As HR continues to play a critical role as a strategic partner within organizations, McLean & Company has found that the traditional approach to performance management (PM) is becoming ineffective and risks negatively impacting organizations through decreased productivity, performance, and engagement. While many organizations believe an agile approach that focuses on continuous goal setting and feedback is the solution to managing performance, agile is not a cure-all to PM challenges. To assist HR leaders in customizing the building blocks for performance management, McLean & Company has publicly shared its data-backed blueprint, Modernize Performance Management.
The firm’s research explains that modern PM offers a middle ground between traditional and agile approaches, combining the strengths of each while mitigating their risks. For example, while there has been considerable debate around the use of ratings in performance management, performance reviews and ratings frequently provide critical input to other talent programs and compensation decisions. However, there are opportunities to adjust current practices to improve ratings use or explore other options based on the organization’s needs and goals. A modern approach includes employee self-assessment and, if selected for inclusion by the organization, ratings that are more accurate and motivating.
“There is no one-size-fits-all approach to performance management. Modern performance management should not be seen as a failure to become agile, but rather as a successful alternative to traditional performance management,” says Grace Ewles, director of HR Research & Advisory Services at McLean & Company. “The process may vary not only across industries, but even within different departments or employee segments in the same organization. Modern approaches to performance management provide the flexibility and freedom to adapt the process based on different groups’ unique needs and context while maintaining the integrity of the broader framework.”
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To help HR leaders shift to a performance management approach that addresses their needs, McLean & Company has developed a four-step process, outlined below:
- Prepare to change the PM framework. Step one includes assessing the current state of the organization’s PM framework, determining high-level goals and metrics, reviewing the PM building blocks, and obtaining buy-in from key players.
- Design the PM framework. Step two guides HR leaders through customizing the PM process, defining expectations, determining a goal-setting model, and selecting competencies with accompanying proficiency levels. This phase also helps determine if and how crowdsourced feedback will be incorporated and decide whether ratings will be included.
- Align related HR programs. Next comes aligning total rewards and talent management programs with the new PM framework, building learning and development initiatives into the PM building blocks, and identifying how the framework will reinforce organizational culture.
- Communicate and train to manage change. The fourth and final step will support HR leaders in determining a rollout plan, creating an action and communication plan, and preparing to address pushback. This phase also includes outlining accountabilities for HR, training managers and employees on the new PM framework, and remeasuring to confirm goals have been met.
McLean & Company advises that performance management in isolation will not move the dial for an organization’s overall performance and that HR leaders must ensure that the PM framework is woven into talent management across the organization. The firm also cautions that getting rid of ratings will not necessarily make performance management fairer. Evaluating performance inherently involves judgment on the part of manager, which can introduce biases, so it is important to ascertain that standards for evaluation are fair and applied consistently.
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