It’s difficult to read any stream of news in human capital management without seeing articles, studies, surveys and reports about transformation in performance management programs. It almost reaches a fever pitch, with people calling GE’s high successful process of differentiating among employees a “rank and yank” program.
As currently practiced, there are many problems with performance management. Too often it is an annual confrontation instead of an assessment and development process. Leaders have very little confidence that it produces results. In response, Industry-leading companies, such as GE, Cargill, and Eli Lilly are taking a new approach to performance evaluations and how they coach and develop employees.
We have seen dozens of surveys that show a consensus that performance management is broken. We also see many prescriptions for success, which usually center around three principles:
- Performance management should be an ongoing dialogue, not an annual event. People need frequent feedback. They want to know they are doing the right things and doing them well. Today’s workers expect feedback, coaching, and development. If they don’t get it, those who can leave. Those who can’t disengage and stay.
- Goal setting should be an ongoing collaborative process based on the changing dynamics of the business, not an annual event based on the fiscal cycle. In this case, collaborative doesn’t mean sending goal drafts back and forth – it means having a conversation.
- The most important function of managers is developing their employees. If employees don’t see a development path for themselves, they will disengage or leave.
If you had a Rip Van Winkle experience in 2001 and woke up today, you would think nothing has changed. The problems being discussed are what we talked about fifteen years ago. The prescribed fixes are exactly in line with the recommendations we were making to clients back then.
At the time, we were implementing software for a world leader in talent management technology. In our discussion we stressed that performance management should include frequent feedback, that goal setting should be a collaborative process, and that automating a process did not mean it could replace frequent conversations between employees and their leaders.
What has changed?
We have had some significant changes in the past 15 years:
- The shape of the workforce has changed. The knowledge worker economy has matured. The rigid command and control structures of the past are not effective in the knowledge worker economy where collaboration and creativity are competitive advantages.
- Technology has changed. The primary purpose of most implementations fifteen years ago was to ease administrative burdens. The user interface, which state of the art at the time, was less user-friendly than what we have today. Now, the emphasis in talent management technology is on the user experience, and we set high standards for user adoption.
- Based on 25 years of research and the success of high-performing company cultures, CEOs have embraced employee engagement as the path to productivity
What has not changed, in too many cases, is the approach to management. Unless there is a fundamental shift in management culture, employee engagement programs will lose their luster.
The Management Factor
Unless organizations get management right, little will change. The 2015 Gallup State of the American Manager report explains that great managers drive engagement and that few people have the talent to be great managers. The statistics are eye-opening:
- Only 10% of managers have the talent to be great managers.
- Another 20% can be coached.
- Companies select managers without the required talent 82% of the time (italics ours).
(“State of the American Manager.” Gallup, 2015. Used with permission.)
In our opinion, the root of the problem is a misunderstanding of the widely-held axiom that past performance predicts future performance. We too often forget it does not apply to a change in roles. As a result, few companies place as much rigor on the internal promotion process as they do on hiring external candidates. The result is that people are promoted based on the wrong reasons.
Our recommendation is to strengthen internal and external hiring to make sure you select the right people to manage, and then coach and support those managers to reach their full potential. This is where technology can help:
- Use analytics to create predictive models for manager behavior. It is possible with the data you already have in your recruiting, performance, and development platforms.
- Use assessments to improve the recruitment, promotion, and coaching of managers. If people don’t have the talent to manage, don’t promote them.
- Develop robust leadership development and succession planning programs.
One final thing. Don’t do this if you are not willing to tell your managers the truth and act on it. We don’t mean you have to fire every manager who fails the assessment. Just be honest with them and help them reach their full potential if they can.