Research Report Summary: The State of Performance Management 2020
Adapt key practices to succeed in uncertain times
Posted on 08-18-2020, Read Time: - Min
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Exclusive Research by The HR Research Institute
Since the start of the Covid-19 pandemic, performance management (PM) has arguably become more important than ever. In fact, our research shows that more than 90% of organizations have a performance management process. Despite this prevalence, however, few organizations believe they have highly successful performance management processes and systems. This is problematic, because well-implemented performance management can simultaneously bolster business results while fueling individual growth among organizational members.
Key Findings
- The Covid-19 pandemic is shifting performance management priorities.
- Most responding HR professionals indicate that their performance management processes need improvement.
- Many managers lack the necessary performance skills.
- Performance management typically has multiple objectives for both the employees and the organization.
- These days, managers are talking to their employees about performance more often.
- Performance management technologies have become more commonly used and tend to have multiple capabilities
- Performance management will continue to change in the near future.
Performance Management in the Covid-19 Era
Globally, most organizations have had to alter at least part of their operations due to the Covid-19 pandemic. As we write this report summary, many organizations have adopted remote work arrangements to maintain social distancing. In addition, many companies have changed work structures and procedures for employees who cannot do their jobs remotely and yet need to reduce risks of contagion. As a result of these and other changes, performance management processes have been adapted to new realities.
Although the future remains uncertain for now, it is likely that at least some of these PM adaptations will continue even after the pandemic recedes. The large majority of HR professionals (85%) state that the Covid-19 crisis has somehow changed performance management in their organizations.
Naturally, with Covid-19 pushing many organizations to allow employees to work from home, the most widely-cited response is that more performance discussions now occur remotely rather than in person (55%).
Covid-19 is not only disrupting organizations but also disrupting the personal lives of their employees. Because external stresses can have an impact on an employee’s performance, it is encouraging to see that 40% say more PM-related conversations involve health and well-being rather than just performance. Two-fifths also say that their performance goals have been adapted to new circumstances.
Covid-19 has affected small and large organizations somewhat differently. HR professionals at small organizations say the biggest change is that their managers need new skill sets for remote work (46%), while those from large companies say performance conversations occur remotely rather than face-to-face (73%).
Although the future remains uncertain for now, it is likely that at least some of these PM adaptations will continue even after the pandemic recedes. The large majority of HR professionals (85%) state that the Covid-19 crisis has somehow changed performance management in their organizations.
Naturally, with Covid-19 pushing many organizations to allow employees to work from home, the most widely-cited response is that more performance discussions now occur remotely rather than in person (55%).
Covid-19 is not only disrupting organizations but also disrupting the personal lives of their employees. Because external stresses can have an impact on an employee’s performance, it is encouraging to see that 40% say more PM-related conversations involve health and well-being rather than just performance. Two-fifths also say that their performance goals have been adapted to new circumstances.
Covid-19 has affected small and large organizations somewhat differently. HR professionals at small organizations say the biggest change is that their managers need new skill sets for remote work (46%), while those from large companies say performance conversations occur remotely rather than face-to-face (73%).
How Common and Successful Is Performance Management?
Performance management processes are a staple in most companies. Nearly all HR professionals say their organization has a performance management process (92%). Organization size does make a difference in this case. The vast majority (95%) of larger organizations have performance management processes whereas only 76% of small ones do. Mid-sized companies fall in between at 92%.
Most HR professionals think their top leaders view performance management in a positive light. For example, based on HR’s impressions, nearly a quarter (23%) of leaders view PM as crucial for overall business performance. However, about a third of leaders (32%) view PM in a more negative light. That is, 25% view PM as a “necessary evil” and another 7% see it as an unnecessary waste of time. Hopefully, in the future, more leaders will view PM in a positive light as performance management systems and processes improve.
Overall, however, managers do not have a favorable impression of performance management. More HR professionals disagree (34%) than agree (28%) that their managers are satisfied with their organization’s performance management system. The rest are noncommittal or don’t know. This is another indicator that improvements are required in most organizations.
The good news, however, is that there is a slight decrease in the percentage of those who disagree or strongly disagree that managers have a favorable impression of PM. In 2019, 41% said they disagree or strongly disagree, a decrease of seven percentage points. This is another hint that, overall, PM systems have been undergoing improvements in recent years.
Only 9% say their PM process meets all organizational performance management goals to a very high degree, though a further 28% say it does to a high degree. This represents an increase of four percentage points from 2019.
HR professionals from larger organizations are most likely to say that their organization’s PM process has the ability to meet all organizational performance management goals to a high or very high degree (43%), compared with mid-sized (28%), and small organizations (38%).
Only about a third agree to a high or very high degree that their performance management process results in better employee development (33%), improved employee performance (32%), or increased employee engagement (28%).
Most HR professionals think their top leaders view performance management in a positive light. For example, based on HR’s impressions, nearly a quarter (23%) of leaders view PM as crucial for overall business performance. However, about a third of leaders (32%) view PM in a more negative light. That is, 25% view PM as a “necessary evil” and another 7% see it as an unnecessary waste of time. Hopefully, in the future, more leaders will view PM in a positive light as performance management systems and processes improve.
Overall, however, managers do not have a favorable impression of performance management. More HR professionals disagree (34%) than agree (28%) that their managers are satisfied with their organization’s performance management system. The rest are noncommittal or don’t know. This is another indicator that improvements are required in most organizations.
The good news, however, is that there is a slight decrease in the percentage of those who disagree or strongly disagree that managers have a favorable impression of PM. In 2019, 41% said they disagree or strongly disagree, a decrease of seven percentage points. This is another hint that, overall, PM systems have been undergoing improvements in recent years.
Only 9% say their PM process meets all organizational performance management goals to a very high degree, though a further 28% say it does to a high degree. This represents an increase of four percentage points from 2019.
HR professionals from larger organizations are most likely to say that their organization’s PM process has the ability to meet all organizational performance management goals to a high or very high degree (43%), compared with mid-sized (28%), and small organizations (38%).
Only about a third agree to a high or very high degree that their performance management process results in better employee development (33%), improved employee performance (32%), or increased employee engagement (28%).
What Are the Features of Performance Management?
There are three key features of performance, identified by more than three quarters of respondents. Most widely-cited (81%) is that the process includes both positive and constructive feedback.
HR professionals say their performance management process also includes discussions of work goals (80%) and conversations about developmental goals and activities (77%). These two topics tend to support one another. When work goals and developmental goals align, it is often a win-win for both the organization and the employee. It is disappointing to see that just 34% say their performance management process accurately portrays employee performance.
HR professionals say their performance management process also includes discussions of work goals (80%) and conversations about developmental goals and activities (77%). These two topics tend to support one another. When work goals and developmental goals align, it is often a win-win for both the organization and the employee. It is disappointing to see that just 34% say their performance management process accurately portrays employee performance.
What Is the Frequency of Performance Management?
Formal employee performance reviews and appraisals are most commonly being held once a year. Large organizations (88%) are more likely than small companies (70%) to hold formal appraisals once or twice a year. However, small companies are far more likely to have formal reviews quarterly (20% vs 7%).
Forty-five percent have performance conversations quarterly or more often, and 52% say they have feedback between supervisors and employees four times a year or more. However, conversations about career goals and aspirations happen less often, with only 24% saying these happen quarterly or more often. In many cases, these types of discussions are probably relegated to annual performance review periods.
Just 24% say their performance management system has changed to a high or very high degree, which is a four percentage-point drop from 2019. However, about half have changed their systems to at least a moderate degree, indicating a considerable amount of change in a short period of time.
Forty-five percent have performance conversations quarterly or more often, and 52% say they have feedback between supervisors and employees four times a year or more. However, conversations about career goals and aspirations happen less often, with only 24% saying these happen quarterly or more often. In many cases, these types of discussions are probably relegated to annual performance review periods.
Just 24% say their performance management system has changed to a high or very high degree, which is a four percentage-point drop from 2019. However, about half have changed their systems to at least a moderate degree, indicating a considerable amount of change in a short period of time.
Managerial Skills and Accountability
Only 40% agree or strongly agree that their managers have received sufficient performance management training. Perhaps this helps explain why only 28% say their managers are skilled at performance management.
Effective performance management is a skill that needs to be learned. If a manager has not received the proper training in the difficult art of performance management, then naturally their PM capabilities will fall short. Moreover, just 32% say their managers are good at helping employees set goals, and only 26% say their managers are good at having conversations about performance management.
Accountability for quality is much less common. For example, fewer say their managers are held accountable by assessing performance levels of their employees (27%), by tracking coaching and/or conversations with employees (23%), by looking at employee engagement and retention rates (18%), or by having employees rate their managers in terms of performance management capabilities (11%).
Effective performance management is a skill that needs to be learned. If a manager has not received the proper training in the difficult art of performance management, then naturally their PM capabilities will fall short. Moreover, just 32% say their managers are good at helping employees set goals, and only 26% say their managers are good at having conversations about performance management.
Accountability for quality is much less common. For example, fewer say their managers are held accountable by assessing performance levels of their employees (27%), by tracking coaching and/or conversations with employees (23%), by looking at employee engagement and retention rates (18%), or by having employees rate their managers in terms of performance management capabilities (11%).
Tracking Performance Management Through Metrics
About three-quarters (73%) say manager ratings are the most common metric used in their performance management process. Indeed, these ratings or appraisals are the most conventional of all PM features. Only about half as many (38%) PM processes include behavior-related scores.
It is interesting that small companies are more likely than average to use peer ratings (27%). Perhaps employees are more comfortable sharing feedback with one another in smaller and less corporate environments.
There are a variety of methods for establishing and tracking performance goals. Although these methods are all similar in nature, they vary in terms of implied processes and generalizability. SMART goals or criteria represent the most popular method, used by 68% of HR professionals. The second most widely-cited method, at 60%, is examining KPIs, or key performance indicators.
It is interesting that small companies are more likely than average to use peer ratings (27%). Perhaps employees are more comfortable sharing feedback with one another in smaller and less corporate environments.
There are a variety of methods for establishing and tracking performance goals. Although these methods are all similar in nature, they vary in terms of implied processes and generalizability. SMART goals or criteria represent the most popular method, used by 68% of HR professionals. The second most widely-cited method, at 60%, is examining KPIs, or key performance indicators.
The Future of Performance Management
Well over a third (37%) say their performance management system will change to a high or very high degree over the next two years. This represents considerably more change than organizations have seen over the previous two years. Moreover, a full two-thirds (67%) expect their performance management systems to change to at least a moderate extent over the next two years. In short, dramatic change is expected by many and at least moderate change is expected by most.
Most (62%) HR professionals say performance management will be more integrated with employee engagement and satisfaction data over the next three to five years. Just over half say there will be more focus on development activities (58%). About two-fifths (42%) predict performance management will become a more automated process related to artificial intelligence. This would allow some performance management systems to become less administration focused, thereby potentially reducing bias and making performance feedback more valuable.1
We invite you to download and read the complete report today to learn how these outcomes and insights may apply to your organization, plus 9 key takeaways.
Most (62%) HR professionals say performance management will be more integrated with employee engagement and satisfaction data over the next three to five years. Just over half say there will be more focus on development activities (58%). About two-fifths (42%) predict performance management will become a more automated process related to artificial intelligence. This would allow some performance management systems to become less administration focused, thereby potentially reducing bias and making performance feedback more valuable.1
We invite you to download and read the complete report today to learn how these outcomes and insights may apply to your organization, plus 9 key takeaways.
1 BasuMallick, C. (2019, October 22). How AI-driven performance feedback can make you a better manager. HR Technologist. Retrieved from https://www.hrtechnologist.com/articles/performancemanagement-hcm/ai-driven-performance-feedback/
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