CoAdvantage-What’s the best way to manage employee performance? Answers to this question seem to fall in and out of favor with the seasons. The traditional approach of high-stakes annual performance reviews has been diminishing in popularity at major employers for a long time, but what are the alternative options available? One word of warning: no single approach is perfect, and many organizations favor hybrid, mix-and-match approaches where the advantages of one approach help to compensate for the disadvantages of another.
1: Performance reviews
Perhaps the most well-known approach, performance reviews require managers to sit down with employees to dissect and discuss their performance in various role-relevant areas, identifying strengths, accomplishments, failures, and areas of opportunity. These reviews are typically scheduled on a recurring basis (anywhere from once a year to quarterly).
Pro: They provide an excellent opportunity for face-to-face feedback and communication, a key component of any good performance management methodology.
Con: They’re often too infrequent to be genuinely helpful, and they can fall short of helpful if the manager doesn’t know how to conduct performance reviews effectively.
2: Numbers rating
Rank employees on a numerical performance scale (e.g., 1 to 5). Sometimes, employers will rank employees in a variety of areas and then average or add up the separate ratings into a final employee score. Policy guidelines will then dictate specific rewards or corrective actions based on the ranking.
Pro: This can be an equitable way to rate employees, and it’s easy for managers to implement.
Con: It can also be highly subjective, inconsistent between different managers, and can erase nuance in employee performance. Worse, it can miss other strengths and contributions from the employee if they’re not captured within the scale.
3: Bell curve grading
This method of management effectively places employees in competition with each other. Only the top 10% get the highest scores, for example.
Pro: It can stimulate healthy competition and push employees to perform at higher levels.
Con: It only works if paired with a smart package of incentives. It can also unfairly penalize otherwise hard workers and high performers if you’re lucky enough to have an overall high-performing team, which can stir resentment and erode morale.
4: Ongoing feedback
As an alternative to annual or quarterly performance reviews, managers provide regular, frequently, ongoing performance feedback instead of reserving for occasional reviews.
Pro: This means the feedback is provided to the employee in a timely way – when it will be most helpful, rather than after the fact – and in smaller, more digestible doses.
Con: Handled poorly, it can come across as micro-managing and feel like the manager is constantly looking over the employee’s shoulder.
5: Paying for performance
Many organizations incentivize performance by providing specific rewards – which can be almost anything, including prizes, awards and recognition programs, gift cards, time off, bonuses and commissions, pay raises, promotions, etc. – to employees who achieve specific outcomes or hit certain performance thresholds.
Pro: There’s little that’s more motivating that financial incentives. Nearly three-quarters (74%) of employers have found incentive pay programs to be “moderate to effective” in reaching business goals.
Con: Like everything else, the devil is in the details. If poorly designed, these programs can stir up resentment and actually reduce performance among some employees.
6: Improve management
In the Workplace Productivity Survey conducted by the Society for Human Resource Management (SHRM), poor management was the #1 reason for diminished productivity So, one of the best ways to manage employee performance is to better manage the manager. Provide adequate training and support to managers and supervisors and take care to pair them with the right group of employees. In other words, don’t let an average or bad manager manage a high performing employee. That’s asking for disaster.
Pro: Stronger management almost certainly will lead to stronger performance among workers.
Con: If this approach deprives employees themselves of attention and resources because the business is focused on managers, it can backfire.
CoAdvantage, one of the nation’s largest Professional Employer Organizations (PEOs), helps small to mid-sized companies with HR administration, benefits, payroll, and compliance. To learn more about CoAdvantage’s ability to create a strategic HR function in your business that drives business growth potential, contact us today.