Performance Evaluation in the Organization of the Future

Changing Attitudes Toward Performance Reviews

Ask a Fortune 500 executive about performance reviews and you’re likely to hear that they are “so last century”. Criticisms regarding traditional performance management tactics range from the time and productivity drain it places on an organization to the fact that reviews lack creativity and fail to foster innovation. A recent article in Harvard Business Review documented the rapid migration of organizations moving away from formal reviews and toward more collaborative, immediate feedback. Annual reviews create missed opportunities for real-time improvements in performance and delay the rewards for top performers until the year-end. Given the pace at which work moves in the modern workplace, it only makes sense that over 50% of organizations have abandoned structured reviews in favor of frequent, informal touch-base meetings, tied to the individual’s goals and smaller weekly or monthly rewards. Performance reviews are also not highly valued by employees, in fact, 61% of Millennials would switch jobs to join a company with no performance reviews.

The Benefits of More Frequent, Less Formal Performance Meetings

One of the first and most obvious benefits of abandoning big annual reviews is the time savings. In any organization, saving time can immediately be tied to saving money. Managers report spending about 3 hours per employee on preparation for the review, the meeting itself, and any follow-up paperwork. The individual contributor in question also spends about three hours, and for companies that have extensive peer components to their review process, that added time per employee will vary by the size of the team, adding about one hour per team member. If the average employee works in a team of five, the number of organizational work hours contributed to just one review could easily be 10 hours. For an organization with 500 or more employees, that can easily translate to $250,000 a year or more.Time and money savings are important, but moving to a more modern approach to performance management has other key benefits. SHRM reviewed Adobe’s decision to do away with formal review and implement “check-ins” and found the following benefits: 80,000 staff hours saved; 10% increase in number of employees who would recommend Adobe as an employer; a 30% reduction in voluntary turnover and a 50% reduction in involuntary turnover.

What does a more modern review process look like?

Modern reviews are more conversational and more frequent. A more interactive dialog allows the employee more opportunity to share specifics regarding challenges and to identify desired areas of improvement and development. Greater frequency ensures that feedback is more actionable, employees are more accountable, and managers are always current on issues like workload, which can have an impact on the day-to-day ability of an employee to progress in growth areas. 75% of employees who receive monthly or more frequent feedback are satisfied in their positions. Modern reviews are heavily focused on the development of talent, and for good reason, 32% of employees state that their current skill set is a barrier to promotion within their organization. Professional development and career growth are both very important to employees of all generations. 87% of Millennials value growth and learning opportunities in their jobs, as do 67% of non-Millennials. In addition to support with professional development, employees prefer hearing feedback that is not overly focused on weakness or gaps in performance; postive feedback is perceived as more motivating.  71% of employees surveyed felt that having a manager focusing on strengths over weaknesses helps keep them more engaged and satisfied.

How Do Frequent, Less Formal Reviews Impact Compensation and Terminations

Formal performance reviews have long been a cornerstone for establishing pay equity and the supporting documentation leading from a negative review has helped provide the paperwork to back up termination decisions. SHRM advises companies that move to more in-formal check-ins to still maintain the normal best practices around corrective actions, including performance plans to document the steps leading toward a termination. Informal reviews and the resulting reduction in documentation can also open the door for discrimination disputes where compensation is concerned. A pay equity analysis might be a valuable exercise in some organizations, prior to moving away from documented formal reviews and giving managers more discretion over setting compensation.

Technology and Employee Satisfaction

In today’s modern workplace, technology is a key enabler of the programs and processes that drive employee satisfaction and engagement. Companies that leverage the right tools will reap the benefits of a more productive workforce. Asure Software is a leader in providing integrated solutions to help build organizations of the future.

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