Managing employee performance allows companies to optimize their processes and improve efficiency and productivity in the workplace. Performance management is a system that uses a set of goals and rewards to encourage team members to dedicate themselves to their work. It can:
- Make it easier for managers and leaders to develop a set of realistic goals to measure employee progress.
- Help increase team engagement and encourage an open dialogue between managers and those they supervise.
- Improve productivity and encourage and inspire employees to perform their best work.
- Increase transparency in the workplace.
A good performance review system should include three key components. The first is performance planning, where goals are set, and standards of performance are established. The second, day-to-day coaching focuses on the day-to-day interactions managers have with their direct reports that allow them to monitor performance and facilitate progress through coaching and feedback. And lastly, performance evaluation, which focuses on the performance review, where employee performance is evaluated against yearly goals.
Not as Easy as It Sounds
While it sounds straightforward, creating and implementing a successful performance management system can be elusive for organizations and leaders alike. In fact, a study conducted in late November 2021 by Quantum Workforce stated that only 5 percent of managers are satisfied with their performance management system, and nearly 90 percent of HR leaders say annual performance reviews don’t provide accurate results. A study by the Society of Human Resource Development in 2023 stated that only about 1 in 4 companies in North America (26 percent) said their performance management systems were effective. Meanwhile, a Gallup survey conducted last year found that 95 percent of managers are dissatisfied with their organization’s review system.
According to an article by Business.com in 2023, some of the reasons performance review systems are failing include:
- The process is too rigid, happens too infrequently, and can even thwart employee development.
- The process creates a sense of competition.
- The process can be bad for morale and increase turnover.
Research: Manager versus Non-Manager Perceptions
Although extensive research and practice have focused on understanding and improving performance management systems in organizations, the formula for effective performance management remains elusive. But the results of a recent study suggest that leaders are falling short in meeting the expectations of their direct reports. Researchers from The Employee Work Passion Company teamed up with Training magazine to poll a cross-section of Human Resources and Talent Management professionals. The purpose was to determine whether established best practices were being leveraged effectively, and if there were differences between the perceptions of managers versus non-managers.
Survey Methodology
More than 300 HR and training professionals responded to the survey. Of that, 46 percent were managers and 54 percent were non-managers.
For the purposes of this study, respondents utilized a validated performance management assessment comprising three Dimensions with 13 validated subscales, with five items per subscale. Each subscale had a response possibility of 1 (Strongly Disagree) to 6 (Strongly Agree) measuring:
- Performance Planning, which includes career development, job development, performance planning, action planning, and goal setting
- Performance Coaching, which includes monitoring, feedback, and coaching
- Performance Evaluation, which includes consequences, fairness and accuracy, trust, meetings, and preparation
The study also included The Employee Work Passion Intention Scale, which measures five work-related intentions using a 6 point scale (1= To no extent to 6 = To the fullest extent) and three statements each including:
- Discretionary Effort—the extent to which the individual intends to expend their discretionary effort above and beyond agreed-upon requirements on behalf of the organization
- Intent to Endorse—the extent to which the individual readily endorses the organization to others as a good place to work and as a quality supplier of goods and services
- Intent to Remain—the extent to which the individual plans to stay with the organization
- Intent to Perform—the extent to which the individual intends to do their job well and work effectively to help the organization succeed
- Organizational Citizenship Behaviors—the extent to which the individual is committed to supporting fellow workers and behaving in ways that are respectful, considerate, and sensitive to others
Performance Planning Dimensions
In this section, respondents rated their managers in the area of performance planning, including Action Planning, Career Development, Job Development, Key Responsibility Areas (KRAs) and Goals, and Measures and Standards. This area includes five subscales with five items each. For the purpose of scoring this scale, the summated rating has a response possibility of 5-30 with 30 being the highest possible score (Action Planning, Career Development, Job Development, KRAs and Goals, and Measures and Standards). Some examples of statements about each subscale include:
Action Planning
- The planning meetings with my manager result in the development of action steps or plans for accomplishing my goals.
- Discussions with my manager result in ideas on how my manager will help me achieve my goals during the year.
Career Development
- My manager understands the steps that must be taken to prepare me for career advancement in this organization.
- My manager explains the organizational policies that impact my career development.
Job Development
- Performance planning with my manager results in at least one goal that focuses on the skills I want to develop to get better results at my present job.
- My manager and I discuss the job assignments that will help broaden my job knowledge and experience so I can improve my performance in my current position.
KRAs and Goals
- At the beginning of the performance period, my manager and I clarify and agree upon the key responsibility areas for my job.
- Planning meetings with my manager result in setting clear, specific goals.
Measures and Standards
- At the beginning of the performance period, my manager and I clarify how my goals are to be measured.
- My manager encourages me to participate in deciding how my goals are to be measured.
While the data does show differences between the manager and non-manager scores, none of the differences are statistically significant. The lowest dimension in the performance planning scale is Career Development, which is understandable given that it can be one of the more difficult dimensions to develop within an organization, especially smaller ones where growth opportunities and upward career pathing can be challenging to create for all employees.
Performance Coaching Dimensions
In this area, respondents rated their managers in the area of Performance Coaching, which includes Coaching, Feedback, and Monitoring. This area includes three subscales with five items each. For the purpose of scoring this scale, the summated rating has a response possibility of 5-30, with 30 being the highest possible score. Examples for the items for each subscale include:
Coaching
- My manager does a good job tracking my performance progress during the year.
- I am asked to submit periodic reports about my progress toward goal achievement.
Feedback
- My manager provides me with regular, timely information on my performance progress.
- I have access to the information necessary to assess my own progress and performance.
Monitoring
- My manager does a good job tracking my performance progress during the year.
- I am asked to submit periodic reports about my progress toward goal achievement.
In regard to the Performance Coaching Dimensions, while there are perceived differences in the ratings of managers and non-managers, these are also not statistically significant.
Performance Evaluation Dimensions
This scale includes five subscales with five items each. For the purpose of scoring this scale, the summated rating has a response possibility of 5-30, with 30 being the highest possible score.
Consequences
- After my performance evaluation meeting, I know where my manager stands on my pay increase.
- I clearly understand why I am given the amount of pay increase I receive.
Fairness and Accuracy
- I am specifically told how the decision on my overall performance level was determined.
- I am asked to rate my own performance and discuss it with my manager during the performance evaluation meeting.
Meeting
- At the beginning of my performance evaluation meeting, my manager clearly states the purpose of the meeting.
- During my performance evaluation meeting, my manager listens openly to my explanations and concerns regarding my performance.
Preparation
- My manager notifies me far enough in advance of my performance evaluation meeting so I can come prepared.
- My manager provides me with the opportunity to assess my own performance prior to the performance evaluation meeting by having me complete a copy of the performance appraisal form.
Trust
- I trust that my manager will assess my performance fairly and accurately.
- My manager creates an atmosphere of mutual trust with me through the performance appraisal process.
Once again, our analysis showed no statistically significant differences between managers and non-managers.
Intention Scales
In this section, respondents rated their own perceptions of their intentions in regard to their organization. There were five subscales with three items each rated on a scale of 1- To No Extent to 6- To the Fullest Extent. The Intention scales have a summated rating possibility of 3-18, with 18 being the highest possible score. Examples for the items for each subscale include:
Intent to Endorse
- I intend to speak out to protect the reputation of this organization.
- I intend to talk positively about the future of this organization.
Intent to Engage in Discretionary Effort
- I intend to volunteer for things that may not be a part of my job.
- I intend to take work home when I know it will make me more effective the next day. Intent to Perform
- I intend to work efficiently to help this organization succeed.
- I intend to achieve all my work goals.
Intent to Remain
- I intend to stay with this organization even if I am offered a similar job with slightly higher pay elsewhere.
- I intend to stay with this organization even if offered a more appealing job elsewhere.
Organizational Citizenship Behaviors
- I intend to consider the impact of my actions on others in this organization.
- I intend to watch out for the welfare of others at work.
Managers are higher in regard to Intent to Endorse and Discretionary Effort. While the differences in regard to Intent to Endorse are not surprising, the fact that managers are higher than non-managers in regard to Discretionary Effort is. Generally, most managers not only manage their own projects and tasks but also their people and their people’s projects and tasks to a certain degree and, therefore, they might be expected to have a lowered sense of discretionary effort than non-managers.
Takeaways
While the data is not overly negative, most areas that were measured indicate that organizations still have room for improvement when it comes to their performance management processes. While some ratings, like those for the Meetings Dimensions were quite high, most were at least 10 points lower than 30. And the two lowest areas were Career Development and Monitoring. Recommendations for improving these two Dimensions and the organization’s performance management system include:
- Review the overall design of your performance management process. Are your managers following best practices in setting goals that are specific, motivating, attainable, relevant, and trackable? What percentage of employees have current goals listed? Have leaders conducted an internal assessment to measure the degree to which employees feel their goals are effective in directing and motivating their performance?
- Determine the amount of time your managers are spending with their people. As a best practice, leaders should meet with their direct reports a minimum of twice a month to discuss progress toward goals and address employee needs for direction and support. Monitoring progress and providing feedback are two ways for a manager to stay involved and partner with an employee to achieve goals. Both activities directly influence improved performance. Check-ins focus on goals, progress, and career growth, personalized for each employee. Quality discussions are more important than written documentation, which is kept to a minimum. Regular feedback from team members and colleagues other than a direct manager also is encouraged, and pay for contribution is the standard for rewards.
- Review your performance review process. In many organizations, goals are set at the beginning of the year and not seen again until the review process at the end of the year. One best practice includes conducting mini-reviews throughout the year or having one of the monthly check-ins focus on overall performance and goal review. This allows leaders and their direct reports to make routine course corrections, eliminates surprises for employees during the annual performance review, and keeps the partnership between manager and direct report both open and connected.
- Focus on both job and career development. Growth opportunities at the job and overall career levels are important drivers of employee work passion and one of the most effective ways leaders can demonstrate to direct reports that they care and are invested in them. Be sure that all performance review conversations include time for a discussion about ways employees can improve their skills in their current role and the steps they can take to continue advancing in their careers.
A renewed focus on performance management can have significant results on the performance of an organization. Give your performance management system a review—and if you find similar gaps, address them to reap the benefits of higher levels of employee work passion and performance.