4 tips for making the most of new performance management technologies

Noma Bruton:

Technology is a game-changer for the performance management process.

Originally posted on Ceridian - Transforming Human Capital Management:

performance reviewTechnology has already had a profound transformative effect on many things we do in business. We now have cloud solutions for storing our data remotely and accessing it, mobile devices for adding flexibility to our daily routines and elaborate telecommunications solutions that make it easier to keep in touch with colleagues worldwide.

We also have begun to usher in a new era for performance management. Now that tracking and analyzing data on the workforce has become so much easier, it’s a new day in human capital management. Business leaders can quickly and easily assess who is performing at the highest levels and who isn’t. This will help them identify both the individuals who are on the fast track to leadership roles and those who are struggling and may need a little extra help.

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Mindful Work at Aetna

Aetna’s stock recently hit a record high and its unconventional CEO, Mark T. Bertolini, is proud of reshaping the corporate culture to include stress-reducing benefits such as yoga and meditation classes for employees.

More than one-quarter of the company’s work force of 50,000 has participated in at least one class, and those who have report, on average, a 28 percent reduction in their stress levels, a 20 percent improvement in sleep quality and a 19 percent reduction in pain. They also become more effective on the job, gaining an average of 62 minutes per week of productivity each, which Aetna estimates is worth $3,000 per employee per year.

New York Times, February 27, 2015

Bertolini also sells the same yoga and meditation classes to the businesses that contract with Aetna.

Read the full article:  At Aetna, a CEO’s Management by Mantra, New York Times, February 27, 2015

Business Leaders Who Influenced Performance Appraisals

People have complained about performance appraisals for centuries.  And the nature of their complaints have remained consistent through the ages.  “The Imperial Rater of Nine Grades seldom rates men according to their merits but always according to his likes and dislikes,” wrote Sin Yu, a Chinese philosopher during the 3rd century Wei dynasty.

Performance appraisals were initially used to rate people such as civil servants and military personnel.  The process first appeared in business in the cotton mills of Britain in the late 18th century.

Owen Robert

Robert Owen (1771-1858)

Robert Owen was a business leader, philosopher and social reformer in Scotland.  He introduced a form of performance appraisal in his New Lanark cotton mill.  To improve the quality of goods produced, wooden cubes painted different colors were placed over each worker’s station.  The color displayed to the public indicated the quality and measure of the worker’s daily production; white indicated “excellent,” yellow indicated “good,” blue was used to indicate “indifferent” and black indicated “bad”.

The New Lanark cotton mill was a great commercial success and a model of good business practices.  Social reformers, statesmen and royals, including the Tsar of Russia visited the mill to see Owen’s innovations.

Austrian-born American management consultant, educator, and author, Peter Drucker made significant improvements to performance management in the 20th century.

Peter Drucker

Peter Drucker (1909-2005)

Drucker added several dimensions to the performance process in the 1950s.  He introduced the concept of goal-setting and aligning employees’ individual goals with those of the company.  Drucker also advocated for a collaborative approach between management and employees.

There are five steps to Drucker’s Management-by-Objectives (MBO) process:

  1. The manager gains a clear understanding of the organization’s overall goals.
  2. The manager and employee meet to agree on employee goals to be reached by the end of the performance period.
  3. At periodic intervals during the performance period, the manager and employee check to see if the goals are being reached.
  4. At the end of the performance period, the employee’s performance is judged by the extent to which the employee reached the goal.
  5. Rewards given to the employees are based on the extent to which the goals were reached.

Drucker influenced a shift in the purpose of performance appraisals to employee development and regular feedback.

Jack Welch

Jack Welch (1935-)

Jack Welch, CEO of GE during the last two decades of the 20th century, took employee performance appraisals to a new level.  Welch applied a statistical Bell Curve distribution to performance ratings and used the result as a basis to terminate a percentage of the company’s  lowest performers on an annual basis.  The GE process for managing employee performance became known as “rank and yank” and Welch became known as “Neutron Jack”.

As with Robert Owen’s cotton mills, GE’s success was held up as a model of good business practice and efficiency and many other companies followed Welch’s performance management lead.  Performance appraisal ratings became a factor in the decision-making of which employees would be terminated during layoffs.

Needless to say, the majority of workers don’t view the performance appraisal as a positive motivation in their work life.

And the objectivity of managers as evaluators remains as much in question today as it was in the 3rd century Chinese Wei dynasty.

Today several major corporations are eliminating ratings from their performance management programs.  Companies such as Adobe, Expedia and Motorola are leading efforts to keep components of performance management that are productive, such as regular feedback and employee development, while eliminating aspects that have been condemned by employees since antiquity.

Technology Improves Performance Management

Reengineering traditional performance management processes is a major HR trend. It’s good to see innovative Technologycompanies eliminate the numerical rating of people as part of the reengineering. Automating the process is the logical next step.   While managers remain the most critical component in effective performance management, technology streamlines the process and gives management the ability to quickly disseminate goals and objectives throughout the organization. But as with any new technology, there are tricks to making it work well.

Track the Process

Technology enables tracking the process to ensure performance meetings with employees are completed. There is a real-time view into which managers are completing reviews and when. No more waiting for paper reviews to be submitted to HR for filing and trusting that managers are engaging with employees.  If the adage “you get what you measure” is true, automating the process guarantees the number of performance reviews completed in the organization will increase.

But the quality of those performance discussions is still an issue.  Freed from the administrative burden of tracking completion of performance reviews, HR professionals can focus on training and coaching managers to facilitate truly meaningful conversations with employees.  An ongoing method to gauge the quality of dialogue between managers and employees is needed to make sure the performance meeting does not become an electronic “check-the-box” exercise. This can be accomplished through focus groups or employee feedback surveys.

Identify Skill Gaps

Want to know the skills in the organization that need immediate improvement? It’s easy to do with performance management technology. Being able to quickly quantify which skills – and which employees – are in need of specific training can be a competitive advantage when employee  knowledge is critical to the business. This is insight HR hasn’t been able to easily quantify and provide to management in the past.

Employees are more engaged when companies provide the training that enables them to do their jobs well.

To achieve this advantage, it’s important that the performance management system is properly configured. Though it’s a time-consuming effort on the front-end to make sure the system is properly set up and skills and competencies are appropriately linked to jobs – it’s time well spent.

Cascade Goals

The ability to communicate company, department and individual goals throughout an organization is a key part of the new performance management technology.  It has been an ongoing challenge for management to ensure company objectives are cascaded to employees and linked to individual performance.  Technology solves this problem.

But, the new systems require goals be well-defined.  This puts pressure on management to set up goals that are specific and measurable; fluffy goals don’t fit well.

Beware!Beware Warning Large

Choose your system carefully! Bad technology will generate the same or worse complaints as those received about paper-based performance management processes.   There is nothing more frustrating than clicking a button that doesn’t work or not being able to configure a component to accommodate a major feature of your process. Performance management should be the dialogue between a manager and an employee. It shouldn’t be an annoyance caused by a technology tool that doesn’t work properly.

Conduct the proper due diligence to select a system that is configurable and reliable. Failure to do so will hurt the credibility of the performance management process.

Technology improves the performance management process, but it will not create better performance management. Only managers can do that.

Update:  A version of this post originally appeared on Blogging4Jobs.com on April 15, 2015.

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