Reinventing performance management system: towards a coaching-based approach

Reinventing performance management system: towards a coaching-based approach

?(Based on Gallup and CIPD studies)

?Behrooz Ghlichlee

[email protected]

Shahid Behshti University

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Traditional performance management systems are broken. Companies, leaders, managers and employees have long participated in time-consuming, frustrating performance reviews that have not yielded clear improvements in individual or organizational performance. Many industry leaders, such as Accenture, Adobe, Cargill, General Electric, Google, Microsoft and Netflix, have made headlines for pioneering large-scale changes to their traditional performance evaluation systems, and many more are considering reinventing their approach to performance management.

??????Gallup estimates the cost of poor management and lost productivity from employees in the U.S. who are not engaged or actively disengaged to be between $960 billion and $1.2 trillion per year. The cost of lost time spent on traditional approaches to performance evaluations alone is estimated to range from $2.4 million1 to $35 million2 per year for a company with 10,000 employees. More conservative estimates tend to exclude lost productivity costs and overhead costs, such as the cost of employee benefits, technology or human resources staff time spent on performance reviews. In 2016, Accenture estimated spending over 2 million hours on performance evaluations alone.

????Unfortunately, Gallup research shows that traditional approaches to performance management are leaving many goals of performance management unachieved. At the core of the performance management problem is a vivid and distressing picture of employees going to work every day and facing unclear job expectations, little coaching from their manager, unfair accountability practices and a lack of opportunities for development. Only 2 in 10 employees strongly agree that their performance is managed in a way that motivates them to do outstanding work. Gallup analysis reveals that employees’ aversions to traditional performance reviews are strongly tied to five primary psychological obstacles: infrequent feedback, lack of clarity, manager bias, adverse reactions to evaluation and feedback, and too much focus on pay incentives.?Organizations have come to realize that traditional approaches to performance management do not effectively motivate employees. To change how performance is achieved, organizations must begin to philosophically and functionally shift from performance management to performance development. Successful performance development is not just about changing the way annual reviews are conducted. Rather, performance development is about creating a cultural shift in how people work and how they work together. Moving from performance management to performance development requires managers to think of themselves in a new way: as a coach, not a boss. organizations can transform their managers into coaches by teaching them to effectively and cohesively:

?1. establish expectations

2. continually coach

3. create accountability

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1- Establish Expectations

A good manager not only establishes expectations and gives employees a voice in the process, but also helps employees understand why their role exists and how their role expectations align with team and organizational objectives. The following guidelines describe the key criteria for establishing expectations that are clear, collaborative and aligned:

????Clear. The fundamental requirement for setting performance expectations is ensuring the manager and employee are clear on which duties the employee is responsible for; what defines outstanding, acceptable and unacceptable performance; and how performance will be measured.

?????Collaborative. Collaborative goal setting also ensures that performance expectations are fair, relevant and challenging. Therefore, managers and employees should work together to set expectations. Collaborative goal setting can also create a psychological contract between employees and managers that builds trust when employees fulfill a commitment managers helped them accomplish. Collaboratively created goals become “our goals” instead of “your goals” or “my goals.”

?????Aligned. Individuals and teams perform better when an employee is responsible for both individual and team goals. Therefore, the work individuals perform and goals they pursue should align with the purpose and goals of their team and organization.

?2- Continually Coach

Continual coaching helps managers and employees create an ongoing dialogue about performance expectations and individualized developmental needs. By creating an ongoing conversation about performance, barriers can be removed, opportunities can be seized and expectations can be adjusted when circumstances change. As companies transition from performance management to performance development, managers must learn to equip, inspire and enable employees by leading ongoing coaching conversations that create an everyday dialogue about performance, rather than merely documenting weaknesses.

Gallup recommends focusing on three key principles that define effective coaching ???conversations: frequent, focused and future-oriented.

????Frequent. The most engaging managers in the world interact with their employees daily using many different modes of communication, such as email, phone calls, hallway conversations and videoconferences. Interacting daily does not mean that managers are constantly looking over their employees’ shoulders or asking for progress reports. Employees need to know that their manager cares about them as a person, knows what they are working on and is available to them when they need support. Employees who receive daily feedback from their manager are 3 times more likely to be engaged than those who receive feedback once a year or less.

????Focused. One potential downside of ongoing coaching conversations occurs when the discussions lack focus. Frequent, unfocused conversations create or heighten employees’ stress when managers introduce too many complexities, create conflicting expectations or assign additional tasks without providing clear direction. To help employees work efficiently, managers must be intentional and clear when assigning tasks and setting priorities. Therefore, managers need to ensure coaching is also focused on employee needs and not just task expectations. Focus is a critical aspect of ongoing coaching because when managers talk to employees, they listen and respond.

????Future-oriented. Traditional performance evaluations and approaches to feedback tend to overly focus on past performance and the specifics of what employees have done wrong and why that behavior isn’t acceptable. These conversations can be viewed as critical and condemning, rather than constructive and focused on future opportunities for employees to do their best work. Moreover, employees can’t change the past, so focusing on past experiences isn’t productive without discussing a clear way forward. A robust examination of performance feedback studies indicates that when feedback focuses too narrowly on past mistakes and feels especially negative, employees feel demotivated and often perform worse. By contrast, the best coaching conversations are future-oriented and create a positive, encouraging dialogue about how employees can do their best work going forward.

?3- Create Accountability

Accountability is critical to achieving high performance. Without accountability, establishing expectations and continually coaching are just talk. As such, effective performance development requires managers and employees to take the time to review progress toward expectations, discuss lessons learned and plan for the future.

????Organizations have traditionally used the annual review as their key mechanism for creating accountability. When the focus of a performance review is on evaluation for purposes of pay or promotion, employees’ attention is on their pay and their manager’s ability to adequately rank or rate them rather than on understanding what they did well, which areas have opportunities for improvement, or how they can develop within their role or company. Employees often leave these discussions feeling judged or condemned for their shortcomings instead of supported and energized about their professional future.

??Astonishingly, less than one-half of employees surveyed by Gallup (40%) strongly agree that their manager holds them accountable for their performance goals. As such, Gallup recommends that, in addition to creating an ongoing dialogue about performance, managers should complete at least two formal progress reviews per year — rather than one annual review — to ensure formal accountability conversations happen more often and closer to when performance occurs. Employees who strongly agree that their manager holds them accountable for their performance are 2.5 times more likely to be engaged.

To help managers transform dreaded annual performance evaluations into constructive progress reviews, Gallup has identified three key attributes that make progress reviews more effective. Progress reviews should be achievement-oriented, fair and accurate, and developmental.

????Achievement-oriented. Effective progress reviews begin with celebrating success and developing an understanding of how the employee achieved success. Celebrating achievements creates both pride and self-reflection — two excellent tools for facilitating learning and performance improvement. Beginning a conversation by reviewing a person’s greatest achievements creates opportunities to discuss employees’ interests and motivations; how the employee leveraged personal strengths and partnerships to achieve outstanding results; and how to better utilize motivators, strengths and partnerships in the future. Progress reviews should include ample recognition of both large and small contributions. By celebrating an array of achievements, managers and employees can create a dialogue about how to experience these “winning moments” more often by enabling people to do what they do best more frequently. In contrast, when a performance evaluation primarily focuses on what a person did wrong, the review feels punitive rather than constructive and often demotivates the employee. By no means should failure and difficult feedback be ignored. Rather, once a manager acknowledges successes, the conversation should turn to how the employee can perform at full potential more often. Managers should certainly provide difficult feedback and explain opportunities for improvement. However, managers should address performance improvement needs by helping employees understand “what exceptional performance looks like” and “what can be done to improve” rather than focusing too much on “what was done wrong.”

?????Fair and accurate. Employees must trust the information used to describe their performance before they can view progress reviews as an effective performance improvement tool. Performance evaluations presented at annual reviews tend to feel inaccurate and unfair because they only occur once per year, are easily influenced by manager bias and tend to include insufficient metrics that often are linked to pay incentives. As such, managers and leaders must make fundamental changes to how they collect and use performance data. Improving the fairness and accuracy of progress reviews begins with measuring and discussing metrics more often. Gallup recommends that progress reviews occur at least every six months. This frequency enables managers to focus on more recent performance and accomplishments, introduces necessary performance corrections before problems become unmanageable, and provides a reasonable time frame for managers to change employees’ goals when their work responsibilities change. 2 in 10 employees strongly agree that their performance metrics are within their span of control, and even fewer employees — 14% — strongly agree that the performance reviews they receive inspire them to improve. Making performance reviews more accurate and fair to team members ultimately means measuring and discussing performance in a manner that better captures a well-rounded view of the work they do and the value they bring to their job every day. Managers must define performance and capture progress using different types of metrics that emphasize the most important elements of a person’s job. When well-calibrated metrics are used to capture an employee’s unique contributions, managers and employees can have a more effective dialogue about personal development.

????Developmental. For progress reviews to serve their ultimate purpose of helping employees sustainably grow and improve, the conversation must include progress toward developmental goals. Managers must be responsible for helping employees identify and meet their developmental and performance goals because both influence employees’ engagement, as well as their personal and professional success. The opportunity to learn and grow in a career is the number one feature millennials look for when applying for a job. Further, when developing employees becomes part of a manager’s focus, performance is accelerated. For instance: ?On average, 3 in 10 employees strongly agree there is someone at work who encourages their development. When this figure increases to 6 in 10 employees, profitability increases by 11%, employee retention by 28% and customer satisfaction by 6%. In addition, 4 in 10 employees strongly agree they have had opportunities at work to learn and grow. When this number jumps to 8 in 10 employees, productivity increases by 16%, employee retention increases by 44% and safety incidents fall by 41%. Thus, if managers want to inspire better performance, they must take employees’ developmental needs as seriously as their performance objectives. When progress reviews include a developmental focus, they provide a perfect opportunity to explore how employees feel about their current developmental path and to determine new opportunities that will help them learn and grow. Managers can support employees by looking for the right opportunities to meet developmental needs, including mentorships, training and stretch assignments. A progress review should not only include a discussion of employees’ developmental needs, but also translate aspirations into individualized goals that are just as important as role performance expectations. Developmental goals include different types of goals, such as skills training, professional development and career path goals. Among the most difficult but most important of these are career path goals. Employees want to know that there is a bright future for them in their organization, and they want to know what it will take to achieve their career goals.

?Performance Development through Strengths-Based and Engagement-Focused Coaching

The three core components of the performance development cycle are the foundation of effective coaching:

?????????establish expectations

?????????continually coach

?????????create accountability

?Strengths-Based Coaching

?Traditional approaches to performance feedback have been notoriously characterized as a time to discuss everything an employee has done wrong and define what needs to be fixed. A qualitative study by Bouskila-Yam & Kluger (2011) illustrates some descriptions employees have given of performance feedback, such as “Feedback equals criticism,” “It was devastating” and “The feedback meeting is a conflict meeting.” Moreover, performance management research consistently demonstrates that overly focusing on mistakes and personal shortcomings to the point that feedback feels primarily negative tends to cause performance feedback to feel unfair, create defensiveness and inhibit performance improvement. Managers learn to truly individualize coaching by studying what makes each employee unique. Strong coaches understand that everyone has a natural capacity for exceptional performance in a role — their talent — which they can develop into strengths with the right coaching, skills and experiences. Gallup’s approach to performance development emphasizes that coaching conversations should be strengths-based, because without an understanding of and appreciation for strengths, managers are just going through the motions of setting goals and checking progress without really knowing how to unlock an employee’s full potential. The strengths-based approach to performance management is based on the theory and practice of ‘appreciative inquiry’, which suggests that people’s greatest opportunity for improvement comes from understanding and building on their strengths, rather than fixing their weaknesses. It is thus presented as a way to help employees develop and improve their effectiveness and performance.

In the strengths-based approach, managers adopt a coaching style in conversing with their employees and use questions and language such as in the following example:

‘I am sure that you have had both negative and positive experiences at work. Today, I would like to focus only on the positive aspects of your experiences … Could you please tell me a story about an experience at work during which you felt at your best, full of life and in flow, and you were content even before the results of your actions became known? … What were the … things you did, your capabilities and your strengths that made this story possible? … [Now] think of your current actions, priorities and plans for the near future…’

?Engagement-Focused Coaching

?Performance does not occur in a vacuum. Rather, it is substantially affected by situational circumstances and human nature — what people need to be successful and how they uniquely experience performance. No matter how well managers define performance expectations, employees still need unwavering support from their manager and teammates to consistently perform at their best. Employees’ performance development needs change as their job demands, environment, teammates, manager and aspirations change. Thus, managers need a systematic way to identify these changing needs and discuss how they can remove barriers to an employee’s success. Gallup’s approach for engaging employees provides exactly that lens for understanding the employee needs that most substantially affect performance. Furthermore, when coaching is engagement-focused, the manager ensures performance expectations can be achieved and employees give their best effort because they feel that their performance needs. ?In 2016, on average, 70% of these top-performing organizations’ employees reported being engaged, and the organizations boasted 14 engaged employees for every one actively disengaged employee — a ratio that is 14 times the global workforce average.

In sum, strengths-based, engagement-focused, performance-oriented coaching is both an art and a science. When managers embrace strengths and fulfill their employees’ engagement needs, they see through a new lens for understanding and unlocking exceptional performance. Managers should keep these key coaching principles at the top of their mind each day — because every interaction they have with their team can affect how employees perform and develop.

Conclusion

?Employees today demand more from their companies. They want meaningful work and managers who care for them as people and provide ongoing communication, clear work expectations, and opportunities to learn and grow. To meet these demands, a company’s performance management activities should develop and inspire employees to be at their best as often as possible.

Unfortunately, traditional performance management approaches were not built to fulfill the demands of the modern workforce. Many companies have discovered that their traditional system fails to engage employees because workers see the annual performance review as unfairly subjective, and reviews happen too infrequently to help them improve their performance. So companies are seeking an alternative that will meet employees’ demands and motivate them to improve performance.

The good news is that companies do not need to completely eliminate all of their traditional performance management practices — including performance ratings and reviews. They do, however, need to improve the way in which performance discussions are orchestrated and progress reviews are conducted. When correctly implemented, performance measurement provides accountability, fairness in evaluation and guidance for how to improve. Igniting this change requires leaders to implement an ongoing performance development approach with managers who know their employees’ strengths and engagement needs. Managers must then use that information to more effectively establish expectations, continually coach and create accountability to ensure both individuals and organizations are well-positioned to reach their goals.

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?References:

1-??????CIPD (2017), Strengths-based performance conversations: an organizational field trial. www.cipd.co.uk

?2-??????Gallup (2017), Re-engineering performance management, www.Gallup.com .?