Being at the top of your game as a HR leader is an amazing feeling – your people are thriving, and the organisation’s culture is contagious. You feel like you’re sailing on calm seas with the wind in your sails.
But building and managing high-performing teams requires focus, teamwork, determination and empathy. You must define what success looks like and empower your people to reach it.
This is where effective performance management strategies are paramount.
Sage has conducted a 360-degree view on current performance management. How is it performing? Are goals being achieved? What are HR and business leaders reporting?
We’ll be featuring some of the very interesting findings in this article.
We’ll be covering the following:
- The future of performance management: Key findings summary
- About the research
- Current performance management
- The future of performance management
- Solving performance management challenges: What companies need to do to get ahead
The future of performance management: Key findings summary
58% of HR and business leaders believe performance management is more important now than ever, with 74% saying hybrid working has made it harder. 75% also feel their performance management processes are outdated.
Further thoughts from respondents:
61% of HR leaders feel their performance management approaches aren’t an efficient use of their HR team and managers’ time.
59% reported they’re not using performance indicators to manage succession planning.
59% are not using data to inform performance discussions.
57% feel their current approach is not equitable.
55% cannot spot high and low performers.
75% think the annual appraisal process is out of date.
86% of HR leaders believe the focus in future will be less on hours worked, and more on business impact.
84% believe goals will be more linked to diversity, equity and inclusion (DEI) strategies.
69% of HR leaders believe performance ratings should be abolished, and 71% feel the nine-box grid will become obsolete.
About the research
Sage polled 1,000 HR and business leaders from SMEs across the world to ascertain how performance is measured, what’s important to them and how they see the future.
The research focuses on the following:
Performance management: what current processes look like.
What the future looks like for performance management – what HR and business leaders desire in future.
Solving HR challenges: what companies need to do to get ahead.
The respondents’ answers provide a full 360-degree view of the good, the bad and the ugly of performance management, and what a future with data and technology could hold.
Current performance management
In a nutshell, it isn’t fair.
Only 26% of companies admit to having a company-wide consistent approach to performance management, and a mere 41% of respondents said their performance management system was effective at fostering equity.
59% of HR and business leaders reported that they’re not using data to inform performance discussions and 55% cannot spot high and low performers.
A misalignment of company goals
Whilst businesses spend time devising business strategies, only 29% are linking individuals’ performances to their goals and values.
Only 40% of HR and business leaders report clear expectations being currently set in performance management discussions.
69% of HR leaders feel performance ratings should be abolished.
Lack of clarity in employee objectives
As one CFO said, “we need to set clear expectations for behaviour and performance and explain how success will be measured”.
A meagre 7% of organisations say they currently provide pay and promotions reviews, while 52% said their performance management processes are not valuable in evaluating performance, and only 44% are using their systems to identify organisational skills gaps.
With only annual reviews, employees aren’t being provided with constructive feedback during the year.
Only 27% of HR leaders report ongoing feedback being continuously collected.
A waste of time?
HR leaders admitted that their current performance management strategies are unnecessarily time-consuming. A mere 39% say their current performance management systems are an efficient use of HR and managers’ time.
The future of performance management
The future is undoubtedly in tech.
When it comes to tech, HR and business leaders are unanimous, with 95% believing technology will enable successful future performance management.
“Technology toolkits are imperative; there is no alternative, not just to execute the performance management programmes, but also generate data that is precise and intelligent,” stated one HR respondent.
This is vital considering only 59% of HR leaders aren’t currently using data to inform performance discussions.
An equitable system
Through accurate visibility of the workforce, organisations will be better placed to make decisions on promotion, compensation, succession planning, learning and development and addressing skills gaps.
89% of HR leaders said more and better data will be used to inform performance management in the future.
Over 80% say goals will be fairer across the board and compensation will be more timely e.g., delivered at project completion, rather than at the year’s end.
Only 26% of HR leaders say they currently have a consistent company-wide approach.
Aligning company goals
86% of HR leaders believe the focus will be less on hours worked and more on business output, and 84% believe goals will be more intrinsically linked to DEI in the future.
More than 70% of HR leaders feel the rigid nine-box grid to evaluate performance will become obsolete as organisations become more flexible in their performance management.
In the future, 83% of companies will make their goals personal as well as professional.
The end of the annual review
In a fast-paced environment, employees need constant monitoring, constructive feedback, open dialogue, and targeted training to ensure they’re hitting their goals and developing more quickly.
82% of HR leaders say continuous discussions will have replaced annual appraisals in the future, and 83% feel feedback will be automated.
Saving HR time
63% of HR leaders forecast spending much less time on performance management in the future, as the entire process becomes automated, freeing up valuable time to focus on employee experiences.
Over 80% of HR and business leaders feel that employee experiences and satisfaction will become even more of a focus as the HR function moves away from admin towards a more strategic and people-centric role.
Solving performance management challenges: What companies need to do to get ahead
So, what does the data mean for HR leaders? What should be on HR’s agenda today?
Firstly, performance management processes should be automated. 89% of HR leaders believe this will be the case in the future, freeing up HR’s time from cumbersome admin.
Secondly, use insights to make fair and data-driven decisions. 86% of HR leaders believe performance management will be more objective in the future, which will reduce bias and inaccuracies.
Next, put feedback at the heart of what you do. Fewer than 30% of HR leaders say performance management is based on employee and manager feedback.
Performance management should be made more equitable. Only 43% of HR leaders say their current approach is equitable. It’s impossible to get the best out of your people without a fair system.
Empower managers is key
Fewer than 30% of companies say their performance management system is designed with input from employees and managers. Enable your managers to continually have discussions and set clear expectations for employees.
Finally, incorporate performance into succession planning
A Mere 37% of organisations are using performance indicators to manage succession planning, and less than half combine succession planning with recruitment data to identify gaps.
Being armed with accurate real-time data will enable HR and business leaders to plan more effectively.
With these steps, organisations can ensure employees are at the heart of what the business does and can truly be listening to and providing what they need.
