What is Performance Management?
Discover how, if done correctly, effective performance management can benefit both employers and employees.
In This Post:
Performance management is crucial for both employees and employers: Workers need to know how well their work is being received, and employers need a way to formally evaluate and give feedback.
Without performance management, employees can be lost. However, there are both effective and ineffective ways of managing employee performance. Below is curated data and research on performance management.
Damaging Effects of the Traditional Modeling
- Some of the disadvantages of the traditional appraisal system are, lack of efficiency, de-motivational, discouraged teamwork, and the inflexibility of the process, it is also very costly. (Impraise)
- According to CEB estimates, a company with 10,000 employees spends around $35 million per year to conduct reviews.
- Managers spend an average of 210 hours a year in performance management activities. (SHRM, 2015)
- Traditional reviews make performance worse one-third of the time. (Kluger, DeNisi, 1996)
- 58% of organizations use spreadsheets to track performance. (Impraise)
- 22% of employees have called in sick rather than face a performance review, 35% have complained to their peers, and a shocking 15% have even cried. (Impraise)
- In 25% of cases, employees quit their job due to a lack of acknowledgment. (Clearcompany, 2017)
- Implementing a recognition or objectives solution will influence one out of four employees. (Clearcompany, 2017)
Data Provided By:
Abandoning the Old System
- 81% of HR leaders are making changes to performance management. (Gartner, 2019)
- 70% of respondents said they are either updating or have currently reviewed their performance management systems. (Deloitte, 2014)
- One-third of U.S. companies are abandoning the traditional appraisal process. (Harvard Business Review, 2016)
- More than 9 in 10 managers are not happy with the current annual review process, and almost 9 in 10 HR leaders stated the process does not give accurate information. (SHRM, 2015)
- Companies like Netflix, Microsoft, Adobe, Deloitte have already transitioned away from the traditional system of assessment, and many others are following their lead. (Washington Post, 2015)
- 6% of Fortune 500 companies have gotten rid of ranking employees. (Washington Post, 2015)
- In North America, 89% of employees believe their company must support their learning and development. (Entrepreneur, 2016)
- Only 11% of employees would be opposed to some form of learning and development. (Entrepreneur, 2016)
- 71% of employees who believe that their boss can identify their abilities are more engaged and enthusiastic at work. (Gallup)
- Employees who are “thriving” are four times more likely than their “non-thriving” colleagues to work for a firm that understands their abilities and interests. (Hrdive,2019)
Inefficiencies in Traditional Performance Management Systems
- 58% of companies report that performance management systems are not an effective use of time. (Deloitte, 2014)
- 45% of managers do not see value in the review systems used. (Willis Towers Watson, 2016)
- 50% of employees were surprised with their rating, and out of those 87% were negatively surprised. (Inside HR, 2015)
- Because of the negative surprise, these employees displayed a 23% drop in engagement. (Inside HR, 2015)
- Two-thirds of performance management systems fail to recognize high performers. (SHRM, 2015)
- Only 32.5% of employees in the U.S. are actively engaged in their jobs. (Gallup)
Continuous Feedback: A Better Alternative
- Companies adopting continuous performance feedback significantly outperformed competition at a 24% higher rate. (Betterworks, 2020)
- Organizations with continuous performance processes are 39% better at attracting top talent, and 44% better at retaining talent. (Betterworks, 2020)
- In organizations with a continuous performance process, HR teams enjoy a 50% increase in their ratings by managers as “excellent”. (Betterworks, 2020)
- Some areas where companies with continuous performance management outperform traditional ones are, increased productivity (66%), motivating the entire workforce (65%), and achieving top goals of the organization (64%). (Betterworks, 2020)
- 72% of respondents thought their performance would improve if their managers would provide corrective feedback. (Hbr.org, 2014)
- According to 86% of employees and executives, poor collaboration and inefficient communication are the main reasons for workplace failures. (Clearcompany, 2017)
- Companies and organizations with greater-than-average levels of employee engagement reported 27% higher earnings and 38% higher productivity. (Hiredna, 2020)
Feedback as a Fundamental Tool
- The team members of managers who provide weekly feedback instead of annual are 5.2 times more likely to strongly agree that they receive meaningful feedback. (Gallup, 2019)
- 32% of employees have to wait more than three months to get feedback from their managers. (Office Vibe)
- Four out of 10 workers are actively disengaged when they get little to no feedback. (Clear Company, 2020)
- 65% of employees want more established roles and responsibilities. (Mercer, 2019)
- Almost all (97%) of Gen Z is open to receiving feedback, and 67% want it in a timely constructive manner throughout the year. (PR Newswire, 2018)
- 60% of respondents said they want feedback on a daily or weekly basis. (Linkedin, 2016)
- More than 75% of respondents said feedback is valuable to their work. (Linkedin, 2016)
- Positive and negative feedback are equally important for improvement. (Harvard Business Review, 2014)
- Focusing feedback on employees’ weaknesses might reduce their performance by 27%. (Clearcompany, 2018)
- Around 10% of U.S. workers felt engaged after receiving negative feedback on the job. (SHRM, 2020)
Performance Reviews
- According to CEB, only 5% of HR managers are satisfied with performance reviews. (Gartner, 2019)
- 95% of HR leaders expressed feeling unhappy with traditional performance reviews. (Gartner, 2019)
- 59% of employees think that traditional performance reviews have “no impact” on their personal performance. (Gartner, 2019)
- Most employees spend about 40 hours per year in performance review-related activities, whereas managers spend 10% of their work year on these activities. (Gartner, 2019)
- 76% of HR professionals believe that ongoing peer reviews result in more accurate annual performance reviews. (SHRM, 2018)
- 76% of employees want at least monthly performance reviews and feedback. (TruQu)
- 77% of employees and 94% of HR managers think the traditional performance reviews are outdated and need to be renewed. (TruQu)
- Nearly half of millennials (47%) after receiving their performance reviews felt like they can’t do anything right. (TriNet, 2015)
- 47% of millennials started looking for a different job after receiving their performance review. (Adobe, 2017)
- 74% of millennials feel “in the dark” about their work performance and how they could improve. (TriNet, 2015)
- 96% of the participating employees think tools can help them receive continuous performance feedback. (TruQu)
- The two main concerns with traditional performance reviews are that the effort is too high (time-consuming, complex) and the usefulness is too low (inaccurate, unmotivating). (Gartner, 2019)
- Nearly two-thirds of HR professionals rate their organization as having a supportive feedback environment with an average rating of 6.1 out of a 1-10 scale. (SHRM, 2018)
- 29% of organizations that use peer review feedback reported it had the most positive effect when it was ongoing rather than given just at certain times of the year. (SHRM, 2018)
- 93% of organizations conduct employee performance reviews, with 71% of them conducting annual performance reviews. (SHRM, 2018)
- Only one-half (51%) of HR professionals believe that their organization’s performance reviews are an accurate evaluation of their employees’ work. (SHRM, 2018)
- HR professionals agree that semiannual (60%), quarterly (86%), or ongoing reviews (90%) give more of an accurate appraisal of an employees’ work. (SHRM, 2018)
- Regular feedback makes employees nearly three times more likely to be engaged in their work. (Gallup, 2019)
- 30% of workers are so discouraged by negative feedback that they actively seek new employment. (SHRM, 2020)
- Each year, 95% of companies report recruiting the wrong employees. (Fastcompany)
- While 98% of firms feel performance management is vital, just 64% believe they have an effective strategy. (Pavestep, 2021)
- According to a Mercer poll, just 2% of employers feel their performance management approach provides “outstanding value.” Less than 3% see their feedback methods as excellent.
- Only 3% of firms believe their performance management is excellent, while 48% think it requires improvement. (Pavestep, 2021)
- According to 70% of the organizations polled, there should be a better relationship between performance management and other talent considerations. (SHRM)
- Only around 50% of the workforce firmly believes they understand job requirements. (Clearcompany, 2017)
- According to 77% of HR directors, performance evaluations are not an accurate indication of employee performance. (LinkedIn, 2017)
On a Final Note
If done correctly, effective feedback can have great benefits for both the employees and the organization. If you are an employer, there are more than 100 performance management software solutions to help with your employee performance management.
Written by Shortlister editorial team
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