Strategies of Global Companies to Utilize Performance Management Solutions > Insight

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Innovation in the performance management system is one of the major trends that have transformed the HR field in the past decade. This trend will continue for a while to coexist with a new generation who values ​​the meaning, fun, and growth of work in a new workplace with transformed ways of working. Unlike the past, all recent changes in HR require technical solutions that are combined with IT. Systems that are premised on offline activities and filling in paper forms are gradually disappearing. It is difficult to guarantee consistent operations, without mentioning the time and cost required to maintain procedural practices.

Naturally, the utilization trend of new performance management solutions has been driven by the preceding trend in system changes. What is as important as using new tools and technologies is to make employees feel the value of improving performance and participating in the process. First of all, the following summarizes the major shift in global companies' performance management methods.

 · Focus on employees showing either exceptionally high performance or, conversely, those well-below expectations. 

This shift in focus eliminates the need for micro-performance-classification and ranking numerous employees who are showing average performance. 

· Many companies try to collect and analyze performance information in real-time through solutions. 

They accumulate abundant more-objective data through this and use them for improving performance.

· Companies are gradually moving away from the mechanical linkage between performance review results and rewards.

· The most important thing is to focus on how to apply the real-time performance information, analyzed based on facts and evidence, to the current situation rather than evaluating the past. 

Let’s examine some examples of global companies, which are already well known for leading this performance management innovation, and summarize the trends in new performance management solutions.

Check-In of Adobe

Adobe introduced “Check-In”, a new performance management solution, in 2012. It abolished the rating-oriented system and the custom of the judgment of their performance compared with colleagues. The characteristic of the “Check-In” solution is to give managers and employees more autonomy when deciding goals. Without regard to the custom of annual goal establishment, it provides the ability to frequently add goals and manage progress from time to time. Additionally, it makes continuous real-time feedback managed through the system. Regular interviews with managers, conducted on a monthly/quarterly basis, completely exclude paperwork and check mainly on three topics: expectation, feedback, and growth and development.

The productivity improvement through this has dramatically reduced the time required for performance review. It is known that managers have saved 80,000 hours per year only by the simplification. The more transparent and open way to communicate through the solution increased the trust of employees in the system as well as their commitment. It was reported that 78% of employees felt that managers were open to their opinions and voluntary employee turnover rates decreased by more than 30% owing to the transparency of the process. It was also reported that managers could have a tough conversation with employees more easily, make tough calls with less trouble, and improve their skills. 

Connect of Microsoft

Microsoft experienced a decline in management performance that could be called a “lost decade” due to unhealthy competition between employees and teamwork without cohesion. It abolished “Bell Curve”, a symbol of forced ranking, and introduced “Connect”, a new performance management system in 2013. This system encourages meaningful discussion and collaboration and focuses on promoting performance through inter-member learning. Managers no longer need to stigmatize a specific distribution of employees into an underperformance group. Moreover, it has an effect of preventing discriminatory behaviors due to unconscious bias owing to the transparent system. Furthermore, since it provides flexibility for compensation and recognition, it is also possible to provide timely compensation for distinctive contributions.

PD@GE of GE

In 2015, GE put an end to the compulsory “Rank and Yank” policy, which GE made popular worldwide. The keys of the new solution are to allow employees to prioritize more useful short- and long-term goals for them, help them have more frequent touchpoints with managers, and send and receive real-time feedback at any time. It was named “PD@GE”.

Managers are now able to track the company's definition of performance and goals, which frequently change throughout the year by using this mobile application. Moreover, it easily records and accumulates feedback requests and responses.

It is known that it increased the trust between employees and managers through transparent feedback, not relying on anonymous any longer, and it boosted productivity by 5 times at the beginning of using the new solution through real-time future-oriented feedback. Meritocracy was the biggest concern during the pilot period, which targeted more than 30,000 employees. It was because of the concern that the transparent and horizontal-looking system could weaken the recognition and rewards provided to members with high contribution and competence. However, managers perceived that it was possible to make differentiated decisions related to compensation without rating owing to more abundant feedback results and more frequent contact with employees.

In addition to the above-mentioned well-known examples, many global companies are actively using performance management solutions. They often have their own systems by using the economy of scale, but sometimes they utilize cloud solutions that are available on the market with powerful functions and features. The characteristics of recent performance management solutions or applications have several key characteristics.

1. Promoting Social Networks between Members

The way of social media has been already proven to be very useful for brands readily trying to communicate with consumers. The same effect has been revealed in the relationship between the company and its employees, between managers and employees, and between employees. This network effect promotes communication to track and improve performance as well as enhance cultural relationships such as communication and teamwork. New performance management solutions focus on creating and extending this network.

2. Instant Feedback

The innovation of performance management accompanies by changes in various aspects, and the most important key is feedback at both the beginning and the end. One of the unique advantages of recent performance management solutions is that they can provide feedback related to performance at anytime and anywhere. Both managers and employees can recognize and fix problems through this continuous function and can take necessary measures naturally. Moreover, it can execute the annual evaluation process more easily through accumulated feedback data.

3. Management of Dynamic Goals

Since the pace of change is fast and uncertainty increases, the effectiveness of annual goal management continues to be questioned. Particularly, as knowledge-based values ​​become an important goal of management performance, it is getting more difficult to define the goals of members with only a few quantitative indicators as we did in the past. Performance management solutions shall be able to produce and manage dynamic goals. What goals are needed at this point is more important, not the resulting achievement and weights. It should allow employees to update their goals over time by themselves. Moreover, it should help companies and managers demand the right goals at the right time. Recent solutions allow flexible updates, while focusing on user-driven goal management and enhancement functions.

4. Social Recognition

Powerful performance management solutions also have the functions to recognize the large and small contributions of employees at the social level. This social recognition helps employees participate and commit to the company on a large scale and the company measures performance on a small scale. One of the solutions’ strong advantages is to allow every member to inform and record the moment of the contribution that is hard for a manager to observe and capture while interacting within a social network called a company. The millennial generation, which is dominating the demographics at work more and more, is especially familiar with sharing and participating in these moments, with a strong desire for recognition. The strength of public recognition in the workplace is highlighted even more because they feel meaningful in creating and circulating information, as well as consuming information.

5. Storage of Performance and Business Record

There have been many cases in the past and present that no meaningful records remain in the performance management system. It is clear that goals, indicators, scores, or ratings, and some qualitative comments cannot represent a person's record. Recent performance management solutions have strong functions as storage that accumulates a wide range of information including feedback, work history, goal management check-in, and career development progress. It even tracks the mutual recognition of colleagues and changes, including social recognition and 360 feedback. Furthermore, it can eliminate the fatigue of “work is one thing, and management is another” by integrating work management and collaboration into a single performance management solution. The relics of these records help people conduct accurate evaluations over time, and can be linked to fostering and promotion through insightful performance analysis.

6. Dashboarding and Reporting 

Various aspects of analysis are possible when more information is managed and accumulated through performance management solutions. Moreover, another advantage is to automate and structure the results, which could only be achieved through manual and repetitive works. There are emerging tools, which allow comprehensive review including achievements in the past, recorded recognized moments, the history of collaboration performed by each individual member, and the relationship between a goal and an achievement, in addition to the final result of a goal. This gives new insights that people could not access before. Solutions made to break away from relative and ranked performance management are now, contrarily, contributing to reduce the meaning of relative and ranked performance. Additionally, a report related to performance evaluation can be generated from this multidimensional perspective.

7. Linking HR Data and Employee Experience Data

The customer experience has already received a lot of attention. The new trend in performance management solutions is employee experience. This comprehensive term refers to all interactions from the moment of joining a company while the individual is employed. It includes the culture they encounter, the environment in which they work, the recognition they receive, the colleagues they work with and socialize, and everything they can obtain at work. Solutions enabling more frequent collaboration, feedback, and check-in provide a high-level employee experience. When recorded HR result data such as annual evaluation results, affiliated organizations, transfer history, and career history is linked with the participation and recognition of an employee and the changes in interaction, it becomes strong big data. Now, the scope of performance management solutions is not just about measuring performance, but is expanding to tools for managing culture and personal experiences within an organization.

Recent performance management solutions allow us to understand what is working well in an organization and, more importantly, what is not working properly in it. It also, of course, helps people make more insightful decisions. It is possible to collect diverse performance activity data that was previously impossible to collect by using these real-time performance management solutions. As a result, they support to conduct more accurate annual performance reviews. Managers can reduce the tension and stress for remembering the detailed performance information of employees. The time will be used to enrich meetings with team members and to have a more meaningful coaching conversation by using the data.