Getting the Most Out of Your Performance Management Cycle

Effective performance management is more than just an annual process for evaluating employees; it’s a year-round effort that helps cultivate an environment where employees are empowered to do their best work while staying closely aligned with key business objectives. Naturally, designing a performance management process that yields results can be a complex and nuanced endeavor, and few people leaders would say they have it totally figured out.

A conversation amongst executives in The Circle led by L. David  Kingsley (Chief People Officer at Illumio) and Kelly Wolf (Chief Human Resources Officer at Hippo Insurance) revealed some common challenges and best practices for performance management around tying performance to organizational goals, the timing and cadence of performance reviews, and manager enablement.

Aligning Individual Performance to Organizational Goals 

Despite two-thirds of leaders in attendance having an organization-wide goal-setting framework, many admitted that setting organizational goals and evaluating performance against them is an ongoing challenge. Some leaders struggle with the process of cascading top-level organizational goals to individual performance, while others experience inconsistent or dilutive results from the performance review process.

Kelly said that bringing organizational goals into performance management is often an iterative process, but establishing leadership alignment on the review process’ main objective should be table stakes. 

“Before you design a performance review process, clarify what you’re trying to get out of it. Are you trying to draw out improved performance, create a culture of high growth potential, drive alignment to your core values? If you can’t articulate the objective of the review process, everyone’s going to go off and do something different.” – Kelly Wolf (Chief Human Resources Officer at Hippo Insurance)

If you plan to use OKRs (as many companies do), remember that sometimes they can be regarded as too restrictive or too abstract by specific employee segments. Rather than worry about formulating a perfect OKR system, focus on ensuring everyone in the organization fully understands the overall business strategy and how their work contributes to it. 

Timing and Cadence of Performance Reviews

Another hot topic of debate among people leaders was how frequently to conduct performance reviews. According to a poll of executives in The Circle, 41% conduct performance reviews semi-annually, while 26% either conduct them once a year or have moved to a quarterly cadence that often involves a self-evaluation, manager review, and year-end calibration.

Several leaders admitted there’s an ongoing struggle between giving employees timely feedback that can guide their performance and development and maintaining the quality and effectiveness of that feedback. More review cycles don’t necessarily translate into better performance; in fact, one of the challenges of a continuous feedback model is that employees don’t always recognize that they’re receiving performance-related feedback without some kind of formal, manager-led conversation or written documentation. One CHRO also noted that adding review cycles can start feeling too onerous to managers and employees and dilute their value over time.

Ultimately, the timing and cadence of performance reviews is an area that requires some experimentation. Kelly noted that, during the performance review cycle, comparing employee self-ratings with manager ratings could be a powerful tool for measuring the disconnect between how your employees grade their performance and how their managers grade them.

Manager Enablement and Accountability

A well-constructed performance management strategy can quickly derail if your people managers aren’t taking it seriously or need to learn how to deploy it effectively across their organizations. It’s a challenge that even mature companies come up against, said David, who offered a perspective on performance management that can both provide context and perspective on why it’s so important:

“There are no A+ players; there are only A+ teams. Our job as people leaders is to build those A+ teams of solid, capable human beings doing the best work of their careers and lives and being rewarded and given feedback according to their efforts and achievements.” – L. David Kingsley  (Chief People Officer at Illumio)

To create consistency around how managers evaluate performance, David recommended providing ongoing guidance and training on implementing a framework such as a nine-box grid or preferred evaluation method. Kelly added that in a prior organization, she would create a special nine-box for managers with suggested actions based on which box the employee fell into.

A few CHROs raised the issue of managers neglecting to complete performance evaluations on time, which can negatively impact bonus and compensation planning. Maintaining accountability is critical to the integrity of your performance management strategy. A potential solution one CHRO offered was to create a public leaderboard that tracks each manager’s progress toward completing their performance evaluations – a friendly, competitive way to encourage performance review completion. But if you prefer more of a “stick” versus “carrot” approach, David suggested you might withhold a portion or the total amount of an executive’s bonus payment until they have finished their performance evaluations.

Final Thoughts:

Performance management is an ever-evolving discipline essential to maintaining a healthy and motivated talent pool. Overseeing this high-judgment, highly complex activity requires CHROs to fully understand the key objectives the company wants to achieve and then equip their people managers with the tools, process, and confidence to execute a strategy against those goals.

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