What's wrong with traditional performance management?
In regards to his company's performance appraisals, Pierre Nanterme, CEO of Accenture, was recently quoted saying, “We’re done with that.”
It’s a bold statement, to say the least. But Nanterme is right, and he’s certainly not alone. Traditional practices, processes, and methodologies are dying, making way for a new generation of performance management. Here are two big reasons it's time for you to make the shift, too.
Reason #1: Traditional performance management Is no longer effective
According to research by Deloitte, 92% of companies report that their performance management process does not drive value. Additionally, 58% believe that their current approach does not lead to increased employee engagement or improved performance.
This is such a problem that even GE recently abandoned its famed employee review program. Remember, GE is where Jack Welsh developed some of the most widely used practices in traditional performance appraisals. Yet today, Accenture, Microsoft and Dell are just a couple of the other big names that have followed GE’s lead and ditched annual performance reviews for fresher, more effective approaches.
Reason #2: Millennials in the workplace are increasing - fast.
Statistics show that millennials, which will make up 50% of the workforce by 2018 and 75% of it by 2025, are leading the charge for more frequent, more direct and more meaningful feedback. This preference for a new approach is swelling in workplaces across the country. Employees want timely and genuine praise, constructive criticism, structured guidance and casual commentary. What’s more, they want it regularly.
No longer is it acceptable to wait until the end of the quarter, close of the half, or year-end to conduct formal performance appraisals. Not only is this feedback far too infrequent, it’s also typically poorly structured, focusing on the wrong items to actually achieve both business objectives and employee growth.
The next generation of performance management strategy is founded on consistent communication, streamlined processes, and cutting-edge technology. In today’s tech-centric, ever-connected world, employees expect these things in all aspects of their lives, and the workplace is no exception.
How innovative companies are implementing new employee review processes
While GE scrapped formal annual reviews for its 300,000 employees in August, it replaced them with more frequent conversations and ongoing dialogues between employees and their supervisors. The company also introduced an app to help managers and teammates share feedback about team members, meaning that feedback would no longer come from each employee’s supervisor alone. Instead, GE employees are now reviewed by a circle of peers, supervisors, subordinates and coworkers.
Accenture did away with annual performance reviews in July. Instead, the company now has a “check-in” system in place that allows employees to receive feedback from managers immediately following assignments.
Deloitte has implemented a system that evaluates workers incrementally throughout the year. The company simplified its employee performance review process drastically and now relies on just four questions to continuously monitor employee engagement and performance, two of which merely require yes or no answers.
Other companies that have made big changes to their performance review strategies include Microsoft, Gap, Medtronic and Adobe.
Is your company still conducting traditional annual performance reviews?
If so, ask yourself why. Are they truly beneficial for your business? Are employees aligned with your business goals? Does your company experience increased engagement, loyalty and productivity? If the answer is no to any of these questions, it may be time for a change.
KPISOFT can help you navigate the shift. Contact us for a free demo today!