Most of the times, the performance management system is just a ritual. This is because the missing part of the system is "purpose". Manager and employees have their own perceptions about the performance management system. Their "purpose" is to compensate their employees. Hence higher rating is always perceived for a higher merit increase. It is leader's job to give the larger purpose to the system i.e. it is not just for the merit increase but recognizing employee contribution and his development areas to be a better employee in the organization.
At the organizational level, this should be the integrity exercise not just to complete the process and run the yearly exercise.
Second missing point is the "relevance" of such systems to the current business scenario. The PMS system is established and very rarely it is reviewed periodically. Performance is always important, but the actual results are always considered rather than how these results are achieved. I am speaking about behaviours. Do we really consider the right behaviours and values while evaluating employees?
Third missing point is "the way it is conducted and communicated". Are managers trained properly to give the right feedback? Are they giving the feedback based on the events and circumstances? It should not be an annual ritual. Performance management system should be one of the milestones in the journey of the employee lifecycle.
Fourth missing point is misinterpreting performance to the potential. The general tendency is to identify the talent based on the performance instead of potential. Hence, I always advise delinking the performance management system. Compensation and identifying the talent based on performance.
Given that a company's workforce now has a significant proportion of virtual and freelance workers, how should performance management include them?
I will suggest having regular business performance meetings, department performance meetings and then individual feedback sessions for team regularly. Business performance meetings can be monthly and quarterly individual feedback sessions. During such meetings focus should be on actual performance and peer learning.
During periodical feedback sessions focus can be on "how" part on behaviours and development needs and employee should get the sense that managers are supporting them instead of identifying faults.
Managers need a lot of training on coaching, feedback giving and other aspects of performance management.
What are employees, managers and decision - makers looking for to make performance management more effective?
I think it is about "expectations management". Employees and managers including decision makers have their own expectations from each other. If you make these expectations clear, then effectiveness will be there. This can be done with more concrete goals (SMART - objectives), aligning goals to the common purpose of the organization and job purpose; Qualitative feedback about the job; and trying to put the expectations well documented.
Transparency and openness is the key to any effective performance management system.
What are some of the new things being introduced in Performance management that are working/not working?
It is evolution. There is no rocket science. It should not be the copy paste system. It should be relevant and aligned with your business needs. Some trends are as under :
There are companies who are eliminating the bell curve. Still, people are rated but not calibrated in force rating.
There are companies who are focusing more on development discussions instead of KRAs and KPIs. KRAs and KPIs are still set up but these are not an integral part of the jobs now.
Companies are delinking performance with the potential and running separate talent calibration sessions for identifying the talent, (HiPos, TiPos).
Few companies have in fact total stopped the annual appraisals for a merit increase. Compensation is paid based on the matrix which is based on role, comp ratio with a certain percentage of appraisal rating.
If not periodic appraisals, then what & how?
The word "Appraisal" is not relevant today. It is an evaluation of the performance based on "what" (achievement) and "How" (behaviours, values, purpose). With this understanding, it can be any time as an organization deems fit. However, it should be the right time for the feedback.
You can have business performance reviews monthly and half-yearly formal feedback sessions with employees. Informal feedback sessions and coaching sessions should be regular and this is one of the vital responsibility of people managers.