If you’re unhappy with your company’s performance review system, you’re not alone. Many employers are widely dissatisfied with these programs--but want to fix them, not scrap them, says a new survey. They’re replacing annual performance review cycles with more frequent employee and manager interactions, applying a more future-oriented definition of performance and potential and implementing new technology.
The survey by global professional services firm Towers Watson found that only 37% of North American companies say their performance management programs are effective. Additionally, only 26% say their managers and employees are satisfied with the process.
Half of the respondents agree that employees and managers just don’t spend enough time on performance management.
“For many organizations, performance management as we know it today is not working,” said Laura Sejen, a managing director in Towers Watson’s Talent and Rewards practice. “These programs haven’t delivered on their promise to improve performance, and there are widespread signs of frustration among managers and employees.
“Employers recognize the importance of these programs and that significant changes, not tweaks, are needed.”
Only 8% of survey respondents have eliminated performance ratings, although 29% are either planning to or are considering eliminating them.
Half of respondents (50%) said they have either changed or eliminated the annual performance review cycle in favor of more frequent interactions between employees and managers, or are planning or considering this change.
Nearly three-quarters (72%) have implemented new performance management technology, plan to, or will consider doing so.
Other survey findings indicate that many companies are rethinking the purpose and business alignment of performance management altogether. Nearly a fourth of companies are taking a more forward-thinking approach.
The most progressive organizations are including in their evaluation whether the employee possesses the skills needed for future business success, says Ravin Jesuthasan, managing director and global leader of Talent Management at Towers Watson.
Still, “too many organizations are still spending an inordinate amount of time making marginal improvements in the effectiveness and efficiency of their core performance management processes,” said Jesuthasan.
The survey also identified several factors contributing to ineffective performance management programs:
- 64% of respondents don’t believe their managers and supervisors have the necessary skills to effectively conduct performance evaluations.
- 56% say there is a lack of effective feedback.
- 51% say managers don’t have the time to do performance management well.
“While most organizations are good at planning the strategy and design of their performance management programs, they are falling woefully short when it comes to executing on and delivering these programs,” said Jesuthasan."
Jesuthasan added that managers who are time-strapped “tend to give performance management a backseat and view it more as a compliance exercise.” He added that this reflects HR’s focus of measuring compliance, rather than focusing on the quality of goals set and whether feedback and coaching are actually happening throughout the year.
According to the survey, 81% of employers say managers spend too little time in ongoing conversations with employees about their performance. More than six in 10 (62%) also say that managers spend insufficient time helping employees set goals. Interestingly, 63% of employers say their managers spend four hours or less per employee on performance management each year.