HRM speaks to industry experts who've overhauled their performance management systems - should your company follow suit?
In 2010, tech start-up Atlassian made the radical decision to abolish official performance reviews, replacing them instead with brief weekly self-analyses completed by employees online.
“Instead of discussion about how to enhance people's performance, the reviews caused disruptions and anxiety, and demotivated team members and managers,” Joris Luijke, Atlassian’s HRD, said at the time.
PwC recently delved into changing organisational practices in its report Performance management: Change is on the way but will it be enough?
The end of the performance review?
“There’s been pressure on traditional performance management to change, as the world of work has changed significantly,” Emma Grogan, partner at PwC, told HRM. “Although traditional performance management doesn’t fit into business cycles any more, we’re not actually seeing those conventional systems becoming outmoded in the marketplace yet because most organisations are yet to find a replacement.”
She added that it is important for HR to find a balance, as the complete abolition of performance ratings could be a step too far.
“It is very difficult to manage pay like this, especially in large bureaucratic organisations,” she explained. “However, many of these organisations still have practices in place behind the scenes where employees are being categorised, at least into two or three performance-based categories. The other extreme is bonuses either get removed all together, and base salaries are increased, or bonuses are retained and they become a profit share type arrangement.”
Does it need fixing?
According to Meahan Callaghan, Seek’s HRD, it’s important for companies to identify problems with their performance management methods before making any changes; Seek’s former method of performance management wasn’t working for several reasons.
“It wasn’t giving us an indication of who our high performers were or diagnosing where our low performers were,” Callaghan said. “No one enjoyed it, from either the management or employee sides, and it took up too much time; the process lasted around two and a half months annually, which placed a heavy and inappropriate burden on the organisation.”
Seek have since made many changes in their endeavour to create a new performance management strategy.
“We’ve taken a few new angles,” said Callaghan. “Firstly, we classified what the expectations of employees at Seek are, which is an aspect of performance management we call ‘This is Seek’.”
One component of ‘This is Seek’ is referred to as “the attributes”, and encompasses the basic traits and abilities which the company expects all employees to have:
Alongside ‘This is Seek’, there is a system in place where employees can look up their performance rating on any device to view how their performance is rated for the current period.
“This reassures employees; if they are having a bad week they are able to go back and see that overall they are a good performer,” Callaghan explains. “It also places a slight pressure on managers to be consistently open with workers about their performance.”
Tailoring is key
Callaghan had one final and vital piece of guidance for HR professionals.
“If your organisation has the same issues that Seek had before the overhaul, then it’s worth considering implementing some of the same changes,” she advised. “But the best HR programs are the ones that are designed specifically to suit a company – I would never suggest that this program is one-size-fits-all.”
Grogan echoed Callaghan’s sentiment that the optimum performance management system depends on the organisation in question.
“In some cases, a traditional performance management system makes more sense, and in others, these changes do make more sense,” she said. “Mostly we’re finding that ultimately one of the key reasons for performance management is to engage employees and focus their attention on the right things.”
“Instead of discussion about how to enhance people's performance, the reviews caused disruptions and anxiety, and demotivated team members and managers,” Joris Luijke, Atlassian’s HRD, said at the time.
PwC recently delved into changing organisational practices in its report Performance management: Change is on the way but will it be enough?
The end of the performance review?
“There’s been pressure on traditional performance management to change, as the world of work has changed significantly,” Emma Grogan, partner at PwC, told HRM. “Although traditional performance management doesn’t fit into business cycles any more, we’re not actually seeing those conventional systems becoming outmoded in the marketplace yet because most organisations are yet to find a replacement.”
She added that it is important for HR to find a balance, as the complete abolition of performance ratings could be a step too far.
“It is very difficult to manage pay like this, especially in large bureaucratic organisations,” she explained. “However, many of these organisations still have practices in place behind the scenes where employees are being categorised, at least into two or three performance-based categories. The other extreme is bonuses either get removed all together, and base salaries are increased, or bonuses are retained and they become a profit share type arrangement.”
Does it need fixing?
According to Meahan Callaghan, Seek’s HRD, it’s important for companies to identify problems with their performance management methods before making any changes; Seek’s former method of performance management wasn’t working for several reasons.
“It wasn’t giving us an indication of who our high performers were or diagnosing where our low performers were,” Callaghan said. “No one enjoyed it, from either the management or employee sides, and it took up too much time; the process lasted around two and a half months annually, which placed a heavy and inappropriate burden on the organisation.”
Seek have since made many changes in their endeavour to create a new performance management strategy.
“We’ve taken a few new angles,” said Callaghan. “Firstly, we classified what the expectations of employees at Seek are, which is an aspect of performance management we call ‘This is Seek’.”
One component of ‘This is Seek’ is referred to as “the attributes”, and encompasses the basic traits and abilities which the company expects all employees to have:
- A passion for making the company better
- Decision making and judgment skills
- Technical skills and knowledge around your area of expertise
- Leadership skills, if the employee is in a management role
Alongside ‘This is Seek’, there is a system in place where employees can look up their performance rating on any device to view how their performance is rated for the current period.
“This reassures employees; if they are having a bad week they are able to go back and see that overall they are a good performer,” Callaghan explains. “It also places a slight pressure on managers to be consistently open with workers about their performance.”
Tailoring is key
Callaghan had one final and vital piece of guidance for HR professionals.
“If your organisation has the same issues that Seek had before the overhaul, then it’s worth considering implementing some of the same changes,” she advised. “But the best HR programs are the ones that are designed specifically to suit a company – I would never suggest that this program is one-size-fits-all.”
Grogan echoed Callaghan’s sentiment that the optimum performance management system depends on the organisation in question.
“In some cases, a traditional performance management system makes more sense, and in others, these changes do make more sense,” she said. “Mostly we’re finding that ultimately one of the key reasons for performance management is to engage employees and focus their attention on the right things.”