Last year, the HR world saw large organisations like Deloitte and IBM abandoning their traditional performance management system. Instead of forcing managers to rate their employees, these companies switched to a rating-less review focusing on continuous feedback throughout the year.
At the 21st Compensation & Benefits Forum held in Dubai last week, the topic of performance management formed a large part of the agenda. How are companies getting on with their new performance management systems? Is it working for them? What lessons have been learnt? Attendees were all too curious to find out what happened over the last 12 months.
The performance management arena is still changing and no one solution has been found to fit all organisations. Performance management is still closely linked to the maturity of the organisation’s HR team and the culture of the business, as Madhur Mehta, Lead-Global Compensation Centre of Excellence at Western Union pointed out.
Managers are still as uncomfortable to have performance discussions with their staff as before.
HR teams are recognising the need to empower line managers to provide feedback to their employees. Moreover, they see the need to equip line managers with the tools to lead challenging conversations with their staff. While many organisations are training managers on a regular basis, these sessions don’t always make managers feel more comfortable having difficult performance discussions.
A training designed by Corporate HR may not take into consideration the local challenges. HR and the business need to speak the same language and the training courses need to represent this. Understanding the learning needs of line managers, HR teams may need to customise the training sessions, communication and tools to enable all line managers. Potential translations into Arabic, French and potential other languages may also be required, depending on the demographics.
Aggregate scores are used to provide fairer ratings.
Aggregate scores are a new trend. Rather than providing one rating at the end of the performance year, some organisations have introduced frequent discussions and are requesting ratings after each conversation. Throughout the year, the employee’s performance will have been rated 6-12 times, resulting in one aggregate score for the entire year.
For both manager and employee, this concept appears to provide a fairer evaluation. Often, the manager and the employee frantically review their emails in preparation of their year-end assessment and seem to focus only on the last few weeks, maybe months. The aggregate score removes this and allows for a consistent review and rating.
The number of ratings has been reduced to an even number.
Organisations like Abu Dhabi Commercial Bank (ADCB) have reduced the levels within their rating system, for example from 5 levels to 4 levels. Many managers use the middle rating as a safe and solid option. Moving to an even number, managers need to “make a decision” on their employee’s performance, as Susan Cunning, Head of Reward Design & Policy at ADCB, pointed out. They can no longer hide behind a rating in the middle of the spectrum.
Ratings are replaced with descriptive texts.
Moving away from numeric ratings, businesses have introduced descriptive texts of the employee’s achievements and improvements. Organisations that have applied this approach found line managers increasing constructive feedback, helping the employee to enhance their performance with specific actions.
HR teams are looking to optimise the effectiveness of the process.
Questions around the validity of KPIs led companies to remove traditional goal setting from the process. They’ve discovered that, despite all their training efforts, goals were not well defined, making the evaluation and measurement more challenging, as Samir Bajaj, Global HR Director at Cola-Cola commented. The exception remains the sales force.
Understanding the time required for performance discussions and documentations, HR teams are looking at software solutions to enhance the effectiveness of their performance management system. Applying a holistic view, HR teams are searching for possibilities to remove the natural dislike by both line managers and employees towards performance management and are identifying technological advancements to reduce the administrative work required for both customers.
Performance management and rewards have been delinked.
Too little differentiation between top, average and low performers has been found in this region. It does no longer warrant the many hours spent by line managers, senior management, HR teams and Compensation & Benefits teams during the annual merit and bonus cycle. Instead of looking at a forced distribution curve which then feeds into the actual merit increase or bonus payout, some companies are arguing for flat merit increases.
Differentiation of performance and the consequent rewards need to happen on new levels. Examples are spot awards during the year, training opportunities or special assignments and career advancements.
The findings from this year’s Compensation & Benefits forum highlight the moving state of performance management systems. The topic is still evolving with no clear solution for all organisations in sight. It further showed the importance for each organisation to identify the right approach for them. What may work for one business, may not be suitable for another.
You’re not happy with your performance management and are you looking to enhance it? Contact us and find out how we can create a programme fit for your company and culture.