Performance Management In 2023

The future belongs to those who adapt

What will the future of performance management look like in 2023? Let’s take a look at current trends and the characteristics of a modern performance management system!

The past few years have had a seismic impact on the way businesses around the world are working. While 2020 and 2021 had many teams busy adjusting to remote working and optimizing their productivity in a hybrid environment, 2022 has opened many doors for further development in other important areas, such as employee engagement, task management, and performance management.

Today, we’ll focus on the future of performance management in 2023 and what this will look like for businesses around the world!

Changing Performance Management Paradigms

Forbes.com shared the top three trends they envisioned for 2022. These trends include shifts that will carry into 2023:

1. The impact of hybrid work
2. More continuous feedback and check-ins
3. Using performance data gathered in real-time

Hybrid work has led to a higher demand for flexibility. Work from home is no longer a perk that companies can use to sweeten the deal when attracting top talent– instead, it’s an expectation, as is all of the flexibility that comes along with hybrid work.

Additionally, Forbes predicted that there would be more continuous feedback in check-ins. Currently, this prediction is heavily backed up by statistics from other sources– ClearCompany notes that 43% of highly engaged employees receive feedback on a weekly basis. 

Lastly, companies have developed new methods for gathering and using performance data. The shift to remote work forces employers to find new ways to measure employee contributions. How long an employee sits at their desk is no longer a good indicator of whether that employee is performing well or not. Instead, companies are focusing on outcome-based performance data, such as KPIs and targets tracked using OKRs. 

Characteristics of a Modern Performance Management System

In 2023 and beyond, we’ll see performance management develop in many different ways. As an HR administrator or business leader, it’s important to keep up with recent trends so you know how to best evaluate and support your team as the norm develops. 

Here are seven characteristics of a modern performance management system that you can implement right now to bring your organization up to speed!

1. Set Flexible Goals

Instead of setting rigid annual goals for your teams that come from the top down, allow for flexibility. Goals should shift according to the top priorities of your team within a given quarter. It’s also important to allow individual employees to identify their own goals and take ownership.

2. Different Criteria for Different Job Roles

Ensure that all employees are being evaluated based on the skills that matter most to their job role. Depending on the employee’s department, seniority level, and role within the company, you should adjust what performance reviews focus on.

3. Clearly Defined Criteria for Compensation

It can be discouraging for employees when they feel that their compensation doesn’t line up with their contributions to the company. Therefore, it’s very important to have a compensation plan in place that is transparent, clearly defined, and easy to understand. This plan must be clearly established with everyone in the organization so that there is no ambiguity in what to expect.

4. Integrate Technology in the Performance Appraisal Process

Organizations that integrate performance tools into their team’s workflow are much more likely to see positive results from the process. Making performance feedback a natural part of day-to-day work makes it easier to coach employees and managers alike.

5. Giving Feedback

Giving feedback is a crucial part of the performance appraisal process, but many leaders don’t give it often enough to engage employees. Feedback should be a continuous, open conversation between an employee and their manager. All feedback should be recorded so that when it comes time for a quarterly or annual performance review, recency bias doesn’t skew an employee’s review.

6. Get Data that Matters

Oftentimes, data used in performance reviews doesn’t dive deep into employee contributions, and feedback and performance that are more recent. This tends to skew the evaluation. To help resolve this, organizations can get high-quality data by using systems that collect information on employee performance on a regular basis. Gathering performance data year-round means that the company is getting better insights into employee performance and employees are receiving more accurate evaluations.

7. Help Employees Become Successful Instead of Pulling Them Down

One-on-one check-ins help identify performance issues early on rather than forcing managers and employees to wait for weeks to discuss them. Managers should make sure that any criticism they give the employee comes from an unbiased and honest place, and always include action items the employee can take to improve their work. If the employee is successful, the team and the organization are, too. This will help employees feel more confident when performance review time comes around, making it a more positive experience in your company.

The future belongs to those who adapt. Performance management is continually evolving and responding to changes within organizations and around the world. Companies all around the globe have had to adapt to changing circumstances in the past two years. Now, it’s time to improve your processes and work on becoming the best at what you do.

While every organization is different, everyone can benefit from enhancing their performance review process to develop more engaged, skilled, and satisfied employees– and a more productive organization!

Senthil Rajagopalan is the President & COO at Profit.co, a San Francisco bay area based SaaS startup that helps companies improve their goal management and execution through their industry-leading offering software. Senthil is responsible for marketing, sales & customer success at Profit.co. He has nearly 25 years of experience in technology and consulting, including 12 years working with enterprise customers in North America. He has been in B2B SaaS for the past 10 years, co-founding a startup in Bangalore, India. He is an OKR lead coach and a certified agile coach. He spends 50 percent of his time with customers helping them with their goal management (OKRs) and performance management initiatives. Connect Senthil Rajagopalan