News and Insights

By Aaron Kinne

Why am I so passionate about continuous performance management?

Simple. I’ve experienced the failings of the annual review from both sides. I experienced them early in my career as a young advertising copywriter, when I received a rating lower than what I had expected in my year-end meeting with my manager. And I experienced them as a creative manager, when the members of my team were invariably disappointed and disheartened to receive from me anything but the highest possible score during their annual review. There has to be a better way. And there is.

The way we work is changing for the better. It is shifting toward networks of fast-moving teams, high collaboration, and continuous feedback. Shouldn’t the way we manage performance and develop careers evolve too?

After all, even the most traditional organizations and industries are moving away from the annual review to a continuous performance management process that unfolds in the flow of work. Because the debate isn’t really about whether traditional, isolated annual reviews are ineffective. It’s about how you replace or supplement them, and with what.

What is continuous performance management?

Continuous performance management is a modern, human-centered approach to promoting, evaluating, and improving employee performance. It enables your organization to create a trusted environment in which employees feel empowered to take control of their own development. In a culture of true continuous performance management, employees support each other with a wide range of real-time performance feedback – celebratory, instructive, and constructive.

Work cultures that embrace continuous performance feedback:

• Foster a forward-looking growth mindset by emphasizing feedback that is in-the-moment, informal, and frequent.

• Strengthen relationships by improving communication and coaching between employees, managers, team leaders, and mentors.

Continuous performance management is about growth and development. It’s about creating a culture where people are comfortable giving feedback up, down, and across an organization. And it’s about helping employees  and organizations realize their full promise and potential.

What defines an effective performance management strategy?

An effective performance management strategy begins with a foundation of trust and gratitude, generated through a strategic, comprehensive employee recognition program. Positivist is the baseline on which growth happens. It becomes the protective foundation in which constructive feedback becomes a welcomed learning opportunity.

When this happens, trust increases, and employees feel safe giving and receiving feedback from their colleagues or manager. In such a culture, they even seek it out. Check-ins with managers become positive experiences rather than events that engender anxiety and stress.

Many world-class organizations define and shape a culture of feedback and accelerate performance and growth with a flexible software solution such as Conversations, part of Workhuman® Cloud. Such a solution boosts the effectiveness of an organization’s continuous performance management strategy with vital key features such as:

• Check-ins – More frequent communication builds trust. Employees, managers, and team leaders initiate discussions to stay in sync.

• Crowdsourced feedback – Employees can tap into their network to get advice about improving their performance; requesting feedback from colleagues and mentors is the best way to learn and grow.

• Priorities – Employees can set and maintain short-term goals that align their focus to the organization’s business objectives.

• Any-time summary – Managers can use summary reports to guide performance discussions.

• Performance dashboard – Bring performance management and recognition together in a single, comprehensive view of all feedback, annual summaries, regular check-ins, and established goals.

• Powerful analytics – Go way beyond simple results and data to uncover how change is happening within your organization.

What are the benefits of continuous performance management?

1. Boosts engagement – Gallup found that employees who’ve had conversations with their managers about goals and successes in the last six months are 2.8x more likely to be engaged. And employees who get daily feedback from a manager are 3x more likely to be engaged.

2. Boosts employee retention – Companies with regular feedback have a 14.9% lower turnover risk.

3. Promotes organizational connectedness – Technology and relationships are linking us together in new ways, and smart performance management systems lean into that organizational connectedness. Traditional performance management (one manager to one employee) conflicts with the realigned, multilateral way organizations work today.

4. Nurtures trust – Strong organizational trust is a key indicator for profitability. Research has shown that workers who trust senior leaders are nearly 2x as likely to be engaged and love their jobs.

5. Delivers vital data – By tracking and slicing aggregate data and looking at outliers, companies can understand how goals are being set and achieved, how managers are interacting with teams, how much self-directed energy is being expended, and where high-potential employees may be hidden. Continuous performance management systems – such as Conversations – provide not just an annual snapshot, but a continuous flow of data to better understand culture and the effectiveness of a performance management approach.

How does performance management impact the bottom line?

The research proves it again and again. Creating a broad culture of peer coaching and feedback – one that lets every employee support, mentor, and reward one another – has a direct and measurable impact on your organization’s bottom line.

Research shows that alignment between the employee and the organization improves overall productivity. According to Gallup, organizations see productivity gains of 5-10% when employees are clear on what is expected of them.

The research further shows that continuous performance management demonstrably boosts employee engagement. And engagement leads directly to improvements to the top and bottom lines, such as increased productivity, customer loyalty, sales, and profits.

In a recent study, Brandon Hall found that in organizations where managers are effective at coaching, employee engagement nearly doubled. And employees who strongly agree that they can link their goals to the organization’s goals are 3.5x more likely to be engaged.

And then, of course, there’s the matter of employee turnover. A Korn Ferry study estimates the cost of replacing an employee is between 50 and 150% of salary. For specialist, senior, and executive positions, the cost per employee rises to up to 213% of salary.

That same Brandon Hall study found companies that embrace a culture of feedback and coaching realize a dramatic improvement in employee retention rates. For instance, at companies where managers discuss growth opportunities with employees, 41% saw an increase in employee retention versus just 18% in companies where managers fail to have that discussion. And as we noted earlier, companies with regular feedback have a 14.9% lower turnover risk.

What are some examples of continuous performance management success?

Here are some real-life success stories world-class companies have realized, thanks to their strategic continuous performance management programs:

First Tech Federal Credit Union – Employees were looking for more clarity and communication on performance. And the leadership team wanted a solution that would help transition away from the annual review, empowering employees to adapt and update priorities as the goals of the business changed all while reinforcing a culture of shared accountability. This case study explores how First Tech partnered with Workhuman to implement a human application solution that enhances communication and engagement, while creating deeper connections to company values and business goals.

Qlik – Employees felt the current annual review process was a “tick in the box,” solely to support pay and merit decisions. The company was looking for an approach to performance management that offered more frequent, authentic conversations that are two-way, not top-down, and integrated crowdsourced feedback. This case study explores how Qlik worked with Workhuman to undergo a complete performance management transformation and realign its people process to the pace of business.

A more human approach to continuous performance management

In my current role at Workhuman, I meet weekly with my manager, Dan Miller, director of content marketing. Rather than being fraught with anxiety, it’s a relaxed and productive get-together. We discuss the projects we’re each working on and use the time to share successes and concerns and discuss priorities. And because we meet so frequently, there are never any surprises.

Along with his own observations, Dan has insight into my performance because he can see the recognition and feedback from my peers, day in and day out. Best of all, the key points of our meetings are captured in Conversations along with feedback from my peers.

Oh, and if Dan and I miss a meeting, Conversations gently pings us. That’s how true continuous performance management happens. Doesn’t that sound better than an annual review?

Aaron Kinne is a senior writer at Workhuman.