(Photo: Shutterstock) 2023 is shaping up to be another challenging year for HR departments across the country as a recession looms. To start, several high-profile banks intend to lay off thousands of workers in the coming months, and over 100,000 tech sector employees have already been let go. Additionally, hiring freezes are spreading like wildfire, with 23% of CEOs halting their hiring plans, while another 23% consider layoffs.
With fewer workers and limited hiring, it's vital that employers grant the necessary support to get the best out of the employees they do have this year, and an optimal performance management strategy is critical to that. However, a recent study from Willis Towers Watson highlighted employers consistently missing the mark when it comes to performance management. Specifically, 93% of employers identified improving employee performance as a top goal, but only 44% of those believe their workers achieved performance goals last year. It's not all doom and gloom, however, as there are a few key strategies employers can leverage to get the most out of their employees while keeping them engaged and happy.
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Implementing personalized, "bottom up" goals
Willis Towers Watson found that only 17% of employers successfully improved their employee's understanding of how their performance is evaluated. Additionally, many employers struggle to convey how one individual's performance contributes to the overall success of the organization. A sense of purpose for each employee is one of the most overlooked pieces of the performance management puzzle.
To help bridge the gap, employers must set realistic and personalized goals for each employee, and track employee progress towards those goals in real-time. Additionally, each personalized goal should include a corresponding explanation mapping back to the organization's overall business goals. This is a concept called "bottom-up" goals, which not only helps employees understand the role they play, but also how their role relates to the overall success of their team and the entire organization, cementing the purpose or "why" within a workforce. Once personalized, "bottom-up" goals are set, 360-degree feedback will more accurately measure how employees are tracking toward their goals.
360-degree feedback
Historically, performance management is a combination of sporadic feedback and yearly performance reviews from management. While many organizations have made great strides to provide continuous feedback, nearly half of companies admit they don't provide ongoing worker performance dialogue. Additionally, feedback and reviews are too often one-sided, with only an employee's direct manager weighing in on their performance.
Feedback from multiple sources provides more employee performance data, which creates a more impactful review. This crowd-sourced feedback also enables management to recognize employees for work that often goes unnoticed. By implementing continuous 360-degree employee feedback, employers can regularly identify worker pain points and the specific projects or methods that bring out the best in each team member. On the employee side, routine feedback means their performance is acknowledged in real-time, and employees feel more engaged as their efforts are recognized. With better goals and better feedback, the last piece is correctly connecting performance to compensation.
Linking performance to pay
It's essential for high performers to receive the pay increases they deserve, and for lower performers to understand why they may not earn an increase, as well as areas for improvement. This is far easier said than done as roughly 75% of employers struggle to effectively link employee performance to compensation; however, there are ways to strengthen the link.
To start, employers should provide a clearer picture of how each employee's current salary is determined. Specifically, employees should understand how factors like their skill set, tenure, experience, education level and prior performance come together to determine their compensation. From there, employers can build a more holistic set of benchmarks necessary for an employee to earn a raise, promotion, or larger bonus.
Compensation can tie directly into the established personalized "bottom-up" goals, and progress can be tracked in real-time through continuous 360-degree feedback. Ideally, this will include shorter-term (monthly or quarterly) and longer-term (yearly) goals to keep employees motivated. If the economic climate or current state of the business makes compensation increases unlikely, that information should be communicated to employees when they check-in with management or HR.
With an arduous year ahead for many businesses, it is imperative to maximize the talent at hand by modernizing performance management strategy. By establishing personalized goals for each employee, tracking their progress towards those goals with 360-degree feedback and ensuring that achieving goals triggers the corresponding compensation boost, employers can create an optimal performance management system that not only keeps employees motivated in the short term, but also helps retain them in the long term.
Aisling Teillard, Chief Customer Officer, beqom
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