The movie Office Space is arguably one of the greatest cinematic representations of an unhealthy workplace. There’s a lot to unpack, but arguably one of the best lessons to come out of the film is just how much of an impact a terrible performance management system can have.
In case you’re not already familiar, in the movie protagonist Peter Gibbons is a disillusioned office worker who reports to a man named Bill Lumbergh who is, quite possibly, the world’s worst boss.
Office rules are arbitrary. Cubicles are gray. And eventually, a climactic scene involving a printer and a baseball bat ensues.
Bottom line? No company wants that to be their printer on the receiving end. And that’s where a great performance management process comes in.
The right approach to performance management not only helps a business align with employees on performance, it also helps keep the workplace both human and honest.
And businesses as a whole are catching on. In fact, some 81% of HR leaders say they’re making changes to performance management. Should you be one of them?
Let’s add some flair
- Why no one cares about your yearly performance review
- Where to focus when designing your performance management
- Performance management strategies fit for a new decade
- 4 performance management examples by industry
Why no one cares about your yearly performance review
For better or worse, you’ve likely been part of an annual performance review at some point in your professional career.
Everyone knows that the majority of traditional performance management practices include that dreaded end-of-year sit down. But what’s less known is that studies conducted by the American Psychiatric Association (APA) have shown that well…they just don’t work. 🤷
In fact, one study found that in about one out of three of cases, annual performance reviews actually made performance worse. Yeesh.
What’s happening here? Luckily, there’s data to help answer that question too.
Annual reviews shift focus to the person, not the work
“I'd like to move us right to Peter Gibbons. We had a chance to meet this young man, and boy that's just a straight shooter with upper management written all over him.” — Bob Slydell
The APA findings suggest that the effectiveness of a performance review decreases as attention “moves closer to the self, and away from the task.”
This makes sense when you think about it. If Peter Gibbons is told annually he as an individual is doing a great job, it’s harder for him to weigh the importance of paying attention to the details of the tasks he’s responsible for, like putting a cover sheet on a TPS report.
A single annual review doesn’t account for cross-training
“Now here’s something else, Bob. I have eight different bosses right now.” — Peter Gibbons
Studies show that cross-training employees increases their efficiency, allows them to gain a full view of the organization, and gives them a better understanding of overall organizational goals.
But when a traditional annual performance review is conducted, it may be difficult for a single manager to comprehend the amount of tasks an employee is involved in outside of their usual job function.
Annual reviews have been shown to increase turnover
“I hate this job and I don’t need it!” — Joanna
And yep, you guessed it. Annual reviews have been shown to actually increase turnover rates.
A work satisfaction survey by VirtualVocations asked 381 professionals what their top concerns were with their current place of work.
Here’s what they said:
- 25.36% felt there were not enough opportunities for advancement
- 10.05% were concerned about inadequate salary and benefits
- 9.09% reported low motivation/satisfaction
- 4% reported little or no transparency from upper management
- 3% felt unheard and undervalued
If your business is only addressing your employees’ professional goals and feelings about their work once a year, it’s easy for these things to get missed.
And if you’re now realizing for the first time that you may be one of many companies stuck in an annual performance review rut, don’t beat yourself up.
While the yearly review almost always comes with good intentions, there are better ways to execute performance management.
Where to focus when designing your performance management
So okay, you might have a paper jam in your performance management process.
Before you grab the baseball bats and bring the whole thing out to the field, let’s consider some alternative options.
A good performance management process gets all of your people pulling in the right direction, and ensures you’re meeting their needs as well as the company’s.
But exactly how do you create a strong performance management process?
Consider your metrics
There’s a lot that goes into keeping your business running at optimal levels. It can be overwhelming to figure out which key performance indicators (KPIs) you need to be focusing on.
That said, a good performance management system starts with just that, the data.
After all, you can’t define what you want from your employees if you don’t have a solid map of how your business should be running as a whole.
Supporting your performance management plan with exact numbers and clear expectations can go a long way in keeping employees on track and motivated. Plus, it can also help you structure interview questions to hire better candidates.
Psst! Keep in mind, stellar employee performance starts with a stellar hiring process. If you suspect it’s time for an upgrade, check out our guide to clunk-free cloud-based recruiting software.
Be transparent, but realistic
There’s no getting around it, some 57% of workers are stressed out on the daily.
To face the challenges of being a person in the world today, employees need transparency and engaged dialogue when outlining individual goals.
Keeping employees in the dark around their own performance metrics can cause confusion and resentment as they try to make due. Your goals for each position should be outlined within your job posting, reviews post-hire should tie back to the function of the job itself, and recruiters and hiring managers should be trained to communicate how that looks.
Take a hard look at the type of performance feedback you’re providing
Confronting underproductive employees can be difficult. However, constructive feedback can make a big difference.
Studies show that the most effective workplace feedback all seem to have some common traits:
- Feedback is descriptive and specific.
- Feedback is actionable and timely, and generates next steps.
- Feedback is constructive, and delivers opportunities.
- Feedback enlarges the vision of what the recipient could accomplish.
Performance management strategies fit for a new decade
Performance management is not a one-size-fits-all strategy.
It’s going to take experimentation and research to figure out what will work best for your business and your employees.
No matter which performance management cycle you try, keep in mind that the right strategy should leave employees feeling inspired and empowered to do good work. Work that will ultimately have a big impact on both your revenue and your reputation as an employer brand.
360 degree feedback
360 degree feedback is a powerful tool that allows employees to receive feedback from their peers, as well as anyone who they may interact with such as customers or vendors. It is recommended to keep 360 degree feedback out of compensation decisions, as it may lead to employees being less honest with their reports.
Here are some of the benefits of 360 degree feedback:
- Helps individuals understand how they’re perceived by others
- Increases communication between team members
- Improves customer service by providing an opportunity to learn from interactions
- Strengthens career development
The 9 box matrix
The 9 box matrix, or 9 box talent grid as it’s sometimes called, is an internal-facing system used to bucket employees by what type of player they are.
When used correctly, this tool can help determine salary, resource budgeting, succession planning and even provide managers with insights on how to best allocate their time when coaching each type of employee.
But take note. This tool can be detrimental when used incorrectly. It’s important for managers to get training or partner with seasoned HR professionals when using it.
The PM cycle
The performance management cycle is a tool used by employees and their managers to align on a plan for growth for the individual, with the most effective performance management also tying back to business performance.
Traditionally, the PM cycle contains four phases:
- Planning - Employee and manager define a specific goal.
- Monitoring - Consistent check-ins between employee and manager on KPIs towards goal. Resources are discussed and provided as needed.
- Reviewing - Managers review performance with employees based on the previously set goal. KPIs are revised and discussed.
- Rewarding - Top talent is rewarded with salary increases, shoutouts, etc.
4 performance management examples by industry
Different types of industries are going to have varying KPIs and review processes.
It may take some experimenting to see what works best for your business, but here are some tips on performance management by industry to help get you started on building (or rebuilding) your own futureproof performance management process.
Restaurant & Food: Fast-paced performance management (with optional flair)
The restaurant industry is a difficult one to navigate with performance reviews. With the pay structure for wait staff being largely tip-based, you may see servers stray from brand expectations and lean more towards practices that yield higher tips.
A strong performance management strategy to support your restaurant or food service business can make a real difference. (And who knows, it may even inspire them to wear more than 15 pieces of flair.)
Texas Roadhouse is a great example of a business that navigated performance reviews in a refreshingly new way in food service.
Here’s a quick peek into their performance strategy:
- Annual pay increases are given to everyone and are based around cost of living.
- Additional pay increases can happen at any time and are gauged around taking on additional responsibilities, exceptional performance, or promotions.
- Managers meet regularly with employees to discuss career goal setting and development opportunities both in and out of the restaurant.
- Managers work to gain an understanding of an employee’s circumstance outside of work, and offer support wherever they can.
Hospitality: Performance reviews that treat employees like VIP guests
The hospitality industry strives to create a home away from home environment. And in recent years, hospitality recruitment has been harder than ever.
The way your employees manage themselves and the brand they represent can have a huge impact on a client’s stay and whether or not they’ll return. Hilton works hard to incorporate a strong company culture, which means changing up how they coach their employees.
Let’s take a closer look at Hilton’s performance review processes:
- “Ongoing onboarding” is used to continuously train existing employees as a reminder of their own roles but also to teach them about other roles in the business.
- Feedback is designed to be empowering rather than disciplinary.
- Performance reviews include a “Heart of the house” assessment, where employees can detail what they’d like changed, such as uncomfortable uniforms or improved break rooms.
- A “For All” approach asks leaders to treat team members at all levels just as exceptionally as their guests are treated.
Retail: Moving away from forced rankings
The biggest issue with performance management in retail is that there is often a competitive, forced ranked system with a focus on individual accountability rather than teamwork.
But it’s not the 1980s anymore and retailers like Sears and Gap have worked to develop a less cutthroat review process.
Here’s a glimpse into what worked for these big-name retailers:
- Frontline and back-office employees work together to stock and organize the stores.
- Short-term goals and objectives are set and reviewed at least quarterly.
- Annual reviews are there to summarize the short-term reviews that happened in the past and check in on compensation.
- Conversations are focused on goals and strengths, rather than performance.
Professional Services: From rigid to real-time performance reviews
We’re seeing more and more progressive professional services companies such as Adobe completely revamp their performance management process.
Here are some of their top performance management upgrades:
- Managers and employees meet for check-ins and unscripted discussions at least once a quarter.
- Employees examine their current role and their desired career path and then receive advice from managers.
- Unmet expectations are dealt with quickly and directly, instead of hiding until the next performance cycle.
- No more formal rankings, managers determine salary based on performance.
Better performance management starts now
Yeah so, if you could revamp your performance management process and move away from annual reviews, that’d be great.
In all seriousness, the world of work has changed dramatically. Companies that succeed in rising above the noise, chaos and competition, will be those with an intentional strategy for measuring and improving employee performance. But not at the sake of their humanity.
In the words of one of the world’s most beloved anti-heroes Peter Gibbons, “It’s not that I’m lazy, it’s that I just don’t care.”
Use your performance management process to give employees a clear reason to care and plenty of support to back them up. Before you know, your performance headaches will be a thing of the past.
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