Research supports what managers and employees have known for some time: that the annual performance review process is broken. Results from the Brandon Hall Group’s 2015 research survey indicate that, although 88 percent of organisations have a performance management strategy, 71 percent view it as ineffective. Since there is no doubt that organisations need a process for evaluating and improving employee performance, attention must turn to transforming the strategy to address negative perceptions by employees and managers and to more closely align it to changing business needs. Here are five best practices that can help to transform the annual performance review into a dynamic, employee-centered strategy, focused on aligning the entire workforce toward organisational priorities.

1. Quarterly goal setting

The goal setting process establishes direction, priority and clarity of expectations for employees and managers alike. The best outcomes come from goals that are both meaningful and challenging to employees, and aligned with organisational priorities. Many organisations perform annual goal setting exercises where goals and objectives set at the top of the organisation are cascaded and translated into individual goals. This effectively gives employees a line of sight into how their work supports the organisation as a whole. But, what happens when change comes, as it inevitably does? Reviewing and revising goals on a quarterly basis ensure that employees stay focused on what matters most. Here are some tips for quarterly goal setting:

• Involve employees in setting individual goals that utilise their strengths and passions and provide development opportunities.
• Set goals that ensure employees and managers have a shared understanding of what is expected of employees and how their performance will be evaluated.
• Consider both the “what” and the “how” of goal setting. In other words, along with quantitative results, consider important behaviors and competencies that should be developed and demonstrated as part of goal achievement.
• Document agreed-upon goals in a place readily accessible to employees and managers. A shared online tool will provide an easy method of keeping track of observations, discussion and progress toward goal achievement.
• Schedule regular discussions (at least quarterly) to discuss progress on goals and make adjustments as necessary to maintain alignment with shifting organisational priorities.

2. Development discussions

Talent management best practices are leaning towards interweaving performance management with employee development in a way that downplays the potentially adversarial relationship inherent in traditional performance appraisals. Instead, managers are enlisted as development coaches, considering each employee’s strengths, passions and career aspirations when making project assignments and regularly discussing development plans and progress. Opportunities for development positively impact employee satisfaction, engagement and retention. Including discussion starters, such as the questions below, into regular meetings is a good way to kick-start the process of incorporating employee development.

• What is your favourite part of this job?
• How could we better use your talents?
• What else would you like to be doing?
• How can we challenge you?

3. 360^o feedback assessments

Using multiple sources of feedback through 360^o instruments reduces the potential for conscious or unconscious bias in evaluating employee performance. It also provides employees and managers with a well-rounded view of their skills, behaviors and development needs from peers, subordinates, customers, team mates and project leaders. To be effective, 360^o feedback assessments must be reliably anonymous, with care taken to use the feedback as part of a development plan rather than strictly as a performance rating mechanism. 360^o feedback need not be limited to formal assessments. Creating a supportive environment where teams are enabled and encouraged to provide and accept constructive feedback from one another will foster continuous improvement and self-management.

4. Project reviews

In a business rhythm that is driven more and more by projects and initiatives rather than the calendar, performance management limited to traditional annual appraisals loses impact and relevance. Instead, consider conducting discussions during and at the conclusion of projects to review results, uncover lessons learned, identify best practices and plan for continuous improvement. This format provides a less-threatening environment for feedback from multiple sources that can be immediately applied and practiced. Regular project reviews also provide opportunities to discuss and address potential project issues before they become serious, thereby increasing probability of success, both for the project and the employees involved.

Documenting and sharing project review observations and conclusions will provide useful and objective information for performance evaluations and individual development planning.

5. Check-ins

Since the four practices described above all involve some sort of meeting between manager and employee, the check-in is more about how to stay in touch and create an open, trusting environment of feedback and support between manager and employee. Check-ins are best when they are scheduled every one or two weeks and incorporate the first four practices as appropriate.

As business needs and generational expectations continue to move from command and control to collaborative leadership, utilizing these five best practices will help to transform the annual performance review into ongoing developmental processes enabling productive and satisfying working partnerships between managers and employees that benefit the entire organisation.

To learn more about how to transform the employee performance review process, download the eBook “5 Ways to Transform the Annual Performance Review”.

Are you interested in experiencing how cloud-based performance management software can help transform your performance management process? Find out more about Halogen’s performance management solutions here or book your complimentary trial today.