Industry Insight: Performance Management

Industry Insight: Performance Management

Optimize Employee Performance to Maximize Business Performance

You’ve built an impressive talent hiring and screening approach, one that better predicts and ensures you are hiring the right talent for your organization and for each position. Now, you can sit back, relax and watch the magic happen right? Not exactly. While you have positioned your company ahead of the competition by better analyzing and assessing your best-fit hires, you can’t just onboard them and assume they will perform, nor can you assume the depth of their potential. In fact, the next phase of their employment lifecycle with your organization is arguably the most important, and most impactful for your own business performance.

Success in today’s business landscape is directly correlated to the performance level of a company’s workforce. According to researchers at McKinsey & Co., there is a clear relationship between a company’s organizational performance management and its financial performance.

Simply put, high-performing companies have high-performing workforces that produce more, innovate more, sell more, and essentially deliver results that exceed the costs of labor.

Not surprisingly, new research findings from The Conference Board and UK partner Chartered Management Institute (CMI) finds that for global business leaders, building a world-class workforce is their top challenge. Specifically, these CEOs say performance management is an ongoing priority.

An Integrated, Cyclical Approach to Performance Management

It’s important to delineate the way leading-edge organizations are approaching performance management today, a vastly different methodology that has evolved beyond the once-a-year performance appraisal of years past. Namely, the best-in-class performance management programs of today are an ongoing process that builds on the same assessment data gathered during the hiring process, and that not only measures and assesses workers’ current

performance (i.e. performance appraisals, reviews, etc.) but also measures and predicts their future potential for advancement and leadership.

Performance and potential are two vastly different measures, but both equally vital to

maximizing workforce effectiveness for an organization. This comprehensive approach ensures companies increase current productivity, identify top performers and leadership pipeline, and continually motivate workers to perform at higher levels.

However, many organizations neglect to connect the two aspects of overall performance management. In fact, a recent study conducted by AMA Enterprises found only 8 percent of participating organizations reported using truly systematic methods to identify their high potentials.

Optimizing performance needs to focus on aligning, developing, guiding, recognizing, and engaging employees. Most importantly, leading-edge organizations are unleashing the performance capability of their workforce by leveraging talent assessment data and tools to better manage, develop and identify potential for their future workforce.

Five Strategies to Create a Leading-Edge Performance Management Program XBInsight, a sophisticated and unique talent assessment platform that turns the promise of talent into practical results, has helped some of the world’s leading brands create a leading-edge

performance management program based on the following five strategies.

Establish Clear Alignment between Individual Performance Goals and the Organization’s Objectives At the core of any high-performing organization is a clear alignment between individual

performance objectives with the overall business performance goals. Key to this alignment is that employees understand the relevance of their contributions to the overall company objectives.

Achieving enterprise-wide alignment is a process that takes time and commitment from senior leadership, but is absolutely necessary to building a high-performance workforce. However, as reported by Human Capital Magazine, a mere seven percent of employees today fully

understand their company’s business goals and strategies and what’s expected of them in order to help achieve company business goals.

For most companies, the challenge is to connect the broader objectives and vision of the company into something meaningful and motivational for individual employees. In the 2011 book The Progress Principle, it found the strongest organizations were those that nurtured their employees’ inner work lives by allowing them to make progress in meaningful work. More often, the individual level is where the vision breaks down – employees see only the gap between the visionary language and their daily work lives and become cynical rather than motivated.

Many of the Best-in-Class organizations are realizing both the importance and the difficulty of individual and organizational performance alignment, and as such are turning to talent assessment partners to help drive their overall performance management process beginning with this key aspect.

Link Assessment Data from Pre-Hire to Inform Post-Hire Performance

Leading organizations are also utilizing their talent assessment partners to ensure their

assessment data and analytics follow an individual from hire throughout their employment. By defining role-based competencies and behaviors for every employee not only establishes a baseline of strengths and gaps, but also identifies for them exactly what is expected of them.

They also form the foundation for ongoing performance evaluations and development plans.

In fact, a study by Aberdeen found that Best-in-Class organizations know the importance of using assessments to select individuals who will go on to hold critical roles, and the value of a competency framework in both the pre- and post-hire. But, they truly differentiate themselves in their ability to create action plans based on these assessments.

While assessment data is valuable in predicting which individuals will be top performers in the future, that success is still not guaranteed. Top performing companies know that individuals must be supported through ongoing performance management, namely development and coaching.

Aberdeen has seen a trend toward using assessment data post-hire to guide development. In fact, seventy-seven percent of organizations that use assessments in the pre-hire also use them post-hire, according to their study. Top-performing companies also use the insight they gain into candidates in the hiring process to guide onboarding and development by prescribing

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Aberdeen Study, 2012

development plans, identifying high potential talent, building skills and establishing performance goals.

Create Consistent, Objective and Data-Driven Process for Measuring Current Performance Once meaningful, employee-specific goals have been established, this becomes a data-based roadmap for developing and measuring employee performance, helping drive a strong sense of cohesive direction across the enterprise. Progress against these goals should be reviewed on a regular basis to ensure achievement and to address any setbacks or gaps in a timely manner.

Using talent assessment data as the foundation for both formal and informal performance discussions helps both manager and employee stay more objective, and keep emotions at bay.

Unfortunately, as uncovered in the recent AMA Enterprises study, only 35 percent of companies used talent assessments to measure performance, while other less objective approaches such as, performance appraisals (74%), manager recommendations (69%), innovative/unique business contributions (42%), and input from peers (35%) were equally or more popular criteria.

Obviously, the risk of this type of talent assessment and management is the process becomes highly subjective, and more like a popularity contest – which can leave the wrong talent in the desks and the right talent walking out the door.

Assessing the effectiveness of an employee’s performance and behavior in their current role should be done separate of evaluating their potential and readiness for future positions. As discussed, this is best achieved using a sound, data-based performance management process that uses the metrics that define successful performance in a given position.

Evaluate Employee Potential and Readiness for Future Positions

Another critical aspect to a world-class performance management methodology is to

continuously evaluate current talent to determine high potential employees and their readiness to take on future roles within the organization.

Competency and development assessments help identify individuals with growth promise, and who may benefit most from accelerated development plans. Robust, actionable plans can be created to help bridge the gap between current strengths and growth areas, and their level of readiness for a future position. The specific strategies and areas of focus must align with the business objectives and needs of the organization, the future role requirements, and the individual’s own goals.

This component of employee performance management is not only critical to maintain an effective workforce, but it is the foundation for building a robust, well-prepared leadership succession pipeline for the organization.

Recognize and Leverage Performance Management as Key Engagement Driver The evidence is clear and compelling – many of the building blocks of a best-in-class

performance management methodology are top drivers of employee engagement. That means, the benefits of improving a company’s performance management program are two-fold: a higher-performing workforce; and a higher-

engaged workforce.

For the many companies today whose workforce is largely disengaged or

unmotivated, the performance management process can become a powerful tool in improving engagement.

Employees rank recognition, feedback, opportunity for promotion/growth, and performance goal alignment with business objectives as having significant impact on their level of engagement. See Figure 1.

While the vast majority of respondents identified all the success factors listed to be very important, many are falling short in delivering those goals, reflecting a gap between what’s seen as a priority and what is actually being followed through-upon within organizations. See figure 2.

The right approach to performance

management should motivate workers, and provide them an opportunity to feel empowered and accountable for their results and their development. Keeping workers engaged and motivated to perform their best is largely dependent on aligning their values,

motivations, and competencies with their current role and strategic priorities of the company – all achievable through an assessment-driven performance management process.

Harvard Business Review, 2013: The Impact of Employee Engagement on Performance

Harvard Business Review, 2013: The Impact of Employee Engagement on Performance

Conclusion

While senior leadership and executives have always been focused on basic talent management – the acquisition, hiring, and retaining of top talent – to truly drive business success and

innovation, companies require engaged, high-performing employees. A leading-edge, effective performance management program is a common thread among all high-performance

companies. It is a continuous process of aligning individual goals to the business, setting clear expectations, linking assessment and performance data to inform development, objectively measure and evaluate both current performance and potential for future roles, and using the process to improve employee engagement. Many organizations continue to struggle with weak or bureaucratic approaches to performance management, but there are leading strategies that can turn the promise of talent into practical results for every organization.

Contact XBInsight to learn more about our talent assessment system, and why the world’s leading brands choose us as their talent assessment partner.

Visit us at: www.xbinsight.com or call us at: (401) 682-2859.