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How companies can use performance management effectively in employee retention
Today, organizations are scaling rapidly, absorbing multiple cultures, becoming agile and nebulous, and measuring work packets in different formats. With this continuous evolution, the role and expectations of each stakeholder is altering significantly, be it employer, employee or manager.
The digital era has significantly altered the employee-employer relationship. In the pre-pandemic era, HR leaders had many tools available with them to manage employee retention. This included a mix of in-person engagement activities and performance management (from a structured process perspective to motivate and reward). Organizations have moved beyond the typical annual appraisals and bell curve ratings to boost employee morale and empower managers.
Today, organizations are scaling rapidly, absorbing multiple cultures, becoming agile and nebulous, and measuring work packets in different formats. With this continuous evolution, the role and expectations of each stakeholder is altering significantly, be it employer, employee or manager. Performance management has undergone drastic changes across vectors, by its very definition, process, and execution. There is an urgent need to make it current and relevant.
While many theories were propounded in the past around this topic, the one most pertinent today is the Iceberg theory. This theory differentiates between what is visible – performance of employees, a function of skill sets, and competencies; and what is hidden – the motivators that comprise of various elements: Leadership, Culture, People Practices, Policies, Processes for Engagement, and Retention.
Handled effectively, the hidden and the visible go hand in hand. Organizations should constantly assess and make the ‘hidden’ relevant to today’s scenario. It is essentially the Employee Value Proposition (EVP), the backbone of employee engagement. HR leaders should have their ears on the ground, understand the employees’ pulse, and accordingly make changes to the basket of features that fall under EVP.
The visible part directly correlates to the employee’s skill set and competencies. With the business landscape adopting Digital, there is also pressure on the individual to upskill and stay relevant continuously. HR leaders should look beyond traditional in-house learning modules and collaborate with third-party educators who can help deliver the same message across multiple formats. Ultimately it all boils down to what systems are available in a workplace which will help the employee scale faster and work effectively.
The outcome of the visible and hidden is the actual performance. While the needle has moved beyond traditional yearly and half-yearly formats, much needs to be done. It needs to be institutionalized, ingrained, just as value systems are.
The question then arises on how one goes about building such a system with strong foundation. HR leaders should consider the following:
- From an organizational perspective, incorporate the right benchmark and metrics. Adopt a best-in-class of Objectives and Key Results (OKR) model.
- Follow a structured appraisal period. Employees prefer payouts and promotions at specified periods. While this is true for annual payouts and promotions, HR should also ensure they recognize talent periodically. Overdoing this will dilute the value of the recognition programme itself.
- Ensure the appraisal and assessment process is objective and outcome-driven and not emotionally driven.
- Mechanism to have continuous feedback from multiple sources, typically known as 360-degree feedback, and incorporate it into development plans.
- Use technology as an enabler to track progress on a real-time basis and use this to feed into continuous feedback. This will ensure the entire process is objective and personalized to the developmental needs of the employees.
Summing up, Performance Management, when used rightly, is a powerful tool for employee retention. HR leaders need to tread on it carefully, design and execute it well. As we advance in the digital age, it is more of an art rather than a science. Today’s employees do not think twice before voicing their feedback on third-party platforms like rating sites which can cause damage to the brand. It is thus the imperative of the leadership and HR teams to structure this model right.
The author, Milind Mutalik, is Head of Employee Experience at Accolite Digital.
The article has been originally published in ET HR World.