Three out of four HR professionals view the implementation of a performance management system (PMS) as a medium-to-high priority task. However, only 11% rate their existing processes as ‘excellent’. Read on to learn about why things go wrong and how you can fix them.
A well-oiled performance management engine helps companies grow by encouraging individual talent and improving employee outcomes. It also helps resolve problems through learnings from past missteps and “performance management fails”, while identifying potential for advancement. However, not all performance systems are created equal. This article explains 22 common reasons why performance management systems fail.
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1. The Wrong KPIs
A Key Performance Indicator (KPI) is a benchmark that measures how successfully a company is meeting its stated goals and objectives. KPIs, if correctly identified, can help build robust performance management strategies and support fact-based decision-making. Companies that are not using the right KPIs will find it difficult to meet their performance objectives.
KPIs should ideally provide a clear picture of a company’s current performance in near-real time and aid managers in making smarter decisions that improve operational task management. KPIs are beneficial only if they provide mission-critical, relevant data.
Solution: It is advisable to adopt an objectives and key results (OKR) system, measure performance against fixed goals, and monitor progress using a performance management system.
2. Siloed Systems
As a company grows, its performance management processes could become fragmented with different teams pursuing different goals, and performance data residing in silos with no interoperability. This could result in an ineffectual performance management system.
Solution: By adopting cloud-based performance management products, it is possible to set up interconnected and extensible systems that work together toward achieving shared objectives.
3. Annual Appraisals That Lack Focus
Under an annual appraisal system, managers conduct reviews only once a year instead of giving employees regular and timely feedback throughout the year. As a result, people invest a significant amount of time and effort without validation on whether or not they are on the correct track. Employees are not given enough support where there are performance difficulties.
Solution: Adopt a continuous performance management system where managers offer prompt feedback that is contextual and relevant.
4. Recency Bias
One of the main reasons performance management fails is recency bias. This is a type of unconscious bias that arises when supervisors evaluate only an employee's most recent behavior rather than their long-term contributions. For example, if a top performer makes a mistake, their previous achievements may be overlooked and not accounted for during reviews.
Solution: When completing the performance evaluation form, it is critical to assess the outcomes achieved over the full review period. The performance management system should enable managers to do this by providing all the relevant information.
5. Unstructured Evaluation Processes
The absence of a structured blueprint is one of the reasons a performance management system may be failing. If a company does not have a well-designed performance management framework, it will struggle to achieve consistent outcomes, and sustain business continuity, especially during challenging periods.
A structured performance evaluation process should lay down clear guidelines on goal setting such as what to measure and how to reward employees. It should have contingency plans in place to maintain business and performance continuity during disruptions.
Solution: Your performance management system should give equal weightage to the qualitative and quantitative aspects of employee performance to be truly comprehensive.
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6. No Reward Policy
This problem is typically seen in small-to-mid-sized organizations where it is assumed that employee contributions are verbally and informally recognized during the course of work. However, rewards are essential to ensure your staff is engaged, motivated, and excited about their future with the company.
Solution: The performance management system should incorporate a fair and objective rewards system that is directly linked to employee outcomes.
7. Lack of Communication
Regular feedback boosts employee engagement, improves manager-employee communication, and drives productivity. In the absence of frequent two-way communication, employees could lose clarity on goals, which could lead to miscommunication and general disengagement from work. Weekly one-on-one sessions, team meetings, anonymous feedback, and two-way conversations where employees can also voice their opinion are key to a successful performance management system.
Solution: Feedback must not only assess and expose performance gaps, it should also outline clear steps for improvement.
8. No Social Recognition
Social recognition is a cost-effective way to boost employee morale and engagement. It refers to the practice of appreciating employee efforts in front of their peers. Social recognition puts the spotlight on the employee’s talent, capabilities, and contributions, motivating them and inspiring others.
Solution: Create an organizational culture that encourages employees to do more by recognizing their efforts and praising their contributions.
9. Inability To Execute Performance Management Design
Performance management decisions are often made by business leaders and are then passed down to employees. The failure to communicate these to employees can result in a broken performance management system. Operational stakeholders must be sufficiently empowered to execute plans effectively.
Solution: Team leaders should be empowered to motivate employees and handle the performance management process for their teams.
10. Outdated Performance Management Programs
While each company is unique and has its own approach to performance management, it is important to keep pace with market trends and emerging employee demands. Years ago, leading businesses like Amazon were confident that annual reviews and a “minimize weaknesses” model were the cornerstones of optimal performance. Today, the company has shifted focus to celebrating strengths rather than the absence of weaknesses to help provide positive reinforcement.
Solution: Adopt efficient performance management systems that keep up with evolving employee demands and are designed to meet their needs.
Read more: Top 10 Employee Engagement Trends
11. Following Outdated Processes
Despite the availability of software solutions, several businesses continue to rely on manual processes and spreadsheet-based performance records. This makes it harder to conduct evaluations and spot performance patterns and anomalies. Data from spreadsheets exist in silos and are almost impossible to scale beyond a point. This also takes up a disproportionate amount of the manager’s and HR’s time, leaving them little time to spend on engaging with employees and making strategic decisions.
Solution: Use cloud-based performance management software, which provides an easy and cost-effective way to carry out performance management tasks. The system can be accessed from any location and device, which makes it ideal in a hybrid work environment.
12. Ignoring Learning and Development (L&D) Programs
In addition to organizational goals, HR should keep employee needs in mind while designing a performance management program. Each member of a team has a distinct and important role to play, which means that individual talent needs to be nurtured. It is so important to tie learning and development to performance management. During feedback, as managers highlight different areas for improvement, employees should be enabled to address skills gaps through L&D.
Solution: The L&D team should work together with HR to upskill employees so that they can achieve their performance goals.
13. Absence of Two-way Communication Between Employees and Managers
Performance management should not be only a top-down process. Although senior executives and HR handle the performance management design, employees should be able to share any ideas they may have, and flag what is blocking them from achieving their goals.
Solution: Create a two-way communication system, where employees have the confidence to openly discuss their problems.
14. Using Clunky, High-maintenance Legacy Technology
Using legacy technology is one of the most common reasons why performance management systems fail. Managers and staff shouldn't have to spend several hours learning complex procedures and technologies or searching for performance-related data and forms. Archaic systems that are hosted on-site lack an intuitive user interface and customization and require constant maintenance, which can prove costly. This can force HR to use manual processes, which will cause unnecessary delays and bring down the return on investment (ROI).
Solution: Install modern performance management software that is easy to learn and use. It should also incorporate technologies such as AI to help reduce the effort needed in repetitive tasks.
15. Focus On Short-term Outcomes
When a company focuses only on short-term outcomes, it may be ill-equipped to handle future and unexpected challenges. It may also cause HR to make decisions detrimental to employee wellbeing. Therefore, it is important to build a sustainable performance management plan that can project future requirements with some accuracy. For example, an employee’s capabilities may not be relevant for an ongoing project but could be useful in the long term.
Solution: Companies must focus on employee development, keep long-term goals in mind and prepare for the future alongside working towards short-term goals.
Read more: Top 22 Ways to Improve Employee Productivity at the Workplace
16. Restricted Feedback Channels
Without ready-to-access feedback channels, it is likely that managers will put off communicating with team members, and, in the process, fail to share valuable performance insights. This is particularly true for in-the-moment feedback, where managers reach out to workers in the middle of or right after a task.
Feedback channels include email and workplace instant messengers, as well as cloud-based performance management software that can have a built-in feedback delivery and analysis module. These channels make it simple to coordinate and consolidate information.
Solution: Adopt multiple communication channels to improve the effectiveness of the feedback process. A modern performance management solution will allow you to compare the data obtained, track trends, and create target-oriented reports.
17. Insufficient Buy-in From Leaders
Several organizations slip into a ‘set-and-forget' approach to performance management. The leadership crafts the performance management framework, signs off on it, and hands it over to HR and middle management for execution. However, there is no real involvement on a day-on-day basis. Without buy-in from company leaders, the performance management process will struggle to stay adaptive and agile.
Solution: Managers must share regular performance reports with senior management, point out areas of improvement and opportunities, and make sure that the framework is aligned with the company’s overall goals.
18. Not Adapting to Hybrid Work
Today, a primary goal of performance management is to build and increase team members' performance effectiveness in a hybrid work model. The manager and the team member will have to collaborate from different locations to plan, monitor, assess, and evaluate the latter's work objectives and overall contribution to the organization’s goals. This involves a variety of techniques, ranging from trait-based to behavior-based to result-based models. The process must be functional even when the different stakeholders cannot meet in person and operate from different locations, devices, and even time zones.
Solution: An effective performance management system should be able to recreate the intimacy and clarity of in-person communication even when operating remotely, without any proximity bias.
19. Lack of Transparency
The lack of transparency in the implementation stage or when carrying out various tasks can cause your performance management system to fail. This happens when there is a fragmentation of systems and approaches, with no single source of truth. Employees should be clear on the short-term, mid-term, and long-term objectives they are to achieve.
Solution: When a performance management solution is being implemented, stakeholders across the organization should agree on the organization’s goals. Without transparency, there will be a risk of conflict, and a breakdown in communication and engagement.
20. Using Only a Single-rater System
A lot of organizations still only use a single-rater system where only one person’s evaluations are taken into account. This one person’s understanding, bias, and personal agenda may influence evaluations. The 360-degree peer review is a professional evaluation technique that encourages employees to offer feedback on their peers’ work performance. This provides a comprehensive picture of a person’s competencies. Since 360-degree assessments are anonymous, there is no pressure of bias stemming from one’s relationships with coworkers, bosses, and subordinates. The findings do not lay blame on an employee; rather, they suggest areas where fresh methods or solutions are required to assist the individual’s growth.
Solution: 360-degree peer reviews can be considered in addition to single-rater performance evaluations.
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21. Not Investing in Manager Training
The process of performance evaluation is lengthy and time-consuming. This approach involves several conversations, feedback, and management design strategies. Without training, managers may not be able to properly define and develop high-quality performance standards or objectively set targets for the members of their team. To address this pitfall, managers need two types of training – they should be able to use performance management technologies effectively and at the right time, and they should have the strategic and soft skills necessary to optimize engagement in the workplace.
Solution: Senior leadership should empower managers to make decisions that are right for their teams, so that every employee, team, and business unit functions like a well-oiled engine.
22. Infrequent Individual Engagement
One-on-one conversations between employees and managers not only serve as a platform to share feedback, they are necessary to maintain engagement and ensure that an employee does not become disinterested in their work. In the wake of the Great Resignation, one-on-ones have become more important than ever before.
Unfortunately, companies often regard non-outcome-focused, one-on-one sessions as a cost center and are reluctant to invest in this practice. This can cause your performance management systems to fail.
Solution: Scheduled meetings are a good way to realign individual and company goals through short, focused, and engaging sessions.
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When executed well, a performance management system can dramatically transform how your company operates. It can be a source of motivation and engagement for employees. It can provide managers with valuable data to inform their decision-making. It can be instrumental in planning HR strategies and answering key questions like which type of compensation model to adopt, how to plan the employee lifecycle from recruitment to retirement, how to conduct appraisals while minimizing stress and bias risk, etc. A good performance management system will also keep your organization resilient in the face of unexpected regulatory changes and HR audits.
Conversely, a broken performance management system can be counterintuitive and bring down employee productivity. It is important to keep an eye out for any sign that your performance management is failing, so that you can take timely action and course correct.
To revamp your performance management system, request a demo of Darwinbox today!
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