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Perhaps you've heard the following phrase as it relates to performance management and appraisals today, “Performance management isn’t dead. The old way of thinking about it is.”

It’s that time of year again and managers and employees alike are dreading the annual performance review process. Managers, thinking appraisals are a waste of time, don’t want to have difficult conversations or give negative feedback, nor wish to fight with HR or leadership on why everyone on their team deserves an “exceptional rating” and a pay increase. Cartoonists mock it, comedians make fun of it, and bloggers blog about the parodies of the old ways of performance management.

Performance Management and Appraisals

Then, there’s the employee perspective.

“Here comes my manager to have a sit down with me about my performance, when he really doesn’t even know what I do every day.”

“We only have these conversations when it’s time to check off a box to send to an evaluation to HR.”

“I better be on my best behavior in the coming weeks, because that is what everyone remembers when it comes to evaluation time. He’ll probably be late giving it to me anyways. Again.”

Performance Management and Appraisals

Sound familiar?

Where are so many companies going wrong with performance management and appraisals and where is the industry headed?

To start, many managers and organizations believe “evaluating performance” and “performance management” are one and the same. Performance must be evaluated in a performance management system, however, if the buck stops there, the system fails.

Performance management systems evaluate both the employee’s current and future status with the organization. Common threads in successful performance management systems include not only regular appraisals, but also competency-based assessments, training and development, as well as evaluating succession/promotion planning opportunities.

To truly manage performance, the industry is leading organizations to create a shift in their approach to one of a continuous performance management culture and create an environment where regular performance feedback discussions are the norm. After all, if Michael Phelps only received yearly feedback on his swimming, would he be the Olympian he is today?

Performance Management and Appraisals

Companies who truly excel at continuous performance management systems are rewarded with engaged and highly productive employees. Performance management systems should influence outcomes and help team members reinforce the set-out organizational goals. This requires regular communication and feedback to each employee and creating a year-round, continuous performance improvement processes. Failing to do so creates high stress and low confidence in employees.

So what do these successful companies do differently?

Revisiting Goals: At a minimum, companies with strong performance management revisit, review, and revise performance goals on a quarterly basis. Managers ensure the team members have a clear understanding of goals and keep goals aligned and in front of employees as performance conversations are held. There are never surprises on where employees stand regarding performance on company goals in a continuous performance management culture.

Identifying Gaps: Successful organizations offer to help fill the skill gaps when identifying areas employees can improve. Managers often shoot themselves in the foot when they identify issues, then don't offer solutions. Consistent feedback coaches employees up (or out, as necessary). Once skill gaps are identified, clear and concise development plans should be part of the continuous performance management system. Employees crave regular, quality feedback from managers and strong managers identify specifics of where and how to improve.

Development Plans: For those employees looking to progress their careers, development plans are the perfect opportunity to road map career growth and bridge any skill gaps to get there. Continuous performance plans encourage the type of culture where employees grow professionally and thrive, whereas in a more traditional model, managers may not know until appraisal time that an employee is looking to advance or the topic never comes up due to time constraints and rushed evaluations.

Organizations that assign learning based on performance reviews see 38 percent better engagement and 61 percent greater amount of positions with a ready and willing successor identified.”

Source: The Importance of Performance Management

In companies that hire for “potential” with the intent to train for skill, it is that much more critical to set employees up for success with sound training and development plans. The fundamentals of continuous performance management marry well with need for employee development in these companies.

Perform & Reward: Lastly, organizations commonly drop the ball in performance management in recognizing and rewarding employees for a job well done - not just at appraisal time, but year-round. Others simply focus on negative behaviors and don’t acknowledge the positive. In shifting to a continuous performance management process, managers provide more timely feedback and thus more easily recognize a job well done. Rewarding behavior the organization wishes to see creates a culture where employees strive to achieve them. Thus, employee engagement is improved, followed by employee retention and ultimately, the bottom line.

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