The annual performance appraisal is dead. Largely an industrial process from another era it has been progressively phased out by large and small organisations over the last 30 years. While team members appreciate receiving constructive feedback from their manager, the traditional process is laborious, expensive and slow moving in a modern organisation structure and business model.
Three major changes that require a different approach are (Cappelli & Tavis):
The battle to recruit and retain top young talent
Over the last decade, the battle to find the best talent has intensified in all levels of business. In small businesses, it is often more difficult to find the “A player” required for the strategic direction to come to fruition. Once these new key members are onboard, an annual performance appraisal system is not going to meet the expectations of these ambitious recruits. It's so hard to find and retain talent that the trend is towards talent and career path development.
This needs to happen in a mutually agreed timeline and with objective and achievable milestones. The first month, 90 days, six months, and so on. The agreement needs to be in writing, mutually agreed and regularly reviewed. The successful small businesses I support have daily reviews and feedback sessions with recruits and then weekly reviews once they are established and up to a minimal level of expected performance.
Young, ambitious and capable “A players” will love this regular and positive feedback and development. “B players” will hate the scrutiny.
Fast moving business and quick turnaround
Today’s fast-moving talent demands regular feedback and a forum to give input. The current business environment also requires this. Annual or semi-annual appraisals are at odds with these requirements. Tech companies using agile and sprint methodologies have been at the forefront of this approach.
The biggest advantage of more regular mini-reviews is that concerns and performance shortfalls can be addressed quickly and turned into a positive experience. Its human nature to want to give and receive feedback so that the team and each member are heading in the same direction and at maximum capability.
Turnaround and accountabilities
Increasingly individuals are working as part of a team, and this can make individual assessment more difficult. Some people can do this, and some find it difficult and so it introduces different criteria and core competency requirements. The performance goals need a mix of team-based and individual-based measurable outcomes. The failure of the team to deliver may not reflect badly on any one individual; just on the ability of them all together to deliver. Alternatively, a stellar performance by a team may not mean all the team members are stars.
What is a progressive response which a small business can adopt?
Business owners I work with are often reluctant to manage the performance of their team comprehensively because the talent is so hard to find and retain. However, my experience has shown that providing a regular feedback loop and forum for feedback can turn this experience into a positive outcome for both parties. Here are some simple steps a small business owner can implement at a very low cost.
Develop a clear strategy that is communicated at regular intervals to the team. The mission, Vision, Values and strategic direction and strategic imperatives. Its acceptable to evolve this message gradually but regular sharp turns and change of priorities should be avoided.
Make sure this corporate view can overlay the individual talent development plans for each staff members. This way, each person will be aligned and engaged.
Enforce Values and Culture through Reward and Recognition
The company values and culture are key components of the strategy. An outward expression of this is the reward and recognition system. The reward and recognition aimed at enforcing the values and culture.
A fast-moving environment will give recognition daily, weekly, monthly, quarterly and annually. Surprisingly it does not always have to be monetary, just recognition. This will enforce the culture.
Performance Management Plans
Performance management plans can be implemented for low performers. It's important to isolate the key areas that need to be improved and give the member a reasonable chance to be successful. This is easier for sales professionals (Cespedes and Marsh) compared with back office functions.
Well implemented programs usually result in improved performance and retained staff. Too often the programs are resisted because it is seen as trying to get rid of staff. Have a simple process where performance management becomes automatic and make it as positive as possible. Of course, if the person is in the wrong role and is moved or removed, then this should be positive for both parties.
In conclusion: if you want a high-performance culture, don’t wait a year to give feedback or receive input. Conduct short reviews regularly and stay agile. Align your team with your strategy and make sure they understand their individual context in the journey.
The Performance Management Revolution – HBR – October 2016 – Peter Cappelli, Anna Tavis
Find the right metrics for your sales team – HBR – August 2017 – Frank Cespedes, Bob Marsh