Sabrin Chowdhury and Owain Williams* say fairness remains the foundation for effective performance management, and it’s driven by four important conversations.
It is no surprise that employee stress and anxiety are hitting all-time highs amid the pandemic.
Ongoing uncertainty coupled with complex family needs and potential financial strain presents a unique challenge for everyone.
Recent research from SHRM highlights that work-related concerns have left more than 40 per cent of employees feeling burned out.
Upcoming year-end performance appraisals are a potential crucible for these concerns.
Indeed, some organisations have decided to skip the process altogether.
One technology company, which normally conducts performance reviews twice a year, suspended them for the first half of 2020.
We believe this is a pivotal moment for organisations to improve their performance management processes.
Based on our research, fairness remains the foundation for effective performance management, driven by four important conversations.
As we head into the final weeks of 2020 and look to next year, it is imperative that leaders get these conversations right:
Goal setting.
Many goals may no longer be relevant due to discontinued projects and fast-changing priorities.
Having year-end performance conversations without relevant or updated goals could result in poor outcomes.
Managers and teams should update goals on a weekly or even real-time basis and discontinue ones that no longer apply.
Discussion becomes an ongoing alignment on what adds the most value and what are markers of success.
Managers should move beyond annual KPIs and introduce a more agile, quarterly rhythm.
This will help avoid planning paralysis and more effectively manage distributed teams.
Furthermore, previous behavioural goals or competencies may need to be reprioritized.
Adjust and emphasise desired behaviours, such as staying close to customers, being entrepreneurial, or sustaining morale and culture.
Ongoing development.
Remote working means many managers feel they don’t have good visibility into employees’ performance.
Employees may feel more anxious, often amid circumstances (e.g., caring duties) that might mean they can’t perform as usual.
Therefore, in addition to year-end appraisals, organisations should also introduce new ways of working such as daily check-ins/-outs and regular retrospectives.
It may be tempting to deprioritise or stop feedback sessions altogether, but organisations should reinforce their importance and provide guidance on how to conduct them remotely.
This is an opportunity to instil a more permanent feedback culture.
Year-end appraisal.
Focus on rewarding the clear over-performers while developing others instead of trying to differentiate the broad middle.
Defer or flex the timing of formal reviews if needed but ensure that there is still a mechanism in place for evaluation.
Total rewards.
In many organisations, total rewards may need to be revised to reflect both financial and non-financial benefits.
Employees may be sensitive and interpret any changes as a step towards layoffs.
As much as possible, organisations should send positive signals by continuing to reward and promote the highest performers.
Also consider where non-financial benefits could be used to support employees.
Emphasise that performance management is about development and growth and not a backdoor to justify headcount reductions.
Across all four conversations, we are already seeing the crisis accelerate movement towards more modern performance management practices. These include:
- Personalised, on-demand, data-driven performance feedback for all employees to “nudge” them towards different behaviours in real time.
- People analytics to mine the trove of data that organisations now generate.
- Stronger emphasis on team, rather than individual, performance as processes and deliverables increasingly depend on cross-functional cooperation.
Yes, the pandemic is challenging, but several clients report a newfound clarity of purpose.
If employees are burned out, hold more frequent feedback discussions to understand how to best support.
If business is volatile, take that into account during appraisals.
And if social turmoil has changed expectations, reflect on where bias may be showing up as you update goals.
This crisis has not changed the fundamentals of performance management.
But it is accelerating the evolution towards an approach that is more data driven, flexible, continuous, and development oriented.
*Sabrin Chowdhury supports organisations on a range of strategy and talent topics at McKinsey & Company. Owain Williams serves financial institutions on organisation, people and strategy topics to increase their efficiency and effectiveness at McKinsey & Company.
This article first appeared at mckinsey.com
