The Future of Performance Management 2022-23
Create performance management systems for the new age of work
Posted on 07-18-2022, Read Time: 6 Min
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Today, in the aftermath of the pandemic, performance management is set for unprecedented changes. Organizations and their employees are looking for agile, transparent, and fair performance management systems that serve as an aid to improving employee development, engagement, and retention.
An exclusive study of HR professionals conducted by the HR Research Institute investigates the capabilities, goals, and challenges of the PM process today.
Key Findings
- Most HR professionals report that performance management in their organization changed in response to the pandemic.
- Performance management processes are often below average in their capabilities across multiple objectives.
- Manager ratings and SMART goals remain popular methods of measuring performance.
- Although a majority of top leaders view performance management in a positive light, many still view it in a negative way, and few view it as crucial.
- Most managers lack PM-related training, which could explain their poor performance management skills.
- Most organizations use performance management technology, but their capabilities need improvement.
- The future of performance management will be focused on the development and based on frequent, natural conversations.
The Prevalence of Performance Management
Nearly all organizations (93%) have some sort of performance management process. However, just 49% say it is a structured and formalized process. A further 31% say it has both formal and informal elements. Only 13% say their organization has an informal performance management system with no formalized elements, and 7% of respondents say their organization has no performance management process at all.
Large organizations are most likely to have a structured and formalized PM process, with 57% of HR professionals from such firms reporting formalized systems. Few large companies only have an informal PM system (9%).
Large organizations are most likely to have a structured and formalized PM process, with 57% of HR professionals from such firms reporting formalized systems. Few large companies only have an informal PM system (9%).
Performance Management Responses to the Pandemic
Most organizations made changes to performance management as a result of the pandemic. Some of these changes—originally made in an ad hoc manner as a response to the pandemic—have now become the norm.
The Effectiveness of Performance Management
When asked about the effects of the performance management system in their organization, 44% say that it meets all organizational performance goals to a high or very high extent. Another 44% say it results in better employee development to a high or very high degree.
The most common objective for conducting performance reviews is to help individual employees learn and grow (69%). A close second is to boost communication between employees and managers (68%). Another popular objective for organizations to conduct performance reviews is to help improve overall performance (67%). About half of respondents (49%) also say that one of the objectives of performance reviews in their organization is to facilitate performance-related changes in pay and to increase employee retention (46%).
The most common objective for conducting performance reviews is to help individual employees learn and grow (69%). A close second is to boost communication between employees and managers (68%). Another popular objective for organizations to conduct performance reviews is to help improve overall performance (67%). About half of respondents (49%) also say that one of the objectives of performance reviews in their organization is to facilitate performance-related changes in pay and to increase employee retention (46%).
The Future of Performance Management
The future signals a shift from a high-stakes, once-a-year appraisal to a more continuous and development-focused approach to performance management. The majority of respondents (69%) say that, over the next three to five years, performance management will be based on more frequent and natural conversations (69%), more focused on development activities (58%) and more integrated with employee engagement and satisfaction data (58%).
Performance is not only about number ratings but a more holistic approach to enable employees to work to the best of their potential. This involves more communication, coaching, appreciation and fairness than ever before.
To learn more about The Future of Performance Management 2022-23, we invite you to download and read the complete report today, including 11 key takeaways, to learn how these outcomes and insights may apply to your organization.
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