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ABSTRACT

Performance management is a critical Human Resources function. It impacts all areas of Human Resources, from recruiting, to training, to compensation, to termination. It is integrated throughout an employee’s lifecycle. Performance reviews and feedback are tools that have been utilized in many organizations across many industries, for many decades. The traditional approach to performance management and its impact on engagement no longer serves a valuable purpose for many organizations. With changes in company expectations, employee expectations, the composition of the labor market and workforce, and generational differences, it behooves organizations to take a closer look at their performance management process and employee engagement levels to ensure it can continue to meet the needs of the business and remain competitive. The move from a traditional, stagnant approach to an agile continuous process is what will ensure companies gain or maintain a competitive advantage. Research is vast and continuous as the concept of frequent informal feedback sessions is beginning to take precedence as the effective method to improving performance. Many organizations have implemented new approaches, some industries are challenged by the adaption of new technologies, and others struggle with applying the right approach to their populations. With increased information on the topic, a move towards an agile performance management approach is inevitable. Many organizations have realized the benefits of redesigning their performance management systems, and others continue to work on improvements. Advantages, disadvantages, successes, challenges, future research and recommendations are discussed.

TABLE OF CONTENTS

ABSTRACT 2 I. CONCEPTS 4 II. HISTORY 6 III. RESEARCH 8 IV. PRACTICAL IMPLICATIONS 17 Successes 17 Challenges 20 V. FUTURE RESEARCH AND RECOMMENDATIONS 23 VI. CONCLUSION 29 REFERENCES 31

Performance management is a critical Human Resources function that every organization must focus on at some point during an employee’s lifecycle. Performance management is the continuous process of evaluating an employee’s performance, providing feedback, identifying position, department, and organizational expectations, effectively aligning those expectations with an employee's knowledge, skills and abilities, developing plans to achieve the expectations outlined and providing demonstrated results. Performance management is highly integrated with other Human Resources functions, such as training and development, compensation, succession planning, retention and engagement. It is the continuous practice of developing and managing talent so that it supports an organization's overall business goals and creates a competitive advantage. As business goals are created, updated, or modified, so should the goals and expectations of an employee’s performance. (Zeuch 2016, 81-85) Performance management is a tool utilized by both large and small organizations, in varying degrees and ways. The continued success of an organization relies on how well this management tool is implemented and supported.

In practice:

· Performance management consists in some companies as annual reviews, providing feedback on the past year’s performance and setting future goals with one year outcomes.

· Performance tools consist of electronic or paper appraisals.

· Knowledge, skills and abilities are assessed.

· Different rating forms are utilized and assigned:

· Absolute ratings for individual assessments.

· Relative ratings for comparative assessments.

· An overall performance rating may also be assigned, as well as individual skills and behavioral ratings.

· Feedback is provided on what was done well and what could be improved upon.

· Performance appraisals are also used as a tool to manage employees out of an organization, a way to document past performance that was not acceptable or did not meet expectations, identifying areas for immediate improvement, and following up with the employee within a specific time-frame to see if improvement has occurred.

· Feedback is not always a regular occurrence.

· Feedback may or may not be tied to department or organization goals.

· Goals from the previous year may no longer be relevant.

· Goals may not be achieved because focus is shifted to pressing new objectives.

· Annual rewards tied to performance may consist of annual salary increases or bonuses.

· Depending on the economy and the health of the organization, this sends a mixed message - low increases or small bonuses due to factors other than performance for individuals with outstanding performance sends the wrong signal.

Conceptually and practically, performance management has the ability to influence various aspects of an employee’s lifecycle and specifically an employee’s engagement. Engagement is critical to job success and high quality performance. Engagement is directly related to performance management as a factor that drives performance and employee success.

Engagement can be defined as physical engagement (related to the amount of energy put forth), emotional engagement (related to motivation and commitment), and cognitive engagement (related to intensity of effort). (Zeuch 2016, 114) From a business perspective, employee engagement is interest and motivation to work towards an organization’s goals. (Schönebeck J., Schönebeck M. 2016, 618)

Effective performance management and engagement alignment affect a company's competitive advantage and organizational success. Views of both performance management and its impact on employee engagement have changed throughout the years, and most recently in the last five years the approach to performance management has advanced beyond a traditional process.

The concept of performance management has been around since World War I when the military used a system to identify soldiers who were not good performers and would be discharged or transferred. Performance management continued to appear in research on organizational management of employee performance. Harvard Business Review outlines a history beginning with the 1940s, when “companies were using appraisals to document workers’ performance and allocate rewards”, through the 1960s, when development of employees came into focus and was future oriented, through the 1980s when employee forced ranking was reintroduced (since the Army’s forced ranking of soldier’s capabilities) and promoted by Jack Welch (employees were categorized and rewarded accordingly), through the 1990s, when McKinsey, due to a low supply of high performers, promoted reward for performance, through the 2000s, where the attention has turned to accountability, more frequent feedback and less formal annual performance reviews. Most recently, performance management has evolved to focus on career and performance development. Work has become more complex, organizations have become more team focused, numerical rankings are no longer welcomed/accepted and employees do not want to be minimized to a number. Technology has impacted the flow of knowledge and how work is accomplished; and, organizations need to adapt to keep up with changing times. Employees’ development and performance feedback needs to align with changing corporate culture and how organizations are creating or maintaining a competitive advantage. (Tavis, Buckingham, Goodall, McCord, & Harvard Business Review 2018)

Employee engagement also has a long history. The concept has been around since the 1920s and was related to employee willingness to perform in alignment with a company’s objectives. It also included the concept that an employee’s morale was a “predictor of unity of effort” ("Developing and Sustaining Employee Engagement" 2017) It was coined, and the term first introduced, by the Gallup Organization in the 1990s. (Schönebeck J., Schönebeck M. 2016, 618) The concept of employee engagement was influenced by Maslow’s notion that individuals “need self-employment and self-expression at work” and engaged employees were productive and more satisfied than disengaged employees. W.A. Kahn is noted as identifying three measurements of engagement: vigor, dedication and absorption. Vigor was defined as energy levels and devotion to performing a task (similar to physical engagement); dedication was defined as the level commitment through experiencing meaningfulness and fulfillment in one’s work (similar to emotional engagement); and absorption was defined as an immersion in one’s work, finding it difficult to step away (similar to cognitive engagement). An employee’s level of engagement on these three dimensions directly contributes to their work performance. (Dagher, Chapa, & Junaid 2015)

Employee engagement was considered an important “sub-concept of employee satisfaction” and research articles and consultant companies developed individual notions on, and definitions of, employee engagement, hence, many theories emerged. In the business world, it could be defined as an “emotional commitment” where employees care enough about their position and the company to work towards organizational goals. (Schönebeck J., Schönebeck M. 2016 617-618)

Performance management continues to be the tool with which organizations ensure their employees are able to help them gain or maintain their competitive advantage and remain successful. Performance management plays a strategic role in any organization. The approach to performance management, how it is utilized, the thought behind various approaches and implementations, has changed over the years. It has evolved over the last few decades and just within the last five years it has shifted its focus to being future-oriented and developmental. A successful organization is one that has created a competitive advantage and is able to successfully manage its talent.

A strategic performance management approach integrates various Human Resources activities with business objectives. A successful system’s objectives have roots in the traditional approach, but has expanded to support the current and future focus of performance management. Traditionally, performance management was not a developmental process, rather a system utilizing a form to provide feedback to employees. The historical view that performance management is necessary from an administrative perspective and for informational purposes is still relevant today. Administratively, performance review and feedback is necessary for making decisions related to compensation, promotions, transfers, terminations and reductions in workforce. It is also used to document performance supporting these types of decisions and defend against litigation or complaints. From an informational perspective, it provides employees with feedback on past performance and expectations and goals for future performance. The focus of performance management as it relates to current views includes strategic alignment of individual performance with critical business goals, regular feedback and coaching for developmental purposes, improving performance and keeping employees motivated and engaged, and workforce planning which includes training needs, talent inventories, reassignment, promotion and succession planning. (Aguinis 13-14)

In reviewing recent research, there appears to be certain aspects of performance management that has evolved, according to An Exploratory Study of Current Performance Practices. The research generally showed that:

1. The purpose of performance management has shifted from administrative, with generally higher ratings, to developmental which tended to provide lower ratings. Due to this contradiction in how ratings are applied, it has been recommended that the administrative and developmental purposes be addressed independently.

2. Ratings have different formats, this is important and the formats should support the purpose of the ratings.

3. Multi-source feedback should be used for feedback only, and specifically to address inconsistencies and agreement of ratings.

4. Behavior-based rater training has a positive impact on a company’s financials.

5. Performance management needs to be perceived as fair and employees should be active participants in the process to ensure and maintain this perception.

(Gorman, Meriac, Roch, Ray, & Gamble 2017)

Recent research also states that changes are needed in order to effectively develop employees, manage behaviors, and motivate high quality performance. The shift has occurred across many organizations - companies are replacing the annual performance review with frequent, regular feedback, both formal and informal. Harvard Business Review identifies that more than one-third of U.S. companies are “abandoning the traditional appraisal process.” (Tavis, Buckingham, Goodall, McCord, & Harvard Business Review 2018)

The annual performance review is a rear-facing view with limited value. Organizations are realizing that in order to manage talent and develop them for appropriate positions and roles, the focus needs to move to the present, and to improving current and future performance. (Tavis, Buckingham, Goodall, McCord, & Harvard Business Review 2018) Companies that are looking to succeed in the market, look towards the future with respect to organizational goals and objectives. Aligning this view with the approach to talent management ensures organizations continue to remain competitive. Cappelli and Tavis identify three main business reasons to move toward regular frequent feedback and abandon the annual performance review. One reason is the pressure to improve talent development. Some companies have shifted from numerical ratings for past performance to learning and development for future performance. An essential factor for improved development is frequent feedback. (Tavis, Buckingham, Goodall, McCord, & Harvard Business Review 2018) The second reason identified is the need for agility. The 21st century has seen continuous change in technology, innovation and business strategies. This ever-changing environment impacts how business goals are set, whether short-term or long-term, and how organizations plan to reach their goals. With employees being a main source of competitive advantage, changes to business cycles and goals need to align with practices of employee goal setting and feedback. While annual reviews may still be needed as a “summary discussion”, frequent discussions with employees addressing immediate performance and short-term goals is required in order to keep up with changing business needs. The third reason to move towards regular frequent feedback is the ability to promote teamwork. Many organization’s work lends to team environments and team-focused assignments and projects. Retail companies, like Sears and Gap, have incorporated a team-performance focus as part of performance management due to increased interaction between and among employees to manage inventory, customer needs, and customer satisfaction. (Tavis, Buckingham, Goodall, McCord, & Harvard Business Review 2018)

Employees help to create a sustainable competitive advantage and in order to develop employees who can produce this outcome, a performance management system must align the knowledge, skills and abilities needed with the organization’s goals. (Aguinis) Additionally, with the ever evolving global workforce and technology, organizations need to find ways to improve employee engagement, which is positively related to performance (Dagher, Chapa, Junaid 2015, 242) The overall decline in recent years of the traditional approach to performance management and the trend towards elimination of a ratings scale continues to be discussed in relation to engagement. The performance management process focused on ratings and force rankings is not motivating, nor does it lend itself to effectively evaluating and aligning employees’ skills and behaviors with a firm’s future goals and objectives. The research is mixed on whether doing away with ratings would be beneficial across the all companies and all industries. Dr. David Rock expresses that changing the performance management paradigm is key, and removing ratings and any documentation may not be practical for all. (Smolkin 2016, 18)

The concept of absolute ratings versus relative ratings is also considered in research.  Removal of ratings, as previously mentioned, may not make sense for all organizations or certain types of workforce. Absolute ratings are ratings of employees on an absolute standard which are typically behavior-based and rate employees on how often “employees performed specific behaviors associated with performance dimensions” or how well employees perform specific tasks or demonstrate required skills. (Roch, Sternburgh, & Caputo 2007, 303)  Relative ratings compare employees against each other, an example is the forced rating distribution mentioned above. These two approaches are very different from each other and have a different impact on employees. Research indicates that perception of fairness has less to do with the rating format, rather, it has more to do with transparency of the process and clearly defined expectations.  With that said, the perception of the absolute rating format can be seen as more fair than the relative rating process. The absolute process provides clear standards for which an employee must meet; the employee understands that if the expectations are met, his/her rating will be high or positive. This approach must be supported by ongoing and on-time feedback and strong and relevant goals; areas many managers may lack the skill to provide.  With a relative format, expectations may be clear, however, employees, while working to the best of their ability to meet standards, may not know where they stand with respect to how they will be rated in comparison to their co-workers. (Roch, Sternburgh, & Caputo 2007) It is a somewhat subjective approach, one not well suited for team-situated work. Furthermore, as team dynamics and members change, the comparison is adjusted and an employee who was at one time rated at the top of the performance scale, after a new comparison, may be rated lower. This comparison may continuously change and may not be perceived as a fair evaluation of one’s skills and abilities as required by the position. Each of these approaches may be better suited for certain workforce categories, such as organizations with a team-based approach versus an individualistic work approach.  A one size fits all approach with respect to how to rate employees is not realistic.  Research identifies recent trends for improving performance ratings. They include the use of calibration meetings, competency modeling, and multi-rater feedback. Multi-rater feedback is a rating system that appears to demonstrate the least amount of performance appraisal errors, including less bias and leniency, and more reliability. (Adler, et al. 2016) This rating system would lend itself well to performance and career development, while providing a review of past and current performance. An attempt to remove ratings altogether may not serve some organizations well, and perhaps, a look at blending the approaches may be a practical solution for organizations struggling with identifying the best approach.  Regardless which process or approach is used, any rating system must be supported by continuous feedback, coaching and development, in order for the entire process to be successful.

Another aspect that needs focus for an organization moving towards a change in its performance management system is culture. Culture is a factor that too must be considered as part of the shift to frequent feedback. Organizations with traditional cultures that have a history of only providing year-end performance reviews may find it difficult to move toward a new more informal structure. Organizations that are open to changing their culture to one that focuses on training and developing supervisors and managers to provide ongoing continuous feedback, and one open to supporting this process, will be one that succeeds and is able to maintain and even enhance its competitive advantage. Progressive organizations look to incorporate stretch goals and immediate feedback to improve performance. (Zenger 2017) A cultural shift in this respect will improve performance and engagement.

HR Solutions conducted a survey that revealed “69% of millennials see their company’s review process as flawed, and nearly 90% would feel more confident if they could have more frequent performance conversations with their manager.” (Smolkin 2016, 16) Clearly, we are a multi-generational workforce. However, this sentiment is held throughout all levels of employees of different generations. The business environment has changed and continues to change; millennials are growing up in non-traditional environments and older generations are needing to adapt. A direct result of these changes needs to be a new approach to performance management. Every business is different and, therefore, the approach to changing performance management will be different. Some organizations have aimed to reduce the administrative aspect of “documentation requirements” and “63% stipulated they now require less documentation and 30% eliminated documentation altogether.” (Smolkin 2016, 18)

How an employee’s talent is managed beginning as early as the onboarding phase impacts how the employee will perform, how the employee will view opportunities, and what will motivate the employee to remain engaged as a high performer, or disengaged and transition out of the company.

Organizations that have moved away from the traditional approach to performance management have recognized and realized the many advantages to implementing a system that is forward looking. Aguinis highlights numerous advantages to implementing a system that is continuous and aligned with organization goals. He states: (1) receiving regular feedback increases motivation, pride and confidence; (2) there is improved transparency and clarity in defined responsibilities; (3) employees are provided with development support, and the ability to understand where their strengths and weaknesses lie; (4) the process for compensation and promotions are perceived as fair; and (5) change in company objectives is facilitated by the alignment with performance management goals that support the company goals. These are a few of the advantages to a well implemented performance management system. The research regarding continuous and regular feedback further supports the advantages that can be realized here. (Aguinis, 4-8). Aguinis also outlines disadvantages to a performance management system that is not well implemented. The disadvantages are mainly the direct opposite of the advantages. For example, dysfunctional turnover may occur and high performers who are not provided with regular and transparent feedback and limited or no developmental tools may leave the organization; employees may be demotivated and less confident in their abilities, leading them to perform poorly; and time and money may be wasted on a poorly implemented process. Additionally, a poorly structured rating system and elimination of a formal annual evaluation summary may cloud or confuse how an intended positive message is received. The ultimate disadvantage to a poorly implemented performance management process is the impact it will have on the organization's performance, how it will meet its objectives and goals and remain competitive in the market.

Summary of the Evolving Performance Management Function

While the general concept of performance management has remained constant over recent years - a process of identifying and measuring performance objectives and goals - the approach to motivating high performance has advanced. Creating and maintaining effective performance management to ensure a competitive advantage is enhanced by employee engagement. Employee engagement has many layers to it, and a direct link between engagement and performance is that a motivation for employees to improve is directly related to their willingness to perform. Studies have indicated that only “one-third of American employees are fully engaged at work. Roughly half of American workers are “not engaged” and over 17% are actively disengaged” (Whittington, Meskelis, Asare, & Beldona 2017, 1) An employee who is willing to perform and is open to receiving feedback on his/her performance, will be motivated to continue to improve, thereby increasing their engagement. The historical work of Frederick Taylor is still meaningful today -- employees require feedback in order to perform well. Feedback leads to clear expectations and this clarity is one layer of alignment between performance management and engagement. (Dagher, Chapa, Junaid 2015) Improved engagement leads to supporting organizational business needs. Research indicates that engaged employees and the level of their engagement is directly related to performance and commitment to do well. Identifying meaningful goals, providing regular feedback, adjusting efforts and re-aligning objectives provides the tools that feed the process which links performance management to increased engagement. The employee, through an effective performance management process, will see the importance of, and have a line of sight in, the work performed and the impact on the organization’s goals and successes. Research suggests that “When properly implemented, an organization’s performance management processes contributes to a high-performance cycle that includes increased levels of commitment, satisfaction, and performance.” The correlation between performance management and engagement is significant and positive. Table 8.1, taken from research conducted and presented in Enhancing Employee Engagement An Evidence-Based Approach, demonstrates this strong positive relationship between engagement and performance management. (Whittington, Meskelis, Asare, & Beldona 2017, 85-87)

(Whittington, Meskelis, Asare, & Beldona 2017 87)

Many organizations have moved away from the traditional approach to performance management towards a more interactive, frequent, development-based approach. The talent philosophy that employees are an investment, coupled with ever changing business needs and continuously improving technology, has moved organizations towards changes in their performance management approach. In 2015, Deloitte, a top global business and professional services firm and leader in their industry, redesigned their performance management system. It estimated that it spent “Some 2 million hours...completing forms, holding meetings and creating ratings.” Deloitte announced it was changing its process from the annual review to more frequent and regular on-time performance feedback, and “[a]t the heart of the process are "check-ins": weekly, future-focused conversations in which team members and team leaders meet to align priorities for the next week.” (Reitman 2017) The industry took notice; Deloitte took a major leap forward in changing an archaic approach that held the company back from changing with the times, changing with the new generation entering the workforce, and changing with business needs. (Reitman 2017) Deloitte dissected its approach and identified where problems existed. They questioned “reliance on cascading objectives, backward-looking assessments, once-a-year rankings and reviews, and 360-degree-feedback tools.” (Buckingham & Goodall 2015) Deloitte understood it needed to change its approach to performance management, that was clear. Deloitte now needed to be committed to finding a solution to making the performance management process better, future-focused, all while engaging employees, keeping performance optimal, and continuing to realize financial gains. Not an easy task. Deloitte’s redesign included: (i) changing the measurement criteria; (ii) identifying objective raters, those outside of a role which creates subjective judgment; (iii) ensuring questions were both reliable and valid, and demonstrated a correlation with other outcomes, such as engagement; (iv) enabling optimal frequency of feedback, based on the project at hand; and, (v) being transparent in feedback and providing a full view of where an employee stands. (Buckingham & Goodall 2015) The change has had a positive impact and Deloitte continues to work on, and modify, the process to ensure continued success.

The need to adapt to change, especially with evolving technology, has required businesses continuously modify approaches in order to keep up with technology and their competitors. As business systems adapt, so does Human Resources need to adapt in order to support the changing business environment. In recent years, organizations have changed their approach, focus, and process. Agile companies quickly respond and adapt to changes in the environment, continuously evaluate needs and goal setting to align with business objectives in order to ensure employees know how they are performing, make necessary improvements to their performance and understand what goals need to be met in the short-term. The move away from long-term goals appears to be inevitable; with a multitude of projects of different lengths and expected completion dates spread throughout the year, the move away from annual reviews and yearly goals may make sense for some organizations.

Another example of an organization changing its approach includes General Electric (“GE”). GE has moved away from a top down approach to facilitating team project management.

Other organizations, such as Gap, Pfizer, Cigna, and P&G, have also moved to more frequent feedback. These companies have become more agile in their approach to all aspects of their business in order to maintain a competitive advantage. Agile organizations demonstrate certain characteristics, such as “course-correct(ing)” errors, enhancing performance and “learn(ing) through iteration.” P&G went a step further and in addition to moving away from a traditional performance approach they also focused on enhancing supervisor and manager coaching skills. The goal was to separate a new simplified performance discussion from career development discussions. Doing so allowed P&G to “free up a lot of time to devote to employee’s growth”. P&G’s culture was not an easy one to change and they spent many hours training supervisors on how to develop goals and set priorities, how to effectively communicate performance feedback, and how to support career goals so that they align with business needs. P&G “has reported improvement in these areas, at all levels of management”. (Cappelli & Travis 2018, 49-50)

Challenges

A shift from the traditional approach to performance management does not come without its challenges. First and foremost, Human Resources must support the shift. Resistance will not only prolong a process in change, but it will impact success. Human Resources systems were originally developed to support the annual process; with improved technology, organizations have the ability to better support frequent feedback. Additionally, risk averse organizations may find it difficult to move away from traditional processes, one that easily justifies employment decisions, and documenting all conversations and facts surrounding performance. (Tavis, Buckingham, Goodall, McCord, & Harvard Business Review 2018) Human Resources resistance to changing technology, specifically the move from internally supported systems to cloud-based software, may also be difficult to support. Risk averse companies will be particularly resistant to moving personal employee data from an internally controlled environment to the cloud. On a global level, regulations such as E.U.’s General Data Protection Regulation has been implemented and companies need to ensure that while managing the process for employee performance on cloud-based platforms they are also complying with legal regulations and data privacy laws.

While a change is required and desperately needed in some industries, certain industries may find it difficult to adapt. For example, work completed by tax accountants or physicians may not lend well to changes associated with agile practices, and the specific performance management approaches that work well in these specific areas may need to remain unchanged. Analytical professionals, including accountants, programmers and engineers may expect that their performance will be quantified with a numerical scale. Eliminating the rating scale may cause more confusion on how they are performing. (Reitman 2017)

Another challenge is training. Providing regular feedback in a meaningful way, separating performance, compensation, and development discussions, and moving from judgment to coaching, all require effective training and a supportive culture. Managers and supervisors will need significant training and support to change their mind-set and bring them to a place where providing regular informal feedback becomes second nature, and, understanding how to separate different conversations will become clear and easy to implement. (Cappelli & Tavis 2018)

Research demonstrates that companies have not always been successful with the changes they have made to their performance management system. CEB, (now merged with Gartner, a global research and advisory company) published a survey and found that “employee performance drops by around 10% when ratings are removed”, because of supervisor and manager inabilities to effectively communicate performance feedback. (Reitman 2017)

Further to addressing the challenge of ratings is the challenge of appropriately applying the correct rating approach - whether it be an absolute rating standard or a relative rating standard - to the performance appraisal.  Employees need to understand if they are performing well or what skills or behaviors they need to improve. Depending on the rating scale utilized, this feedback may not align with the type of work being performed or the setting in which it is being performed.  Employees rated using the relative rating approach may not fully understand how well they are specifically performing; they only know that relative to their co-workers they are either performing better or worse than others. If the group dynamics change throughout the year, it may not be an accurate approach to evaluating employee performance.  However, strong managers who are able to clearly communicate the approach to the ratings and identify and recognize true top performers, will create an atmosphere of transparency and perception of fairness. Companies using the absolute approach have set expectations and goals for individuals, and employees are able to easily measure their performance based on the objectives set before them.  It is therefore incumbent upon the manager to clearly set those expectations; and, poorly trained managers may not have the ability to do so. Organizations are challenged with determining the appropriate appraisal rating process to use for the appropriate population within their workforce. (Roch, Sternburgh, & Caputo 2007)

Furthermore, high performers may become non-committal or detached, quite the opposite from the goal of engaging employees with more frequent informal feedback. Additionally, research found that employees who are “not meeting expectations ‘may be flying under the radar.’” Research did find that successful performance management for those companies that eliminated the annual review included formal quarterly feedback meetings. The quarterly meetings became the regular performance meeting where employees received feedback, discussed goals, and understood expectations. (Reitman 2017)

Addressing these challenges will facilitate the exploitation of talent and an organization’s ability to create or maintain a competitive advantage.

Performance management has expanded and the practices needed to support this critical Human Resources function have become strategic in nature, aligning itself to business activities and goals. Research on the topic is vast and growing. Recommendations for future research include:

1. Improving upon data collection for effective performance management and engagement impact. Different industry research and results need to be obtained in order to have a population sample large enough to be able to provide valid research results that may be applied across all industries. Furthermore, engagement is measured generally through surveys. Employees are self-reporting which leads to results that may be bias in nature.

2. Consideration of cultural differences, various approaches and how certain Human Resources functions are intertwined and it impacts engagement. Research should focus on and consider companies within certain industries, that operate in different countries, with different cultures, and how they function differently. Categorizing results from these different populations to be able to generalize the impact, seems to be lacking in the literature.

(Dagher, Chapa, Junaid 2015, 248-249)

3. Focused research on employee engagement to help align what tools are needed to support changes in the performance management approach. Further research on why employees have different levels of engagement, such as, do employees experience different levels of engagement because of their company’s culture and environment, or because of the type of work that they perform, or are levels of engagement specific to the individual’s characteristics?

4. Whether a different performance approach or coaching approach impacts engagement and how. Whether the type of approach taken, and when and how often feedback is provided, may depend on an employee’s skill level or job level - do lower level jobs need more frequent feedback than senior level positions and what should that feedback look like? Does that feedback then directly impact performance and engagement?

5. Whether employee demographics such as age, ethnicity, tenure, or gender affect an employee’s engagement, how they receive feedback and how they implement changes to improve their performance.

(J. Schönebeck and M. Schönebeck 2016)

Based on research cited throughout this paper, some recommendations for organizations to help improve current performance management practices and enhance, generally, the approach to managing employees include:

1. A supportive change in the organizational culture. Employees need to experience and work in a culture that supports more frequent feedback, changing goals and timely review of performance. To this end, employees who embrace and implement frequent feedback and timely reviews, should be rewarded and recognized for their efforts. Support needs to start at the top; senior level employees must be advocates of change management and lead by example.

2. Adjusting the process to accommodate different types of jobs and the work that is associated with those positions (for example, sales vs manufacturing). Companies can create different feedback cycles, ones that align with initiatives specific to the group being evaluated and the specific work cycle. Feedback structure should be created to align with appropriate developmental goals. And, documentation should appropriately address the performance being managed, reviewed, and developed. Appropriately providing timely feedback allows employees to address current performance issues while developing future skills.

3. Improving and increasing training for supervisors and managers on how to provide feedback, when to provide feedback, how to provide future-focused feedback, and how to coach and develop employees. With the right training, supervisors and managers will be equipped to address performance issues, provide critical feedback, positively engage employees in future objectives and goals, and continue to keep employees committed and interested in their work.

4. Determining if the current performance rating system makes sense. Is an absolute or relative rating system more appropriate? Organizations should review their rating systems and determine if it continues to make sense. Should a blended approach be used? Should certain segments of the workforce utilize one system while others utilize the alternative? Additionally, if the performance management process is evolving, determine if the rating scale should be better defined, eliminated altogether, or utilized only annually.

5. Increase in employee engagement surveys - pulse surveys - opportunities for company to identify problem areas and improve in the short term. Increasing the frequency of soliciting feedback will help to manage employee expectations and will also help organizations adjust their approach.

6. A changed performance management initiative should follow a defined process when being implemented implementing. Organizations attempting to change their performance management approach should develop a strategic implementation plan.

a. Companies need to identify the design of the performance management process they wish to implement and their talent philosophy and human resources strategy should support it.

b. External research should be thoroughly completed to identify successful approaches as demonstrated in the company’s specific industry by looking at what other companies have implemented and what was successful and what was not.

c. Internal research should be conducted to identify high performers and outstanding management and teams. Identifying practices in place internally that are successful and can be integrated into a new performance management platform would help ensure future success across the organization.

d. Identify specifically what works for the organization by way of goal setting, feedback sessions, frequency of feedback, and frequency of documentation. Identifying and documenting current processes and how those processes need to change.

e. Create training programs centered around development and coaching that can be shared and deployed across the organization so that managers and supervisors are trained on the same content and a consistent message is sent across all areas.

f. Identify and document the connection between the new performance management platform and other areas of Human Resources including recruitment, rewards, compensation, promotion, succession planning and termination.

g. Determine how often to survey employees on their engagement levels to help understand if changes in project management and feedback are making a positive impact.

h. Identify software that will support all of the objectives established for a successful performance management platform.

i. Develop best practices based on successful deployment and outcomes. Best practices may include external practices utilized, but more importantly should consist of internal organization-specific practices.

Research has clearly demonstrated a strong sentiment to pull away from traditional performance appraisals towards a more agile performance feedback, coaching and developmental approach.  While many organizations are moving in this direction, it would be prudent for individual companies to assess the needs within their organizations to determine if a move in this direction makes sense for all employees or for only certain groups of employees.  Implementing the recommendations outlined above will help improve any performance management process and employee overall performance. All employees need some sort of recognition and acknowledgement for the work they accomplish.  A formal annual review should not be eliminated, rather supplemented, with ongoing and regular performance discussions. It is simply human nature to want to be appreciated and have an understanding of how to move to the next level. The annual appraisal should be embraced as a culmination of discussions that have occurred throughout the year; with the understanding that future goals may be fluid based on business needs and changing organization objectives.  Without a formal, “official” conversation, employees, especially top performers, may not be motivated or remain engaged to continue to perform at top levels. Top performers must continue to be motivated and engaged through a formal process, one that explicitly provides detail feedback on performance throughout the year, one that identifies top skills exhibited and clearly outlines accomplishments and goals. This formal conversation is an opportunity to identify future career goals and objectives, thereby keeping top performers motivated.  

Understanding the need for an annual and formal conversation and appraisal along with the need to continue using some format of a rating scale also supports the original objectives of the traditional approach discussed earlier in this paper. With recent focus on fair pay, increased focus on discrimination, and the need to justify employment decisions, organizations, I believe, still do need to address performance in some formally rated process. Doing so facilitates and defends employment decisions, from who to hire, who to promote and who to terminate. Ultimately, this approach should be supplemented with frequent, future-focused performance feedback to help employees continually develop and provide the organization with the best talent. This can be accomplished, in part, through an effective and impactful performance management system. Additionally, the success to any change and any determined approach will rely on how well evaluators are trained and supported in providing feedback and coaching; this is integral to the success of any performance management system.

The research supports, and I agree with, the need for improved and continuous feedback to support performance goals, organizational goals, talent development, and engagement.   Furthermore, ratings should not be eliminated in their entirety.  A blended approach in any organization would be prudent - certain areas of the workforce would benefit from relative ratings, while other populations would benefit from absolute ratings. There is no one size fits all.  Regardless of the rating scheme utilized, it is more important that the outcome is a fair, objective and relevant appraisal.

As Human Resources Professionals, a strategic goal is to support the success of an organization and provide a competitive advantage through talent management. Gallop has demonstrated that the performance of an engaged workforce had higher success rates than organizations with a disengaged workforce. (Gallup, Inc. 2013)

(https://news.gallup.com/businessjournal/163130/employee-engagement-drives-growth.aspx)

Gallop determined that organizations of different sizes, across different industries, in different cultures, demonstrated a strong relationship between performance and engagement. Engagement drives performance and employee success and employees must continuously be motivated to perform at their best.

With much research already available and more research to be shared, there are a few practical factors gleaned from the literature, factors all organizations should heed. Employees must perceive the performance management process as fair and equitable. An appropriately used and defined rating system, whether absolute or relative in nature, should be used by organizations in a way that makes sense for their workforce. Choosing one system for an entire company is not fitting, nor will it be well received. A blended and targeted approach should be applied. The annual appraisal should remain in place, performance feedback must continue to be documented, and it must be supported by regular continuous feedback, coaching, and development throughout the year. Documentation is required for a number of reasons from legal reasons to supporting changes to an employee’s position, as well as providing a comprehensive summary of an employee’s current and future expectations. Feedback must include short-term and long-term goals; the need for agility impacts how these goals are set and how organizations expect to meet the overall business goals. Employees’ line of sight and evaluation of performance based on these aligned goals supports a fair and equitable process. Implementing these key performance management concepts will improve engagement and undoubtedly drive motivated high performance.

Managing talent can be complicated, however, this shift in performance management has provided a roadmap for continued success. It is clearly advantageous for a company to dive deep into analyzing performance processes, approach and ratings, understand what drives success and make changes that will impact the bottom line. Ultimately, Human Resources needs to provide the drivers for that financial success.

1. Adler, Seymour, et al. “Getting Rid of Performance Ratings: Genius or Folly? A Debate.” Industrial and Organizational Psychology, vol. 9, no. 02, June 2016, pp. 219–252., doi:10.1017/iop.2015.106.

2. Buckingham, Marcus, and Ashley Goodall. “Reinventing Performance Management.” Harvard Business Review, Apr. 2015, hbr.org/2015/04/reinventing-performance-management.

3. Cappelli, Peter, and Anna Tavis. “HR Goes Agile.” Harvard Business Review, vol. 96, no. 2, Mar. 2018, pp. 46–52.