To check employee performance, the typical practice is to hold a performance review once a year. During these reviews, employees evaluate their own performance. They also receive evaluations in the form of numeric scores from their managers. After listening to feedback from their peers and team leads, employees may then get a raise. Or they may get fired if their performance wasn’t satisfactory.
A performance review is generally a single yearly conversation. No wonder it’s irrelevant, meaningless, and a waste of time.
In fact, only 14% of businesses are happy with their current performance management system. Most of these systems have been in use for more than 60 years. But the needs of today’s workforce have changed. And the changing nature of organizations creates new business opportunities.
In this article, we’ll talk about how to build a next-generation performance management solution that provides measurable and meaningful insights into employee performance while meeting the needs and expectations of today’s employees.
Millennials are the largest generation in the American workforce. They’re tech-savvy, creative, and picky about where they work. To do a better job of keeping them, companies need to rethink their performance management strategies.
Traditional performance management solutions are designed for HR managers only. They are great at automating performance reviews and storing employee data. But they don’t help employees feel more connected to their organizations.
One of a company’s strategic goals is to keep key talent. Tracking performance reviews isn’t enough to achieve this, however. Workers want to know that their company values and appreciates them. Frequent feedback and recognition for accomplishments helps increase employee retention.
From a top-down hierarchy and ratings, we’re shifting to a bottom-up and feedback-centric approach. Here are some of the differences between a traditional approach to performance management and the new approach:
Annual cycle feedback
Some companies have already started to change their approach to performance management by substituting traditional methods with something called employee engagement – because the more engaged an employee is with their company, the better their job performance.
These companies want agile, easy-to-use tools that help people feel more satisfied with their jobs.
Modern solutions for performance management are employee-centric. They’re essentially employee self-service systems. This means that all team members use them – not just HR managers. These systems provide:
- Real-time, consistent feedback
- Goal sharing and agile goal management
- Recognition of the most important people's achievements
- Integration with communication tools that people use every day
- Mobile access
To achieve results and improve performance, employees need to have well-defined goals. With clear goals, workers know exactly what they need to do and get more satisfaction from their work.
In many companies, goal setting happens only once per year. When the year ends, these companies revisit the goals they set a year ago. But often those goals are no longer relevant.
According to Deloitte, companies that look at goals every quarter see a 30% greater performance and retention than companies that look at goals yearly.
Your performance management system needs to help users manage their work objectives continuously. Employees should be able to set weekly, monthly, and quarterly goals. They also should be able to share their goals with managers and track progress.
To build goal management functionality, it's best to rely on a proven methodology.
Objectives and Key Results (OKR) is a management methodology that was created by John Doerr for Google in 1999.
The idea of OKR is to connect the work of employees to the company’s strategic goals. Objective is an ambitious goal that an entire organization wants to accomplish. Key Results are measurable tasks or milestones that define how a given employee can help to accomplish the Objective.
It’s important to have a limited number of Key Results so employees don’t feel overloaded. In the OKR framework, each milestone needs to have a deadline. Tracking progress toward goals makes it easier to stay focused.
BetterWorks uses the OKR system for its goal management functionality, setting goals that are bottom-up, cross-functional, and visible to the entire organization.
How can you develop goal management functionality for your performance management solution? Your system needs to let users:
1. Create goals
A user should be able to create goals and add measurable milestones to reach these goals. For example, here’s what a product manager’s goal might look like:
- Increase daily engagement with the product by 3%
Measurable milestones for this goal may include:
- Interview 100 customers by October 1
- Set up 10 A/B tests by October 2
As with Reflektive, you can let users set goals as public or private.
2. Update goal progress
Users should be able to track the progress for each of their goals and milestones and view what other people are working on. And they should also be able to see how their goals intersect with other people’s goals.
It should be convenient for employees to update their status. You can integrate tools that your target audience uses in their everyday work into your app. These can be tools for project management such as Trello, Asana, or Jira, or CRM systems like Pipedrive. BetterWorks, for example, integrates Gmail, Slack, and Salesforce.
3. Collaborate on objectives
You can add comments to let employees, colleagues, and managers discuss objectives. This is what Small Improvements does. When an employee posts a comment to Small Improvements, their colleagues are notified via email and Slack.
4. Schedule check-ins
The check-in is a regular communication practice introduced by Adobe instead of annual reviews. The idea of check-ins is to get employees and managers to have discussions about goals. This system helps keep the right people in the company. And it helps manage employees who aren’t succeeding in their work early on.
Check-ins helped Adobe make their employees more productive. Since Adobe began check-ins, their stock price has increased from about $30 to over $80. I don't know if it directly correlates with check-ins though.
Reflektive and BetterWorks both offer check-ins – short surveys that are completed by employees and shared with their managers. After an employee completes a survey, they get together with their managers for an in-depth conversation about their progress.
Ongoing feedback is the second pillar of modern performance management systems.
Providing feedback is critical to engagement and retention. But to be effective, feedback needs to be regular and on the spot. Millennials want immediate recognition of their efforts. And they value feedback not only from their managers but also from their peers.
There are many ways to put ongoing feedback functionality in your application. Let’s look at the feedback features offered by Reflektive, Small Improvements, and BetterWorks.
In Reflektive, users can request feedback from their managers or peers at any time. Managers can also request feedback on behalf of their employees. Gmail, Outlook, and Slack are used to notify workers when someone requests their feedback.
Using a one-on-one module, Small Improvements users can suggest talking points. These are issues that employees want to discuss with their managers. Talking points help create an agenda for a meeting. During and after the meeting, one-on-ones users can take meeting notes in the app to make sure they don’t forget anything important.
Recognition features are very important for a performance management system. Praising employees motivates them to work better and increases their productivity. Most existing performance management systems include recognition functionality.
Reflektive, for example, allows users to post positive feedback on a recognition wall in the application for all to see. These posts are also shared on Outlook, Gmail, and Slack.
Small Improvements offers fun kudos badges. Users can customize them and share them with everyone. Badges add gamification to the work routine.
360 degree reviews let employees receive feedback from their peers. In Small Improvements, employees can indicate who they want to review them. A reviewer then gets a notification to their email with a link to the review.
Reviewers answer questions and can view historical feedback about reviewees. This feedback puts the review in context and includes records of one-on-one conversations, praises, check-ins, and other forms of feedback.
The performance review as a separate feature isn’t necessary for a performance management system. Frequent feedback can substitute performance reviews.
However, people still use the term performance review. Reflektive offers users three types of performance reviews: self-assessments and manager assessments, 360-degree reviews, and check-ins or lightweight conversations.
Small Improvements performance reviews summarize all feedback users have collected. This includes reviews from peers, feedback related to goals, and notes from one-on-one meetings.
Peer feedback. Image source: BetterWorks
The market for talent management software is very competitive. There are a lot of niche players and specific solutions. For example, BlackbookHR, tinyHR, and CultureAmp are solely focused on capturing feedback from employees.
Major human resources management software vendors include IBM, Oracle, Lumesse, Cornerstone on Demand, and SAP SuccessFactors. They offer complete cloud-based suites that cover recruitment, learning, performance management, talent management, and analytics.
Core features of these systems are often commoditized and complex and are often integrated with enterprise resource planning software. And this makes users’ lives even more complicated.
Small providers focus on innovation and simplicity – exactly what modern consumers want.
According to a study by Human Capital Trends, ease of use and an integrated user experience are the top criteria for customers when it comes to buying HR software.
To beat the competition, your solution needs to offer a simple user interface and has to integrate with tools that employees use every day such as Slack, Gmail, and Outlook. Your performance management app needs to be employee-focused. And because the majority of your users will likely be Millennials, it needs to appeal to their preferences and needs.
If you’re looking to build an innovative solution for performance management, we would be happy to help. Read more about our services here.