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5 performance management challenges and how to fix them

Performance management is an area fraught with misunderstanding for HR, managers and employees. Here's what HR and other leaders should understand to avoid making common mistakes.

Performance management can feel like one of the most difficult aspects of talent management.

As an HR leader, you understand that you need to cultivate and foster the best in your workers. On the other hand, you also know performance management challenges are widespread.

Aside from acquiring great talent to begin with, there's nothing more important than focusing the efforts of employees on the objectives of the organization, said Kevin Kruse, founder and CEO of LEADx, a Philadelphia-based coaching platform.

"Are people working well on the things they're supposed to be working on?" Kruse said. "And how can we maximize their effort toward these goals?"

Performance management isn't only about presenting employees with their annual raises. It's about efficiency, productivity and profitability as well.

Yet, studies show that few managers and employees are satisfied with their organization's approach to performance management challenges.

For example, only 20% of employees believe their performance is managed in a way that motivates them to do "outstanding" work, and just 14% said their reviews inspire them to improve, according to the Gallup report "Re-engineering Performance Management."

At many companies, the HR teams, managers and employees actively dislike the performance review process, said Jason Renda, global senior HR business partner at UST Global, a digital services software provider based in Aliso Viejo, Calif.

"Managers hate meeting with employees and providing [feedback] on an annual basis," he said. "Employees hate receiving it, [and] HR hates administering it."

The reason for all this sourness is "because it's very rarely aligned to what the business is trying to do," he said.

To better understand this complexity, here are five of the most common performance management challenges and lessons HR can help the rest of the business understand.

1. Leadership buy-in and change management are missing

The majority of performance management challenges are people issues. That starts at the top and extends to the most junior employee.

Transforming the performance management process and implementing the necessary technology requires a C-level champion, specifically an executive who understands how yesterday's approach to performance management challenges isn't going to help the organization succeed in the future, Renda said.

Transformation happens on the front lines as part of daily workflow. The most thoughtful strategies or capable tools aren't of much value if line managers and employees don't embrace them.

"If you change the performance management process without the change management piece needed to drive adoption and acceptance, it's going to fail," Renda said.

2. Leaders mistake measurement for management

Too many employers regard performance management as a measurement exercise when, in reality, it's about feedback, said David Wilson, founder and CEO of Fosway Group, a U.K.-based HR industry analyst firm.

"It's about what actually helps improve performance," he said.

Companies must also include factors such as mission, improvement and other areas that raise performance levels for both individuals and teams into a performance management approach, he said.

"I think the first thing we have to do is think about it more holistically," Wilson said. "It's as much about improve and develop as it is about manage and measure."

3. Leaders view tech as the solution

Employers can't simply implement a performance management platform and consider their work done.

Addressing performance management challenges requires integrating both processes and tools into the organization's workflow. That makes the implementation of performance management technology a major transformation project, Renda said.

"You have to work with the business to understand how the company and the business is transforming itself," he said.

That understanding will help HR recognize the company's future workforce needs, he said.

"HR has to understand where your organization's going and how it's setting its overall organizational goals and how the talent would need to transform in the future," Renda said.

This means it's a mistake to equate technology with performance management.

"The technology isn't going to do the job for you," said Todd Holzman, founder and CEO of Holzman & Company, a leadership consulting firm based in New York City. "You still ultimately have to have the conversation and have it well."

4. Employees don't trust the process

Employee buy-in is just as important, and the key to earning that is transparency.

A common issue is that employees are confused about how they're rated. If employees view the rating system as mysterious or unfair, it is unlikely they will support the process, which is likely to affect other issues, such as employee experience.

This is true even if a system is ratingless.

Some employers have adopted ratingless performance management systems in the last few years, Renda said. These reviews don't include any kind of score or grade, or even descriptions such as "excellent" or "needs improvement." However, many workers believe managers are rating them somewhere within the performance management technology's back end. Only by educating them about the system's workings can you overcome that.

"You need to make sure that you explain how the technology is being used and what types of things a manager sees," Renda said. "You have to be very transparent."

5. Managers aren't trained

People are complex, and they bring that complexity to work. That means managing them and helping them improve are inherently difficult tasks.

"Most managers, by default, don't know how to do [performance management] well," Holzman said.

Many managers prefer to keep conversations comfortable and exert too much control, he said. Organizations do need to create an effective approach for addressing performance challenges, but leaders also need to make performance management a priority.

"[Organizations] have to equip and empower their managers to have fabulous conversations with their people about performance, and that has to be something they do almost every day, not just at the end of the year," he said.

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