Rethinking the Performance Review Cycle

10/30/2018

If you feel like you’re herding cats instead of adults, you most likely have performance management issues. Why is performance management important? It’s simple. Happy employees mean happy owners and guests. However, getting to that point is not that simple.

Performance management leads to positive behavioral changes, in all industries. This framework motivates employees to work hard, ideally beyond their specific duties, to contribute to a team or help another employee on a project. Less obvious outcomes are the retention of key contributors, prevention and protection against lawsuits and insights for internal promotions and succession planning.

When reflecting on your performance management process, evaluate the answers to these key questions:

Are your performance reviews driving the behaviors you need for your employees to succeed?
Are your employees meeting and exceeding their goals?
Are you provided with timely and relevant information regarding internal promotions and succession planning?

If your answers are not clear and positive, it’s time for a change.

Deloitte conducted an internal case study in 2014 by looking at how much time the company spent on performance reviews. Like many companies, they were setting objectives for each employee at the beginning of the year. After every project, people were rated on how well they met their goals and where they did and didn’t excel.

At year’s end, managers got together to examine ratings and compare people. After a lot of discussion, they boiled down every employee’s contributions for the year into a single performance number. That whole process took a lot of time in which the employees were not privy to discussions or able to make a case for their performance a year ago, six months ago and so forth.

In addition to the process taking too much time, Deloitte’s business needs were evolving so quickly that their annual goals couldn’t keep up with their needs. Managers found that real-time discussions are much more valuable than year-end conversations about performance and pay.

The study also discovered that skill ratings are not consistent from reviewer to reviewer. In 2000, a comprehensive study showed that ratings reveal more about the people who give them — what they value and how tough they are — than about the people being rated. In other words, ratings are mostly a reflection of the reviewer.

If this scenario sounds familiar, you know why employees often dread the annual review process. Many employees are left feeling frustrated and managers are exhausted. When managers have difficulty relating well to the people they manage, it generally leads to issues with communication, recognition, motivation and morale. Ultimately, productivity and retention are most vulnerable after the annual review process.

As we get closer to the end of a decade, what changes can we expect to see in performance management? The biggest component we’re seeing is that it’s time to find a better system. It’s time to make ratings more consistent and accurate, generate timely, tailored discussions and get everyone focused on fueling future performance instead of assessing the past.

Although I don’t have a crystal ball to predict the future, there are a handful of dominant trends that are sticking. Trends that make sense and help businesses find and keep the right people through their performance management system. Here, we combine current workforce and review trends with insight from the Deloitte study to shed light on how vacation rental businesses can build and retain great employees.

Engage Employees

Develop a system to engage employees. The three things that matter most to employees are:

Coworkers’ commitment to quality
A mission that inspires employees
The chance to use their strengths every day

What is fascinating is how employee engagement correlates directly to your company’s performance results. Gallup’s research found that companies with engaged employees experience an increase of 10 percent in customer loyalty, an increase of 21 percent in profitability, an increase of 20 percent in productivity and an improvement of 40 percent in turnover. Engaging employees is a competitive advantage for your business.

Deloitte’s executives realized they needed to spend more time helping people use their strengths. To do this effectively, they had to collect better data on performance. With that in mind, they sat down to define three main goals for their new system; those goals were reward performance, see performance and fuel performance.

Reward Good Performance

Not only for vacation rental managers but for all industries, it’s important to tie good performance to pay. There are a number of ways to do this both through rewarding high performers with raises and bonuses and ensuring that base pay or wages are fair for the company and fair for the employee. Managers should incorporate and connect performance incentives or bonuses to individual and team performance.

Create recognition programs. A few low-cost recognition programs include peer-to-peer acknowledgments, thank you notes and public recognition. Rewards like gift cards are popular, especially when the card targets something the employee needs or offsets a personal expense like a gas card. Other rewards like lunch with a supervisor, manager or owner provide opportunities to show respect for the employee’s work and accomplishments while showing that you care. Consider movie tickets or other fun rewards that give the employee experiences with their family and friends; it also shows that your company believes in life after work.

See Performance

The best judge of an employee’s performance is their supervisor or team leader. Nothing trumps direct, daily experience and engagement with an employee to see their performance accurately and factually.

For Deloitte, they needed to do a better job of rewarding performance, and this initiative started with streamlining their process by prioritizing the supervisor or team leader’s feedback above all others. In essence, they stopped asking multiple people for feedback on each employee — input from the team leader was enough.

Still concerned about the unique ways that people judged others’ skills, Deloitte stopped asking team leaders to assess skills altogether. Instead it focused on something that people tend to judge more accurately: their own feelings and intentions toward an employee. After every project — or once a quarter for longer projects — Deloitte now surveys leaders about what action they would take with each team member. The shift from “What do you think of your employees?” to “What do you do with your employees?” provided more real-time assessments of an employee’s skill sets.

To give you an idea of how this works, consider the following example. You just finished implementing a new property management system and are asked to evaluate your team’s performance. Ask your leaders to respond to four future-focused statements versus their typical assessment. First, ask your leaders how much they agree with the following statement, “I would award this person the highest possible increase and bonus.” This captures views of the employee’s overall performance and value. Next, ask your leaders how much they agree with the following statement, “I would always want this person on my team.” This gets at an employee’s ability to work with others.

Then ask your leaders to answer yes or no to two statements: “This person is at risk for low performance” and “This person is ready for promotion today.” One identifies problems that might harm customers or the team, and the other identifies high potential.

The responses to these statements provide a snapshot of the employee’s performance at a certain point in time. Each snapshot becomes the starting point for decisions about salary increases and bonuses. Deloitte also factors in how challenging assignments are and the employee’s other contributions to the organization.

Fuel Future Performance

You want to do more than just measure and reward performance; you want to improve performance. What do great leaders do? For ideas on how to reach that final objective, Deloitte looked at the practices of its best team leaders. Deloitte found that great leaders hold weekly check-ins with team members about current projects. In these meetings, they set expectations, review priorities, provide feedback on work and give information and coaching.

Why make the check-ins weekly? Frequency matters. Drive accountability by holding employees responsible for initiating the check-ins. Check-ins ensure that coaching stays focused on the near term, not on past performance. Both Deloitte’s and Gallup’s research shows a direct correlation between the frequency of conversations and the engagement of team members.

Lastly, shift annual feedback to ongoing conversations to give more timely feedback and allow employees to make corrections or ask for help. To support those goals, Deloitte has created new evaluation and coaching rituals. By using frequent, immediate conversations about performance, they shifted from a focus on the past to a focus on the future.

Key Takeaways

Managers and supervisors in all industries need to be agile. Agility allows you to rethink how you manage performance. It’s a slower, organic process that is departing from a planning-based approach governed by rules toward a simpler and faster model driven by feedback from participants — your employees.

It’s also necessary to show that you care. One of the easiest ways to improve your business’ culture is to show your employees that you care. If employees are troubled over personal matters, show them compassion. If they come to your leaders with ideas, encourage their innovation. If they have a big win or go beyond their jobs’ duties, express gratitude. If they come to you with issues, listen.

Everything you need to know about what your employees value in the workplace, including the pride of working hard for a small business, is discovered in the act of listening. Hear what they value and act to reward their accomplishments.

With this reexamination of performance management, you can attain or even exceed your expected weekly, monthly, quarterly and annual goals. Real time, ongoing feedback engages employees and supervisors in working hard together to accomplish tasks and goals.