Aligning Performance Management with Business Strategy

A good performance management process is one of the more elusive aspects of employee engagement and development. Research shows that the vast majority of managers and HR leaders do not believe in the current performance management processes their companies offer, but developing a new one is no small task.

There is a great deal to consider when developing a new performance management process. Every stakeholder has a different view of the process and something different that they need to get from it, whether its documentation which supports personnel decisions for managers, or accountability measures for companies. But at the end of the day, the employee remains the focal point and biggest beneficiary of a good performance management process and it should be developed with that in mind.  

“Successful products are built by meeting the needs of the customer you’re serving,” Srinivas Krishnamurti, Director of Product Performance at Culture Amp says. “Successful performance management processes are built by meeting the needs of your employees – to know how they’re doing, how they can get better, and what they need to do to have a bigger impact in the company.”

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The Need to Rethink Performance Management

The shifts in performance management techniques in recent years have been driven by a number of factors, among them demographic shifts in the workforce. As Millennials became the largest segment of the workforce, employer strategies when it came to things like employee engagement, performance assessments and compensation had to change, and so they will again with the arrival of Gen Z employees.

From a business perspective, shifts are taking place around things like remote work and employee development that will ultimately help companies address the skills gap, but creating a consistent dialogue with employees and understanding what each individual brings to a team will require a more holistic approach.

WEBINAR: The Importance of Gathering Employee Feedback During Uncertain Times

“In many cases, and especially as more employees work remotely or in distributed teams, managers don’t see what their direct reports do every day,” David Ostberg, Director of People Science and Performance at Culture Amp says. “Constructive developmental feedback from peers that work with an employee on a daily basis can provide valuable insights.”

The Challenge of Performance Management

There are a fair amount of issues when it comes to performance management, be it uncomfortable assessment and compensation conversations or the organization’s overreliance on flawed ratings systems.

This is not to say that rating an employee’s performance is something to do away with. Quite the opposite, companies simply need to re-examine the content and design of the ratings system to get more accurate data into the hands of decision makers who can use it to make better personnel decisions.

“Rating scales get a bad rap, but in many cases that’s because they’ve been poorly designed,” Ostberg says. “Well designed ratings systems should harness clearly defined anchors to enhance validity and reduce bias. Work with your team to create more clarity around what each rating means and establish specific criteria for each rating so you can reliably differentiate performance on your team.”

In keeping with the idea that you are putting the employee at the center of the process, HR teams redesigning their approach to performance management have to remember what is important to the employee and make the experience a comfortable and transparent one.

“Companies are distracted by so many challenges around performance management that they often don’t realize how important feedback is to their employees,” Ostberg says. “Capturing real data around what managers and employees are experiencing can be the difference between loosely knowing it’s a problem and clearly seeing where the problem exists – and when you see the problem, you can act on it.”

As HR teams go about redesigning and rebranding a performance management process, they’ll want to consider things like the elimination of bias, goal setting, implementation guidelines and creating a feedback schedule.

To learn more about all of these techniques, download Culture Amp’s whitepaper titled “Raising the Standard of Performance Management: How to Align Development and Compensation with Business Strategy.”