Performance management is an essential aspect of any organization. It helps managers to evaluate the performance of their employees and provide feedback to improve their work. However, traditional performance management systems that rely on ratings have been criticized for being time-consuming, demotivating, and ineffective. In recent years, many companies have started to shift their focus from ratings to feedback-based systems to improve employee performance.
Take, for example, Deloitte, which has redesigned its performance management system to focus on real-time feedback and individualized learning. The new system is designed to be agile, one-size-fits-one, and focused on fueling performance in the future rather than assessing it in the past. The system has no cascading objectives or once-a-year reviews. Instead, it relies on weekly check-ins with managers to keep performance on course and produce better insight through quarterly or per-project “performance snapshots”. These check-ins and performance snapshots are augmented by other processes (surveys and talent reviews, for example) that, in the aggregate, are intended to measure, reward, and improve performance
Deloitte's new approach is based on three pieces of evidence: a simple counting of hours, a review of research in the science of ratings, and a carefully controlled study of its organization. The company discovered that the organization was spending close to 2 million hours a year on performance management, and that “idiosyncratic rater effects” led to ratings that revealed more about team leaders than about the people they were rating. Idiosyncratic rater effects itself is a phenomenon in which ratings given by different raters for the same performance or behaviours might not align with each other due to differences in the perception of raters. Thus, mere ratings might not be sufficient in capturing and improving employees’ performance.
Next, from an empirical study of its high-performing teams, the company learned that three items of their performance measurement tool correlated best with high performance for a team: “My coworkers are committed to doing quality work,” “The mission of our company inspires me,” and “I have the chance to use my strengths every day.” Of these, the third (“I have the chance to use my strengths every day”) was the most powerful across the organization. This provides additional proof that when employees are given opportunities to learn about their skills and exercise their capabilities, they are more likely to engage in high-performing behaviours.
Deloitte’s feedback-based performance management system has been successful in improving employee performance and creating a culture of continuous improvement and growth. According to Deloitte Insights, 90% of companies that have redesigned performance management see direct improvements in engagement, 96% say the processes are simpler, and 83% say they see the quality of conversations between employees and managers going up
In addition to Deloitte, many companies have also started to shift their focus from ratings to feedback-based systems to improve employee performance. Here are some examples of those companies
The company adopted its web-based tool for giving and receiving feedback to increase informal performance conversations
The Minneapolis-based food producer and distributor has been using a feedback-based system to engage and motivate its 160,000 employees around the globe
The company abolished stack ranking and annual performance reviews in 2012 and started using a frequent check-in system that allows managers and employees to discuss their goals and review their performance regularly
The company eliminated forced rankings and adopted a solution that was more in line with their new performance management perspective
Benefits of Feedback-based System Appraisals
Feedback-based systems have several benefits that can help organizations improve employee performance and create a culture of continuous improvement and growth. Firstly, feedback is a critical component in improving performance organization-wide and is a two-way street. Not only is it important for managers to regularly provide feedback to their direct reports, but employees should share it with their managers and their peers as well. As the amount of feedback exchanged increases, it provides managers with insights into their leadership skills. It also gives employees insights into their work from the people they work most closely with. And positive feedback has proven to have a positive impact on your business outcomes
Secondly, by implementing an easy and structured way to request feedback when it matters most, managers are actively putting people in the driver’s seat of their development instead of having to constantly initiate the process. With this shift, people become accustomed to requesting feedback whenever they want or need it, creating a workforce of empowered employees, while also taking pressure off HR
Thirdly, a strong feedback culture gives employees the tools to address issues before they escalate. When people don’t feel able to share feedback even on the smaller things, over time they can transform into workplace conflict.
Lastly, feedback-based systems can increase employee engagement. When employees feel comfortable sharing, asking for, and receiving analysis of their performance, managers can expect notable changes in how a company operates. Employees are more likely to be engaged and motivated when they feel that their contributions are valued and that their opinions matter.
How Companies can Adopt Feedback-based System Performance management
Adopting feedback-based systems in performance management can be a great way to improve employee performance and create a culture of continuous improvement and growth. Here are some ways companies can adopt feedback-based systems:
Encourage ongoing manager-employee feedback throughout the year
Create a mutual understanding of what type of feedback employees need to be successful and enable them to own and schedule feedback conversations by educating them on the types and frequency of dialogue that can occur.
Develop a framework for assessing future performance
Assess employees’ development readiness — their capacity, ability, and willingness to take on professional development at a given point in time — not just performance, and align coaching conversations and support to their true needs.
Gather feedback from co-workers on how employees help fellow team members
Guide managers on how to identify sources of feedback based on who knows an employee’s work, rather than limiting feedback to the employee’s formal relationships, such as their work colleagues. Peer assessments are a good way to hold employees accountable for demonstrating critical behaviours and get a more comprehensive understanding of their contributions.
Promote discussions beyond individual contexts
Encourage team members to reflect and develop their individual goals for teams to review for alignment, impact, relevance, and overlap. Similarly, create a space for employees to provide feedback to managers to reinforce employee agency and power in feedback conversations.
Increase transparency of skills across a team
Encourage managers to communicate behaviours and skills needed for future success. Providing feedback on what skills their employees need for the future, in addition to merely reflecting on their past accomplishments, encourages cohesiveness, coaching, and on-the-job development.
Create a simple approach to seeking and requesting feedback: Encourage employees to recognize their peers’ contributions to create comfort and confidence regarding feedback exchanges. Frequent prompts to focus managers on recognizing and reinforcing good behaviours throughout the year can also help.