In most cases, employee performance is appraised broadly. Managers form a general impression of work over the course of an entire year (with some amount of bias toward what has occurred most recently). At the same time, a great deal of precision is applied to that impression, as anyone who received ratings with decimal points or many layers of ratings can attest.
With the rise of modern approaches to performance, however, that balance has begun to shift.
These days, performance itself has become the more precise concept, as companies seek out innovative ways to help employees contribute to the business and develop themselves. Performance, feedback, and recognition occur in real time, generating rich data along the way. Interestingly, the appraisal process has become more general, grouping levels of performance into broad categories while still meeting the needs of compensation and workforce planners.
There are several converging trends that have led to this shift.
Chief among them is the rise in tools and social technologies available to employees that support richer ongoing conversations about performance and growth. Those technologies complement the emphasis that many organizations now place on creating a positive employee experience and cultivating more human workplaces based on autonomy and empowerment.
One example of this approach to performance is Patagonia, which was featured on a recent HCI podcast.
Two things about Patagonia’s process stood out as I was listening. The first is that performance is largely employee-driven, the organization focused on providing the tools that facilitate goals, conversations, and feedback around performance. These tools help to establish both a cadence and continuous improvement mindset. The data provides insight on both current progress and future direction.
The second is the clear separation between discussions around base pay and merit increases (reflecting one’s core skills and abilities) and variable pay and bonuses (reflecting one’s specific contributions over the year). For the purposes of the latter, a majority of employees fall into a group defined by consistent performance (operationalized as having met at least three-quarters of one’s goals). The simplicity of the approach allows for much more focused and ultimately more developmental conversations.
I believe we will see similar features in the solutions that eventually replace the traditional performance review, balancing the needs of individual employees to grow and meaningfully contribute, with the needs of organizational and compensation decision-makers. These approaches will be employee-driven, data-rich and process-light.
How has your company responded to the changing nature of performance?
As Globoforce’s Vice President of Client Strategy and Consulting, Derek Irvine is an internationally minded management professional with over 20 years of experience helping global companies set a higher ambition for global strategic employee recognition, leading workshops, strategy meetings and industry sessions around the world. He is the co-author of "The Power of Thanks" and his articles on fostering and managing a culture of appreciation through strategic recognition have been published in Businessweek, Workspan and HR Management. Derek splits his time between Dublin and Boston. Follow Derek on Twitter at @DerekIrvine.