Nearly 10 years ago, Harvard Business School professor James L. Heskett noted that performance reviews “rank alongside root canal dental work on our list of things we look forward to as managers and employees1.” Yet despite near-universal frustration with the process, the HR-mandated performance review has long been a mainstay in the modern business world.
It seems that this vestige of last century’s 9 to 5 is finally on its way out, however, with the traditional performance review now under the microscope. And while some firms have taken advantage of workers in a high-unemployment market, more and more are recognizing the importance of people, “the fifth P”, in maintaining a successful brand2.
A Shift in Employee Management
Google, Adobe and Microsoft have all stepped away from conventional performance reviews, but it’s not only trendy tech firms that are making the switch: GE and Deloitte also have opted to retire their long-standing review processes. These companies are not reinventing the wheel, though. Businesses gather oceans of data on their customers – their interests, their social connections and the kinds of promotions they respond to, for example – and have made an art of the customized consumer experience. Today, a growing number of organizations are realizing that the same data-driven process can be used internally, just as effectively, to maximize team output, productivity and engagement through innovative coaching and management practices.
Big Data in Action
This system, known as performance management, takes employee assessment out of HR’s filing cabinet and moves it into the workroom. In leveraging a more data- and analytics-driven performance management approach, organizations are realizing a number of benefits that range from greater employee engagement to the ability to respond to the increasing pace of change in today’s business environment. When ING Direct USA1 adopted a performance management system for its call centers, the organization collected data on everything from call content and call time to employee longevity3. Much of this personalized data across key performance indicators (KPIs) was available to each team member, and the transparency and actionable insights created an atmosphere of accountability and motivation that challenged them to self-correct. Because managers could see those same numbers, they were suddenly able to provide valuable frontline coaching for their staff. The data also allowed them to pinpoint employee weaknesses and provide support in those specific areas, rather than assign entire teams to formulaic training programs. The ongoing performance execution plan allowed ING to replace one-size-fits-all goals with individualized, realistic targets.
The result? The call center’s productivity increased, with After-Call Work (ACW) reduced by 11 seconds per call. Calls-to-sale decreased by more than two calls on average, and ING Direct USA found itself in the No. 2 spot on Forrester Research’s Customer Experience Index in 2012. Since then, the firm has automated a wide range of performance improvement activities, including coaching. The methodological approach underpinning performance management optimizes efficiency, increases workplace satisfaction and avoids many of the biases and pitfalls of human nature that accompany traditional performance review processes.
Forward-thinking Employee Improvement Plans
Some experts are now predicting that at least half of Fortune 1000 companies will drop numerical rank categories for data-driven policies over the next few years4. By and large, the decision to adopt a performance management approach isn’t just to keep up with the GEs of the world, as performance management is far more than a substitute for traditional human resources. It’s a way to align an entire firm, from front line employees to executives in the C suite, around a central mission and goal. To stay ahead in today’s constantly fluctuating business world, an organization needs to be attentive, agile and focused.
That’s the beauty of the data-driven approach: It is fair, it is efficient, and it yields concrete results. It can be put to work in nearly every industry5. It supports a range of proven methods that promote a dynamic team culture of continuous performance improvement. And the side benefit? You’re unlikely to hear your organization’s performance management system compared to dental surgery.
1 Jim Heskett, “What’s to Be Done About Performance Reviews?”, Harvard Business Review, http://hbswk.hbs.edu/item/whats-to-be-done-about-performance-reviews
2 William J. McEwen, “The Fifth P”, Gallup, http://www.gallup.com/businessjournal/799/power-fifth.aspx
3 “ING Case Study”, NICE, http://www.nice.com/sites/default/files/nice_ing_direct_nt_convert.pdf
4 Kris Duggan, “Why the Annual Performance Review is Going Extinct”, Fast Company, https://www.fastcompany.com/3052135/the-future-of-work/why-the-annual-performance-review-is-going-extinct
5 “Performance Management”, NICE, http://www.nice.com/engage/workforce-optimization/performance-management