Prediction 2: Performance management will continue to be redesigned

By Josh Bersin Jan 7, 2015
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Throughout 2014, Deloitte found companies struggling to fix an overly complex, unhappy performance management process to make it simpler and to put more focus on development. Sadly, Deloitte’s Global Human Capital Trends 2014 report found that only 8 percent of surveyed global organizations believe their performance management process is worth the time they put into it. The race is on to change that.

How did many current processes suddenly become obsolete? For one thing, an influx of younger workers and heightened demand for skills has made it increasingly important for companies to focus on coaching and development. For another, teams are often led by team leaders (as opposed to managers) and work in a cross-functional way, making traditional manager-led evaluation limiting.

Also contributing to the peer-to-peer dynamic is the fact that social tools now let people share goals, recognition and work-related information in a transparent way.

Finally, numeric ratings, rankings and formal evaluations without positive feedback may create a culture of reduced performance, according to new research on the neurology and psychology of work from David Rock, director of the NeuroLeadership Institute.

In 2014, more than 70 percent of the companies Deloitte surveyed for the Global Human Capital Trends 2014 report were re-engineering their performance management process, and in 2015 more companies will likely follow suit.

Several important issues should be addressed as you take on this highly strategic project:

  • Companies should revisit the “why” of their performance management process. What business, talent and cultural outcomes are you trying to achieve?
  • Performance coaching, development and evaluation are among the most important parts of the process, so companies are simplifying the process to help managers focus here first.
  • Goal management, once considered a top-down cascading process, should be more agile, frequent and transparent. (See Bersin by Deloitte’s High-Impact Performance Management: Using Goals to Focus the 21st-Century Workforce report, 2014.)
  • Numeric ratings play a smaller role than before. Companies are using new values-based scales and other methods to give people feedback and advice, not just a “grade.”
  • The 1:1 match between rating and compensation is becoming a thing of the past. Forward-thinking companies eliminate or separate these concepts entirely and make pay adjustments based on performance, customer impact, skill scarcity and the competitive nature of employees’ positions.
  • Training managers on how to coach, give feedback and regularly check in with employees is critical to success.
  • Large HR software vendors are slowly starting to build more-agile performance management tools, and a number of new vendors are launching low-touch, easy-to-use performance and goal management tools.

Josh Bersin is the principal and founder of Bersin by Deloitte, a research and advisory consulting firm in enterprise learning and talent management.

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