Shift from Performance Appraisal to Performance Management

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Performance Appraisals are always an integral part of any organization’s plans for performance management and improvement. However, in the wake of the Coronavirus, most of the companies have been forced to cancel their annual appraisal meetings due to cash flow issues, budget cuts, and layoffs.

This is the best time for companies to rethink their traditional approach and implement a more fitting one, by redefining their process from performance appraisal to performance management.

This can be implemented by swapping traditional methods with real-time performance management methods, companies can get the best out of each employee through feedback, regular check-ins, and discussions. 

What is Performance Management? 

Performance management can be defined as the process of identifying, measuring, managing, and developing the performance of the human resources in an organization.

It’s an ongoing dialogue between a supervisor and an employee, broadly covering expectations from both sides, setting up goals, and reviewing results through a constant feedback channel. Performance management enhances the value of the workforce by bringing more to the appraisals process through association, training, and monetary incentives. 

Difference Between Performance Appraisal and Management?

The basic difference between performance appraisal and performance management lies in the approach followed to measure the employee contribution toward the end goal. While the former follows a top-down approach, the latter brings employees and managers together to plan a continuous and comprehensive feedback mechanism that involves frequent discussions between both sides.

Additionally, appraisals are mostly a yearly ritual, whereas performance management happens through continuous real-time reviews. Performance management places focus on the present and future performance with quantifiable objectives, values, and behaviors, unlike appraisals where the focus is typically only on past performance. 

Performance management helps managers understand the core competencies of their team, gauge their strength, and identify areas where improvement is needed. This process also sets up people to succeed at the next level and ensures the team functions optimally even if a crucial resource leaves.

Through this process, organizations can find out which skills they are lacking and set up a proper upskilling/reskilling channel for the employees. Even though performance management establishes guidelines similar to appraisals, they are susceptible to change depending on the job role, the employee, the management style, and the overall situation.

Is one better than the other?

Studies confirm that bonuses and increments keep the employees motivated for the first 3-4 weeks only. Often, performance appraisals are counterproductive. There has to be other ways to galvanize the employees.

Happy employee - From Performance Appraisal to Performance Management - Oorwin

As organizational objectives become more fluid and focus shifts rapidly, big corporations like Accenture, Facebook, and Microsoft have adopted the performance management method effectively for their workforce. Rather than “talking about people,” the big tech giants have shifted to “talking with people.”

Facebook encourages real-time feedback where employees receive feedback from their managers and co-workers after completing each task. For roles that require cross-departmental cooperation, feedback is encouraged from each department. This way, employees can figure out what went wrong and immediately try to rectify them.

Are Performance Appraisals the True Indicator of Employee Performance?

Well, simply put, they are not.

Performance appraisals are, mostly, annual rituals where managers review team members’ performance and rate them against a predetermined set of objectives. The result of this process determines their salary hike or promotion.

However, in most cases, the process is not transparent, meaning the confidential meeting can be impacted by other factors. Personal bias could colour the ratings given to team members. Or some employees may choose to put in their full effort only when it’s time for the appraisal and may slack off the rest of the year. According to a McKinsey & Company report, annual performance data is no longer the sole indicator of compensation or increment due to the same issues. 

Realizing the limitations of the quarterly or yearly appraisal process, multinational professional service provider Accenture introduced a digital platform for all its employees based on an analytical data model. This design aimed at elevating individual employee performance by helping them grow through feedback and teamwork rather than measuring it in the past. 

Performance Management - Performance Appraisal to Performance Management - Oorwin

How individual employee performance impacts your organizational goals?

Each employee needs to understand how his/her contribution helps support the vision and goals of the organization. Even one employee not having a clear understanding of her role can easily get demotivated and may impact the performance of the entire team. 

Microsoft realized the need of a peer-to-peer feedback tool  that can encourage employees to build on each other’s work. This tool is a great way for employees to suggest things that their colleagues should “keep doing” and actions they should “rethink”, making everyone realize the importance of their contributions to the organization. 

Management teams across the globe agree that cascading organizational goals into teams and then subsequently to individuals helps ensure that goals are achieved on time.  And it is a proven fact that employees who feel valued stay motivated and eager to do more throughout their employment cycle, contributing the most toward organizational goals. 

Boosting the performance of your human resources

Technology plays a crucial role in implementing performance management protocols in the workplace. AI-enabled HRMS allows employers to establish frequent feedback loops which allows managers to monitor individual performance. Additionally, employees can view their data to find areas of concern or request for a review in case of any mismatch or inconsistency. 

 Monitoring Performance - Performance Appraisal to Performance Mannagement - Oorwin

With a few tweaks, an HRMS can help establish a peer-review network where employees can receive feedback from their colleagues and clients after completing each project. HRMS securely holds the entire employee database, allowing the supervisors to see the performance history of the employee, set career objectives, identify skills the employee needs to achieve them, and monitor overall progress. 

Business goals are always evolving, and it makes sense to continuously monitor employee behavior and learning rather than at the end of a financial year. With performance management, each manager acts as a mentor and guide, focusing on frontend planning instead of discussing past performance. Certainly, the top management must initiate the process by encouraging dialogues, transparency, and real-time administration. Organizations can achieve the best results by making the feedback process a part of daily corporate life rather than a once-in-a-blue-moon activity that makes employees anxious.

Do you still think performance appraisals are the best way to rate employees? Let us know in the comments.