]

  1. A social approach. Social performance management systems like work.com (and Workday, Oracle Fusion, SuccessFactors, PeopleFluent with SocialText and SilkRoad) enable the setting and sharing of team goals, linked to a particular program or sales account. Individuals on the same team can see each other’s goals, and can ask for and provide feedback on those goals. Some offer integration into an internal social network, e.g., sales chatter for salesforce.com, or other system such as Yammer, so people can share their goals more widely if they choose.
  2. A more flexible approach. Rather than set objectives, and then revisit them once or twice a year, these systems encourage setting objectives around key projects, and then setting new objectives when the next project starts. At the end of the year, all of the progress rating, feedback, etc. is collated in one place.
  3. Real-time feedback and recognition. These types of systems allow individuals to ask for and receive feedback in the moment. They also allow managers to recognize people in the moment, either through praise or “points,” which in some systems automatically flow through into real items such as Amazon credits. Some systems build in an element of gameification to encourage the giving of feedback, and a feedback culture. Facebook has integrated work.com with the compensation module of workday so performance ratings flow through into compensation modeling.
  4. Reputation. The Silicon Valley thought leaders talk about the increasing importance of your online reputation. Some are starting to think that, particularly for knowledge organizations, internal online reputation, or a combination of internal and external online reputation will be the greatest indicator of your performance and value to the business. The wisdom of the crowd should identify those who are truly adding value. So the number of times you give feedback online, the number of “thanks” you get, the number of “likes” your articles and posts receive, the number of re-tweets, the number of connections you have – all are quantifiable, and indicators of your worth in a connected workplace. One future scenario has this concept replacing performance appraisal, although most companies are certainly not there yet.

Challenges

To make any of this work, organizations need to use a certain amount of technology, but also a lot of work on culture and mindset. For many U.K. and European companies, some or all of these features would represent a very different way of managing people. There is also the need to somehow link performance to pay, and while many are saying they are doing away with the annual appraisal, this can be taken to mean they are focusing much more on ongoing objective setting, feedback, and recognition, but are still having something at the year-end to assign an overall rating that links to the pay round, i.e., they are not doing away with the annual process at all. It also makes sense to challenge whether such a fluid approach to performance management is right for your particular company, industry, or workforce. It most likely will not work for everyone.

KPMG’s own adoption of the new approach

At KPMG, a new performance management system (on SAP) has just been launched alongside a big campaign to shift our employees’ behavior from “performance management” to “performance development.” KPMG is also piloting features that are called “spontaneous feedback,” which encourage (through game mechanics) people to provide feedback to others and enter into a dialogue about that feedback. If the recipient chooses, he or she can save the conversation to his or her performance record.

Hear more about issues related to Human Resources by visiting KPMG’s HR Center of Excellence and by listening to the KPMG Advisory Institute podcasts Data-Driven Human Resources, Eradicating the Stigma: HR’s Future, and Rethinking Human Resources in a Changing World.

 



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