With only 3 months left in the year, companies are preparing to close the last quarter on a high note. Managers are also getting ready for the oh so dreaded year-end performance discussions with their employees. Or are they really?

Companies like Deloitte and Microsoft have set a new trend towards cutting-edge performance management. The traditional approach was rather static and focused on the past with managers looking at the employee’s performance during a mid-year and a year-end conversation. Business leaders were stuck in admin work and had to label their employees with a rating often made to fit a forced distribution curve. Companies found little alignment to their strategic objectives and their pay-for-performance philosophy.

This criticism has forced a shift from traditional performance management to cutting-edge performance management which sets to achieve:

  • Greater forward-looking and strategic alignment
  • Improved behaviours and skills without forced labelling
  • Increased motivation for and true differentiation of high performance
  • Objective and meaningful conversations with the employee.

Continuous and timely feedback
Employees, especially Millennials, require more feedback than that given during the traditional mid-year and year-end performance discussions. Sheila Heen acknowledges 3 types of feedback: Appreciation, coaching and evaluation.

Giving real-time feedback, managers can recognise employees on the spot or pinpoint a problem and guide the employee when resolving it. Employees can now also adjust their behaviours, leading to improvements and increased efficiencies.

Assessment of the potential to grow and develop
Managers now also evaluate the potential of an employee and identify which skills they’ll need to acquire to drive the company forward. Performance management becomes forward-looking and specific plans for formal/informal training, coaching and mentoring can be established for the employee as a result.

Minimised low-value adding admin work
Companies can utilise ERP systems to reduce the time required to collect feedback from other people or to document the performance review. Managers are freed up to prepare in depth for an individualised conversation and make the review discussion much more meaningful for the employee and them.

Transparent processes
Knowing which behaviours are valued by the company and lead to increased performance, the employee can also see a clear link between their performance and their rewards.

This link between pay and performance has also been maintained by 80% of companies with rating-less appraisals. Here, managers have been given more discretion in the distribution of their merit and bonus budgets.

Empowered managers
Top executives lead the adoption of the cutting-edge performance management, yet, front-line team leaders, supervisors and managers need to be trained and empowered to make it a successful transition. HR teams need to equip the business with the tools to evaluate performance, provide feedback and make fair pay decisions.

While cutting-edge performance management is a relatively new approach, initial studies show a positive impact on performance and rewards. Clear improvements have been found in the way top performers are rewarded and also in the differentiation of pay based on performance.

Are you looking to raise your performance management to the next level but aren’t sure how? Contact us and find out how we can create a programme fit for your company and culture.