Newmeasures clients have recently been asking for ways to evaluate their performance management practices. Such audits are warranted considering organizations with strong performance management processes are 41% more likely to outperform competitors on non-financial measures such as retention and customer satisfaction. Moreover, this translates into 51% stronger performance than competitors on financial measures such as profit and stock price (Bernthal, Rogers, & Smith, 2003).

Unfortunately, many performance management systems are poorly designed and/or administered. Ultimately, success depends on end user reactions and recent evidence suggests that end users are not particularly pleased with their performance management systems. In fact, less than 25% of employees, managers, and HR leaders feel their current performance management practices are valuable.

The key to strong performance management is ongoing and meaningful feedback as a means to guide, motivate, and reinforce effective behavior and lessen ineffective behavior. Unfortunately, a Cornerstone OnDemand (2013) survey found only 34% of employees felt they received useful feedback from managers within the 6 months preceding the study and only 40% felt feedback received during their performance review helped them improve their performance. Regrettably, many systems are a simply a once a year paper shuffling event driven by HR that simply result in a rating tied to pay and/or advancement discussions. While performance ratings are important, they aren’t sufficient in developing employees or producing behavior change. Without meaningful feedback, ratings can produce unfavorable reactions that hinder feedback acceptance and application. In addition to feedback acceptance, a Newmeasures study found that employees who had a meaningful conversation with their manager about their development were 4 times more likely to be engaged.

Feedback should be evaluative of performance, but not without clear reasoning and illustration and strategies for growth and development. Evaluations or ratings generally include the sign of the feedback (positive or negative) and should include links to business outcomes and comparisons to past performance and organizational standards (not rankings or comparisons to other employees). Feedback sign influences employee  reactions and in general, positive feedback tends to be accepted more readily; however, negative feedback can be more effective when deemed an accurate reflection of performance (Steelman, Levy, & Snell, 2004). Performance improvement following negative feedback is more likely when feedback is clear, linked to achievable results, and focused on development:

Feedback becomes most valuable when the recipient can use it to improve performance or change behavior. Specific examples of past and desired behavior can more clearly illustrate to recipients the effectiveness of their actions and what behaviors can and should be changed. Message specificity is critical to future behavior; for example, Sujan (1986) illustrated that feedback crediting poor sales to strategy led salespeople to practice more adaptive selling techniques – altering sales presentation to situations. However, when alternative feedback credited lack of effort, salespersons were more likely to work harder but not necessarily smarter. 

Feedback discussions should also include performance improvement planning, strategy development (e.g., goal setting, intention formation), and tactics to monitor and review progress. Feedback followed by goal-setting can not only improve performance but also enhance work satisfaction and organizational commitment (Tziner & Latham, 1989). However, goal setting is often overly focused on outcomes (e.g, increase sales by 10% in Q4) and neglects process. Process feedback includes information regarding the actions that produce the outcome (Earley, Northcraft, Lee, & Lituchy 1990) and are more controllable than outcomes. To be most effective, feedback should consider both process and outcome. Finally, feedback should include strategies to deal with multiple, often competing goals.

Bearing in mind the impact effective performance management can have on important business outcomes, it is critical to understand your employees’ perceptions regarding your entire process as it guides the quality of the feedback they receive. There are five important and intricately linked components to every performance management system (Young, 2015).

1. Performance measurement: Do employees understand the how their performance is measured? Can they differentiate between “good” and “bad” performance? Do they agree with the performance indicators and standards of measurement?
2. Feedback content: Does the feedback clearly convey effectiveness as compared to standards, goals, etc.? Is there action planning for improvement or behavior change, career growth, goal setting, etc.? Is the feedback focused on job relevant and controllable behavior?
3. Feedback delivery process:  Is the right amount of feedback available at the right time? Do employees have a voice in the feedback process?
4. Feedback source: Are the feedback sources perceived as trustworthy and credible? Is the feedback source supportive?
5. System commitment or support: Are managers trained to deliver feedback and coach performance? Does leadership support the system and commit to improvements when necessary? Is there incentive to participate and take the process seriously?

Feedback content doesn’t live in a bubble, each of the preceding components should be considered when evaluating your performance management processes. Considering almost 60% (n=750) of HR executives graded their own systems at a C or below, it could be worthwhile to look under the hood and make adjustments where indicated.

References

Bernthal, P.R., Rogers, R.W., & Smith, A.B. (2003). Managing performance: building  accountability for organisational success. HR Benchmark Group, 4(2), 1-38.

Earley, C. P., Northcraft, G. B., Lee, C., & Lituchy (1990). Impact of process and outcome feedback on the relation of goal setting to task performance. Academy of Management Journal, 33(1), 87-105.

Steelman, L. A., Levy, P.E., & Snell, A. F. (2004). The feedback environment scale: Construct definition, measurement, and validation. Educational and Psychological Measurement, 64(1), 165-184.

Sujan, H. (1986). Smarter versus harder: An exploratory attributional analysis of salespeople’s motivation. Journal of Marketing Research, 23 (February), 41-49.

Tziner, A., Murphy, K.R., & Cleveland, J.N.(2001). Relationships between attitudes toward organizations and performance appraisal systems and rating behavior. International Journal of Selection and Assessment, 9(3), 226-239.

Young, B.L. (2015). Feedback intervention perceptions: Development and validation of a measure. Paper presented at the 31^st Annual Conference of the Society for Industrial and Organizational Psychology, Anaheim, CA.