Performance appraisals have never been the favorite season of the year for both managers and employees. Add to that the oscillation around the end of Covid, the spreading apprehensions of tech companies, a wary global economy, and we have an even greater responsibility for managers to have honest and fair conversations during appraisals. Many leaders are heading into appraisals as the financial year comes to an end and their actions in the next few weeks will create peak moments that define how their teams see them.
Leaders who lean into objectivity and empathy will find that beyond the direct outcome of the conversation at hand, they will be able to focus on positivity and potential and build relationships seeped with integrity.
Data is the foundation of corporate decision making and finally, we have systems that give us great insights into employee performance and behaviour through people analytics.
What and why people analytics?
People analytics involves using data to understand employee behaviour and performance, including analyzing employee engagement, turnover rates, and other metrics. By using people analytics, we can gain insights into what motivates our employees, what drives their performance, and what areas need improvement.
Research has shown that both employees and employers dread performance appraisals. Some of the challenges include:
- a lack of clarity on the feedback given to employees
- manager biases when conducting performance evaluations
- lack of transparency regarding the evaluation process
- too much focus on pay incentives rather than employee development
A well-designed performance management process backed by analytics can serve as a valuable development tool for both managers and employees. Here are some ways managers can leverage people analytics in their favor.
Decreasing manager biases
Several research studies have found that performance evaluations are hardly objective. A Harvard Business Review article noted that most performance reviews are done without any structure and are filled with open-ended questions. This leads to managers relying on stereotypes such as gender, race, recency, and other biases to make decisions.
People analytics can help reduce such biases by providing objective data on employee performance. Performance appraisals backed by analytics are more objective and transparent, increasing employees’ trust in their organizations.
Improving the productivity of employees
Traditional annual performance appraisals don’t provide a comprehensive picture of the employee’s performance. The CEB study found that 66 percent of employees said performance reviews interfere with their productivity, while 65 percent said the feedback wasn’t relevant to their jobs.
In today’s dynamic world where individuals and teams work across various projects, individualized feedback is important for employees to succeed. By using people analytics, we can track employee performance over time and identify trends which can inform more effective performance evaluations and feedback. Also, analytics can provide real-time feedback which can help employees make immediate adjustments to improve their performance.
Spotting and retaining high-performing employees
Nielsen conducted a five-year study to identify reasons for their talent loss and found that employees who didn’t experience a change in job duties due to promotion or lateral movement within two years were more likely to leave. As a result, Nielsen identified high performers who were at risk and provided them with growth opportunities. With this change, Nielsen achieved a 5-10% increase in annual retention rates across all departments.
People analytics can help organizations identify high-performing employees who may be at risk of leaving the company. By understanding employee performance over time, we can better recognize and reward high-performing employees, improving employee retention.
But analytics is half the answer
While people analytics can provide valuable insights into employee behaviour and performance, managers play a critical role in using that information to drive improvements. Having access to data is only half the battle – it’s equally important to have skilled managers who can interpret that data and give meaningful feedback to employees during performance appraisals.
Here are three game changers for managers to have more effective performance conversations.
Have a no-surprise conversation
According to a Gallup study, managers who offer frequent feedback (weekly vs annual) are 3.2 times more likely to motivate their employees to do outstanding work and these employees are 2.7 times more likely to be engaged at work. Managers might find giving frequent feedback uncomfortable. However, to be good leaders, they need to overcome personal awkwardness and share feedback on an ongoing basis.
In a large bank, we shared a 24/7 rule for giving feedback and found that the clear guidance on timelines encourages managers to have conversations on time instead of postponing them. The 24/7 rule of giving feedback is that the manager should give feedback to the employee within 24 hours when the observation has been made. In any case, if the manager is unable to give feedback within this period, the feedback should be provided within 7 days and no later than that.
The 24/7 rule ensured that there were no surprises or debates during the appraisal and instead, conversations focus on learnings from the previous year and the development journey ahead.
Wear your coach hat
Managers wear different hats with their team, ranging from Manager, Trainer, Leader, Mentor and Coach. In a performance conversation itself, 3 hats could come into play.
Manager – Focuses on the results and makes sure that the outcomes are delivered efficiently and on time.
Leader – Focuses on a long-term vision and motivates their people to work towards a common goal.
Coach – Drives collaboration, provides guidance, and helps their people build ownership and develop their skills.
Managers should aim to keep the coach hat in focus during performance conversations. The coach hat means that the conversation will be guided by focusing on the individual, their aspirations, where they want to go, and what they want to achieve professionally.
Our work with managers across industries indicates that most managers do not have the skill set to have coaching conversations with their employees. Added to that the pressure of reviews and review timelines means that the conversation ends up being transactional and feels judgemental to the employee. A coach ensures ownership of goals and outcomes and creates more positive and realistic change.
Separate performance conversation from development conversation
A lot of the dissonance in performance conversation comes from combining the appraisal discussion with the development conversation. This often needs to be clarified for employees who only take back the emotional balance of instructional judgment.
Separating performance conversation from development conversation can lead to a better focus on each. Performance conversation can focus on how the employee is currently performing in the role, and whether they can achieve the organization’s expectations and goals. Development conversations can focus on employees’ career goals, interests, motivations, and future aspirations.
This may seem like an addition of tasks for already time-scarce managers but we saw outcomes that underscored our belief in a large multinational client we worked with. The separation of the performance and development cycle will ensure that both happen on time and have concrete outcomes. The feedback from employees and managers was that it simplified the conversation and made each more effective. In this organization, the separation was a few weeks but the separation of a few days would also be effective.
Conclusion
People analytics can help to reduce manager biases, improve employee productivity, and identify high-performing employees who may be at risk of leaving. However, managers play a critical role in using that information to drive improvements, and they need to provide regular and constructive feedback. Together with the power of data and the strengths of the managers, the performance appraisal process can help retain talent and identify future needs, so that the business stays competitive and can achieve long-term success.
We hope these insights provide you with some direction while having performance conversations with your employees more effectively.
If you need further guidance on how to have effective performance conversations or just want to bounce off ideas, we are just an email away! Please drop us a note at connect@metistm.com.