Performance Management in a Facebook world

By Philippa Youngman, November 2011

You all know the stats. 10.3 billion Google searches per month, a third of us spending more than three hours online per day, one in every eight minutes online spent on Facebook, one person  in five using smart phones to purchase goods.

The world is changing as we all do business and socialise more and more online. This article could be filled with mind-blowing statistics about how much the world is changing, how consumers have so much more power, business models are changing, new industries rising and others are failing.

As HR professionals are we adapting to this new world?

Are we aware of similar shifts that are happening amongst employees who are online and informed? Employees, like consumers, are empowered with more information, have a greater ability to move jobs, are exposed to publicity about high executive payments and what they are worth in the market.

Interesting insights into the future of HR in this changing world were revealed in the 2010 Boston Consulting Group (BCG)’s study “Creating People Advantage: how companies can adapt their HR practices for volatile times.”

Online surveys were processed with 5,561 people across 109 countries, and a further 150 in-depth interviews were completed with senior executives.

What emerged was that high performing companies (defined by profitability and revenue metrics by industry) emphasised certain HR practices that low-performing companies tended to play down. 

Across all industries “performance management and rewards” in particular is a topic that separates strong and weak companies. It was ranked as the second highest HR capability by high performing companies but only ninth by low performing companies. 

High performing organisations believed that their HR team was very capable in this area.  Interestingly the top performers tended to continue to focus their HR efforts in this area even when they are already strong, evidence they are seeking continuous improvement by focussing their effort on the areas where the most value can be obtained.

In the BCG study performance management) had moved from the 8th top issue in 2008 to top 4 in 2010. Contrast that with the fact all respondents said performance Management was one of the most frequent type of HR projects undertaken but also often poorly managed.

Too often performance management projects start with optimism but fail to deliver. Projects are given a lot of time and effort, but often they don’t achieve employee engagement and alignment.

What organisations end up with is staff unhappy at the lack of meaningful participation in their performance management reviews, and frustrated at the length of time taken and the flow-on impact for remuneration adjustments.

Line managers see the performance management process as too lengthy and over-engineered - a “paperwork” exercise. CEOs and other executives are unable to see regular reports on how individual performance is connecting with company strategy.

The poor old HR team get frustrated at manager’s unwillingness to complete performance reviews according to policy and a lack of real employee involvement in the process.

Getting performance management right is not simply about introducing new technology though. In fact technology can just make the process go wrong faster!

It is critical to have the foundations, the quality and clarity of process, right first.

Best practice in performance management, backed by research around employee engagement from the likes of AON Hewitt  globally and the JRA Best Employers survey in New Zealand points to some common success factors.

One is clarity. Employee engagement in relation to performance management is highest where they answer positively to the statement “I understand how my tasks and actions contribute to organisational success”.  There is also a strong and direct correlation between the statements “My manager can explain how my pay is determined” and “I am satisfied with my remuneration” in organisations where employees feel most engaged.

It is absolutely key that managers can clearly explain how pay and performance is linked, and that employees understand how what they do contributes to organisational performance.

How much someone gets paid doesn’t actually change their engagement (at least past the immediate impact); it is their sense of how clear and fair the process is that counts. Are they hopeful their day-to-day work will make a difference to the organisation’s overall goals, and will they be fairly rewarded for that if they are doing a good job?

That clarity doesn’t always exist.

For example, many companies have relatively open performance management processes which they discuss with employees, but then go through a different measurement process (usually secret to certain higher level managers) to measure performance in the context of the talent management process. The rationale being that because the talent process doesn’t have to be discussed with the employee they are “apparently more honest!”.  How then do such organisations explain to supposedly “high performing” individuals that they have not been considered for that leadership course limited to our high talent individuals?

Process quality is another critical success factor. The AON Hewitt “HR Connect – Asia Pacific report on Optimizing HR Results for the Business” concluded that organisational process effectiveness has a strong correlation to overall organisational performance.

When AON Hewitt tested those HR processes that had the closest relevance to business strategies and then compared those organisations that were defined as achieving “HR Excellence” against all other companies – some big differences were seen.

• Performance management was described as being relevant to 88% of excellence companies, and 76% relevant in other companies, however the effectiveness of the process was ranked as 63% to 27% respectively.

• Compensation process management was 75% relevant in excellence companies vs 61% relevant in other companies, with effectiveness rated 69% vs 25%.

• HR Technology was 69% relevant in excellence companies vs 36% relevant in other companies, effectiveness of the technology was 56% vs a stunning 16%.

From all of this several themes emerge around best practice in HR and particularly performance management, in a world where employees are more connected and informed.

High performing companies have strong performance processes. They are clear on the connection between individual activity and objectives and how that connects to organisational performance. And they focus on continuous improvement of the process of performance management and rewards, often supported by good quality technology.

That delivers engaged employees, organisational effectiveness and therefore high performance.

A conclusion of the BCG study was that the HR function needed to be ‘rebooted’ at many firms, and more investment made in it. For example, a strong theme from the BCG study emerged that business managers believed their own most important HR skill was being able to deal with low performers. However they also typically rated their ability to do this as low, so it’s an area where HR can make a real difference in coaching and training.

BCG concluded that HR needed to be viewed as functional experts and partners to business units, much like a corporate finance team might be. But to do that they need better tools and skills.

Technology is part of this toolkit, when the process is right i.e. clear and consistent. With good processes in place technology can be used to streamline them, making them more secure and more easily accessible across organisations.

The result is that employees are more engaged, line managers feel confident and equipped to manage their performance management process, and senior management has visibility to the process and how it connnects with corporate strategy.

And for HR it enables us to focus on what we should be really doing, not administering a painful and laborious process, but providing valued-added advice that helps create an engaged and high performing workforce in a highly connected world.