Performance Management

- Harsh Kumar

Introduction – The New Age Performance Management


The idea of performance management system (PMS) has gone through some drastic developments in recent years. Adobe scrapped their performance reviews in 2012 and Deloitte in 2015. General Electric and Microsoft completely abandoned their annual ranking system. Companies are now focusing on goals based on employee-oriented review system.


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Fig 1: [Statistics Credit: Human Capital Trends reports 2014 & 2015 by Deloitte University Press]


Figure 1 says that 75% of respondents believed PMS is an important process in 2015 as compared to 68% in 2014. The shifting away from annual ratings and focusing more on continuous evaluation resulted in better responses towards performance management.


Why Companies Want to Scrap Performance Reviews?


• Traditional PMS was based on jobs quantifiable by hours and targets. 70% of Millennials prefer employers with societal or creative projects, as per a recent Deloitte survey.


• Both managers and employees think traditional system as time-consuming and demotivating. As per CEB Blogs, almost 2/3rd of the systems do not value mid-level performers. This creates a resentment towards high achievers and team morale is affected.


• 68% of employees say their managers do not help in career growth, as per a


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Right Management survey. This urges them to frequently look out for encouraging employers.



Evolution of Performance Management System


• Early 1960s: Employee Service Records or Annual Confidential Reports (ACR) graded employees on 10 traits like job knowledge and punctuality, but companies never shared the reports or remarks with the employees.


• 1970s: Employees were given negative remarks. Performance appraisals replaced ACRs. Employees could then claim their achievements in the annual self-appraisals. Quantifiable parameters like annual targets were introduced to measure productivity and performance.


• Mid-1970s: PMS became more about development than control. Larsen and Toubro and State Bank of India initiated the availability of appraisal reports to employees. An HR department was introduced to address talents and staff issues.


Performance Management Benefits

• Organization: Enhanced performance and communication, increased employee retention and cost benefits


• Managers: Steady performance and on-time delivery, reduced conflicts, assured productivity


• Employees: Clear expectations and career growth, better performance, increased job gratification


Opportunity Loss

Many companies survive without proper PMS. However, a 2016 ClearCompany blog says that companies are facing the following losses due to poor or no performance management.


• Poorly framed strategies lead to miscommunication between stakeholders and staff. Only 32.5% of U.S. employees are engaged and beneficial to the company.


• Poor measurement policies result in obsolete change management processes. 25% leave organizations as they think their hard work goes unrecognized.


•  50% feel they don't know their work expectations.


• Irregular reviews and insufficient training and tools cannot accomplish company goals. 86% blamed their failure to achieve goals to lack of proper feedback and communication.


What an Effective Performance Management System Should Have?


• Clear job details and employee performance plans

• An alignment towards company goals and objectives

• An impartial selection process

• Continuous training and feedback

• Training facilities for the career and developmental needs of employees

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Conclusion with a Bright Future


True to the employee-driven review, companies are focusing more on the paralyzed mid-achievers. Some have automated reviews for more objective performance feedback, while others are disconnecting the rate-based compensation from feedbacks so that employees can focus more on achieving goals. Since life preferences are changing, it is time the ratings change, too.