Almost half of employers surveyed by Mercer say they intend to change their approach to performance management within the next 18 months.
The 2015 Mercer Performance Management Snapshot Survey of 64 organisations also revealed that, of the 48% of employers planning to make imminent changes to their performance management systems, 67% say the changes will be significant or evolutionary, rather than minor adjustments.
Tim Nice, Mercer’s Rewards Business Leader, said organisations such as Deloitte, SEEK and GE, while having different operating models and business objectives were all responding to the perceived inflexibility of tradition performance management
“Companies are looking to be more flexible, agile and responsive in the way they operate, and it’s natural to apply disruptive thinking to a process like performance management.
“We know from research we have conducted on a regular basis that there is a high level of dissatisfaction with traditional performance management.
“Chief among the concerns driving this dissatisfaction are the limitations of the annual review process: it is highly formal, it doesn’t focus on real-time information, it removes responsibility from managers to have meaningful discussions with their employees on an ongoing basis, and, at its worst, is reduced to a rating out of five.”
Mercer contends that the shift to the next generation of performance management will require organisations to evolve existing practices, rather than revolutionise their approach.
“The traditional performance management model has served Australian employers well for decades and there are many elements worth retaining.
“However, there are some fundamental changes that need to be made if organisations are to foster a high performance culture and remain an attractive value proposition to current and prospective employees.”
Mercer has identified eight emerging trends that employers need to understand to evolve their thinking on performance management:
- Performance management will evolve – not disappear: the focus will shift away from annual performance evaluations to a continuous dialog on performance, development and coaching – more about talent management than purely management against objectives.
- Closer link to corporate culture and values: a shift away from “fixing” performance to enabling employees to be at their best. Embed this as an ongoing activity, rather than a once a year “event”.
- Different approaches for different parts of the workforce: different types of jobs (e.g. sales versus senior executives versus designers/developers) need different types of models – one size doesn’t fit all.
- Abandon the performance rating: the rating ends up being a label but not helpful for enabling performance. If ratings aren’t eliminated altogether then they will be simplified into broader categories.
- Separate performance from reward: formulaic approaches to reward, based on performance ratings, are questionable particularly where the objectives are more qualitative or delivered through team collaboration.
- Continuous feedback: the frequency, focus and quality of interactions will all change to enable a more real time conversation about feedback and more contemporary data on how the employee is tracking.
- Technology to enable, rather than record: mobile technology can be used to allow for more immediate and personalized feedback.
- Enable managers to become leaders: development of managers to enable them to become better coaches and mentors for their employees. Enable them to focus conversations with employees on capabilities and performance rather than what went wrong.
About the survey
In light of the emerging global trend of organisations moving away from traditional performance management models, the 2015 Mercer Performance Management Survey gathered insights of senior HR executives from 64 organisations across the Asia-Pacific, North America, South America, Europe and the Middle East.
The organisations represented a wide range of industries including financial services, consumer goods, energy manufacturing and retail.
Mercer is a global consulting leader in talent, health, retirement and investments. Mercer helps clients around the world advance the health, wealth and performance of their most vital asset – their people. Mercer’s more than 20,000 employees are based in more than 40 countries and the firm operates in over 130 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global professional services firm offering clients advice and solutions in the areas of risk, strategy and people. With 57,000 employees worldwide and annual revenue exceeding $13 billion, Marsh & McLennan Companies is also the parent company of Marsh, a leader in insurance broking and risk management; Guy Carpenter, a leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a leader in management consulting. For more information, visit www.mercer.com.au Follow Mercer on Twitter @MercerAu