Revolutionizing the appraisal process with continuous interaction
The right tools for efficiency
The world of HR talent is in the middle of a fundamental shift, as more and more companies are trying to find efficient ways of conducting the appraisal cycle in their organizations, instead of the old ‘pay for performance’ principle.
‘Pay for performance’ is outdated
Most companies today still have a rewards process that is tightly integrated with the performance process (the ‘pay for performance’ principle). In other words, a good performance score makes you eligible for a pay raise or a spot bonus. This performance process occurs between the employee and his/her direct manager in 3 phases:
- Objective setting: objectives for the coming year are agreed upon.
- Mid-year review: after roughly 6 months, the objectives are reviewed against the actuals.
- End-year review: at the end of the cycle, objectives are reviewed and scored for the past year and the new objectives are planned for the next performance cycle.
Unfair, forced and demotivating: ‘pay for performance’ needs an upgrade
Performance cycle results are then fed into the compensation or financial systems to define new pay rates and eventual bonuses available to the employees. Even though the process is tried and true, it doesn’t resonate with today’s workforce and organizational expectations. Here are a few reasons why:
- A lot of employees consider the process to be unfair, since managers are seen as not making an effort to collect feedback throughout the previous year (they usually focus on the period just before the formal meetings). Another grievance is confusion regarding the difference in rewards for top and low performers (payouts are perceived as too similar).
- Managers feel trapped in a system of a fixed envelope that is given to them to reward employees that need to fit into a ‘gauss curve’ (any exceptions have to be explained in detail, leading to frustration).
- In organizations, the annual performance review process is often seen as expensive, time-consuming and often demotivating, as the focus is on separating over- from under-performers (which is counter-productive to the goal of constructive dialog).
Encouraging better and continuous interaction
Companies like Microsoft, SAP, Accenture, and Deloitte have recently switched from this ‘traditional’ model to something very different. They adopted a system dubbed ‘rating less’, which is based on continuous feedback exchanged between the employee and the manager. Pay incentives are linked only after these meetings. Other companies are taking a more radical approach (no more annual reviews) than others (taking the best of both worlds). The goal for all is to put emphasis on continuous interaction between employees and managers to be able to deliver continuous and constructive feedback to the global workforce.
The right feedback, the right tools for efficiency
For this approach to work, the company culture must be based on good and constructive feedback. This is where most of the change management lies: not every manager is ready and able to give continuous feedback (positive or negative) to their teams. It’s also important to equip the organization with the right tools to follow-up and assess the performance of your teams simply and easily. If not, costs in time and effort will far outweigh the benefits of continuous performance management.
So where do Flexso and SuccessFactors come into play?
SuccessFactors has expanded its performance solution to support the continuous performance culture on the horizon. This is done by tightly intermeshing desktop applications with the mobile versions of continuous performance management. Comments from one-on-one meetings can be stored and recorded in the mobile application and then pulled into the performance cycle documents. This allows for real-time, on-the-fly feedback on any device (tablet, phone, desktop) with the advantage of everything being centralized and viewable by all parties at all time.
The SuccessFactors solution leverages the best of both worlds:
- A continuous feedback tool allowing to make relevant decisions in all formal steps of the performance cycle.
- Possibility of integrating this performance cycle into a more global compensation cycle to be able to “pay for (continuous) performance”.
The hybrid approach boosts user adoption, since there is less of a ‘learning curve’ – users are already familiar with the process. This smooth transition between systems is very important to encourage buy-in at all levels of the organization. So, what can the hybrid solution look like?
Interested? we are happy to demo these new tools and answer any questions you might have! Contact us.
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