Managing people

Performance management evolved: Why we need to rethink goal setting

Whether you’re planning your dream holiday, saving up to buy a new car, running your first marathon, or learning a new skill, setting goals and having a plan to achieve them is essential.

As one year ends and another begins, it’s natural for us to look at what we’ve achieved and to think about what we plan to do going forward—and the same applies to our career goals.

Traditionally, businesses have mapped out typical career paths for employees. To get to the next rung on the career ladder (i.e., the goal), employees would need to meet or exceed certain performance metrics (i.e., a plan). Employees and managers would meet once a year to review performance, identify areas for improvement, and track and benchmark progress towards the goal.

But imagine if you were trying to lose weight and only weighed yourself once a year. Or you only timed your fastest lap around the running track once every 12 months. It’s difficult to stay motivated and focused on your goal if you only check in on your progress annually.

So why do we do it in business with annual performance reviews? It’s an ineffective way to keep employees engaged, motivated, and focused on their personal development.

It’s time we started viewing professional development the same way that professional athletes meet their goals: with regular pulse checks, acknowledging and rewarding progress, and being willing to change tack if things aren’t working.

Misconceptions of performance management

More and more research is proving the ineffectiveness of annual performance reviews:

  • 92% of employees want feedback more than just once a year,
  • Employees are three times more engaged when they receive daily feedback from their managers versus annual feedback,
  • 43% of highly engaged employees receive feedback at least once a week, and
  • 77% of HR leaders say annual reviews are not an accurate representation of employees’ work.

Employers avoid performance reviews because they’re time-consuming and entail a lot of admin, often dismissing these processes as mere box-ticking exercises. And employees often dread review season because they’re worried they’ll receive harsh or unfair feedback, especially after they’ve spent hours completing forms to prove their value and put their best foot forward.

These negative perceptions exist, in large part, because performance management and performance reviews usually don’t evolve at the same speed as the business itself. And yet, performance appraisals are critical to running a good company.

It’s time to reframe performance management from being an annual chore to understanding that it is a continuous process of development that delivers regular clarity, support, feedback, and recognition to employees as they work together with the business to achieve shared goals.

Performance management done right

Successful performance management is so much more than just sitting down once a year and highlighting our faults and failings. It’s a great opportunity for empowerment, learning and growth, especially if you approach it in the right way.

According to Deloitte, to extract maximum value from time-consuming performance management and performance review processes, we need to stop looking in the rear-view mirror, an approach that is effective for little more than evaluating salary adjustments.

Instead, we need to start looking ahead to accurately assess our employees’ future potential. This puts HR in the driving seat to create a more successful business. It also empowers employees to be more responsible for the progression of their careers.

Here are three things to consider if you want to reinvent your business’s performance management process.

1.    Provide regular feedback

When performance reviews take place annually or quarterly, reviewers and reviewees have to wait a long time to give praise, air grievances, or address issues. And often, problems are overlooked because something that happened several months ago may no longer seem relevant.

This is why it is so essential to provide regular feedback. Consistent performance reviews are especially important given the rise in remote and virtual work. When your teams are working remotely, it’s a good idea to discuss performance as frequently as possible to keep up to date with how your employees are doing and keep them engaged. This will also help you to create a more people-focused business.

But these feedback sessions must be simpler and more pleasant than traditional performance management processes. Find channels for continuous feedback that are easy to use so that the process doesn’t leave busy managers and staff feeling frustrated.

And let’s not forget that all of the data generated from regular reviews provides the company with valuable insights into performance and talent retention. HR can use this data to improve business forecasting, streamline operations, and make strategic workforce decisions.

2.    Adjust plans consistently

Regular performance appraisals can help businesses mitigate issues before they become overly problematic—but only if your performance management strategy is linked to tangible outcomes.

Suppose an employee, let’s call him Jack, and his manager, let’s call her Thandi, sit down regularly and fill out a form where they score different metrics out of ten. But if they don’t make any plans to change areas of concern, these meetings won’t bear much fruit. If Jack is nowhere close to meeting his targets, it is critical to figure out why and devise a plan to get him back on track. One way to do this is to use performance management tools that track conversations and progress towards goals, so everyone is always aligned.

As part of these sessions, ask your employees what type of monitoring and feedback is most helpful to them. And remember that even high-performing employees can benefit from ongoing advice and coaching.

Research shows that regular appraisals boost overall employee job satisfaction and productivity, particularly when these assessments are linked to promotions and provide further clarity around job expectations and feedback about employee performance.

3.    Prioritise goal setting, together

Goal setting is a big part of regular feedback. But how involved should you be in helping your employees establish and achieve their goals? Because failure to meet goals can have consequences on the individual, their team, and the broader business, it’s important to find a happy balance between getting involved and ensuring that the employee has ownership over the process.

One approach is for employees and their managers to set goals collaboratively. Jack develops a draft list of goals, and Thandi comes up with ones she believes Jack needs to focus on. The pair then sit down to discuss any overlaps and create a final list of goals they both agree to. This list should include goals that are challenging but achievable. Jack needs to see how his personal goals align with broader business goals, so this must be emphasised. While Jack is ultimately responsible for his achievements, which makes him more accountable for his success, Thandi monitors his targets and works alongside him to help him reach his goals.

But what if he fails to meet certain goals? While this can happen, when you’re reviewing and evaluating performance consistently, you’re less likely to fail because you can proactively address issues when they happen and easily adjust goals where necessary.

Transform your HR and payroll with Sage

Sage 300 People offers you a range of tools to manage the entire employee journey while spending less time on admin and more time on strategic people activities.

With Sage 300 People, you can:

  • Manage performance by defining performance agreements, competencies, and objectives, including goals and development plans,
  • Make the most of your talent with an accurate, up-to-date overview of how employees are performing,
  • Celebrate exceptional contributions and gain insights into where improvements can be made,
  • Collaborate on performance criteria, rate achievements, provide comments, and attach supporting evidence, and
  • Empower employees to complete their performance reviews through self-service functionality.