In a series of four articles on Consultancy.uk, Angel Hoover, EMEA Regional Practice Leader Talent Management & Organizational Alignment at Towers Watson, reflects on key trends and developments in the human capital space. In her first article Hoover discussed some fallacies around performance management, while this article will explores the more practical side of the debate – what to do with all of these insights, and how should they impact technology and systems.
For me, it comes down to asking two questions:
- What is the impact our system needs to make on managing performance?
- How can we make the process more efficient and effective in making that impact?
I have been working recently with a global financial services organisation with a great external brand, for both consumers and employees. However, they do not have a reputation for growing and developing talent. As a result, they have experienced some difficulty attracting newer generations to their workforce and been ineffective in managing out poor performers. Because of this, leaders made the decision to evaluate performance, career and talent acquisition programmes to determine what changes needed to be made to meet the evolution of the impact they want these programmes to make on attracting, developing and retaining talented employees.
The former system was a pure measure of what an individual was delivering on an annual basis to the organisation and its link to overall business objectives. Traditional backward looking metrics of what an employee delivered. With the new system, there is an additional measure of competencies; how one delivers against those objectives has become equally important in the evaluation process. For some of you, this additional facet of the system is evolutionary. For others, this has been in place for some time. The final, more revolutionary aspect of their new design, is assessing how much an individual has developed these competencies over the course of the year – and tying pay to it! Thus, they are impacting not only the performance one is delivering during the year, but also tying a reward to the observable development of competencies critical to performance. Under this scenario, employees and managers become much more motivated to have development discussions.
To be effective, this requires capable managers. They must be equipped with the right capabilities and tools to facilitate meaningful development and career discussions. According to Towers Watson’s most recent Global Workforce Study, career growth and advancement is one of the top three drivers of attraction, engagement and retention globally. It doesn’t matter whether you have a performance management system with a 5-point rating scale or have gone “ratingless”. Managers need to be effective at having these conversations and in fact, it becomes a prerequisite for a ratingless system because the focus shifts to forward-looking development and career. This type of conversation tends to have far fewer guidelines, so less confident or capable managers struggle with one key facet of employee engagement and retention.
On the efficiency side of the equation, a couple of sustainable developments have appeared. The first is simplifying the number of goals or objectives that individuals need to define at the beginning of the performance year. The key is to focus on a few meaningful contributions that will truly drive value into the business, and her or his team. Abolish the systems that require an individual to define two to three goals across four or more categories. Focus!
The second is to streamline the calibration process. I am a proponent of the calibration process because I feel that this discussion ultimately becomes an organisation’s talent review, which many organisations only seem to allocate time for during the end-of-year processes. However, the recommendation here is to focus on the segments of the population that are critical to your business (delivering competitive advantage to the organisation), high performers and your high potentials. Limit the time you are spending on the solid middle of the organisation. Pay and treat the solid middle fairly, but spend the majority of the leadership’s time discussing career and development opportunities on those critical segments that deliver strategic and competitive advantage.
Make no mistake, I’m definitely in the camp for evolving the performance management system and processes. I may even be in the camp of revolutionising the programme. But I absolutely believe that managing employee performance is a critical aspect of delivering financial, business and shareholder value. Which is value captured through HR programmes. In order to achieve this, we need to be bold about challenging the status quo and ask ourselves the important questions. The media has given us a burning platform for change, so grab it if you find yourselves unable to satisfactorily answer the questions on impact, effectiveness and efficiency questions, as well as agreeing with the headlines you are reading.