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New performance management trends are shaking up the way that big businesses keep track of and review employee performance. For decades companies have relied on annual reviews where managers ranked employees based on their performance over the whole of the previous work year. Puzzled employees were often penalised in December for mistakes made the previous January — mistakes long since forgotten.

Did that strategy improve employee performance at work? You can absolutely bet that it did not. Fortunately, top companies have cottoned on to the fact that box-ticking style performance reviews need to go, but should SMEs be copying what the major players are up to?

What are the top companies doing?

Top companies who are leading the way in overhauling performance management for the better include Microsoft, Accenture and Deloitte. All three have decided to scrap traditional annual performance reviews in favour of regular, informal chats during which employees can receive feedback from their managers and discuss issues as they arise.

The changes have come in because reports have indicated that the old methods of performance management simply aren’t effective. On average, over 200 hours are spent on performance management each year by managers, according to a report from Personnel Today. The real issue though is that 90% of HR leaders don’t believe that the process actually produces accurate information.

This year alone, at least 52 major companies have implemented new performance management strategies and shifted away from traditional once a year performance reviews. Research from PwC found that two thirds of large companies are looking to update performance management, and that 1 in 20 are considering getting rid of formal performance reviews altogether.

Should small businesses be making changes too?

Small business owners certainly haven’t missed the change in attitude toward performance reviews. It’s estimated that performance management trends will trickle down and hundreds of other companies will follow suit. But should small businesses be jumping onto the performance management bandwagon quite so quickly?

The main concern is that SMEs who are keen to embrace change and improve their performance management may not have a company culture that is ready for it. Emulating the actions of larger companies may cause more harm than good if their company culture hasn’t been addressed first to ensure there are no negative consequences.

Changes to performance management should be implemented gradually, over time. This applies to any new, particularly innovate, change to a company’s processes, including scrapping annual performance appraisals like Accenture, introducing unlimited holiday time like Virgin, or being transparent about employee salary like Buffer.

What the experts are saying

Performance management experts say that new trends in the sector are positive. Performance management strategies are shifting their focus away from reporting on incidents in the past to moving forward and finding better processes for the future.

In the moment feedback and regular informal chats between managers and employees are bolstering this outlook. This approach means that issues are tackled head on, so nothing is left sitting on the backburner until the annual review meeting.

Making small changes to your company’s everyday work culture, seeing how employees adapt to these changes and supporting employees in achieving their goals is the best way for companies to judge which changes will result in meaningful progress for their workforce.

 

By Stuart Hearn, CEO of Clear Review

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