What’s that one key event in your professional life that many of you are still doing just once in a full year? No rewards for guessing — it’s the whole exercise of filling up the annual performance review form. For some reason, there’s a shared discomfort among managers and subordinates the moment that important mail with the subject tag ‘annual performance review’ flashes on the top of their inbox. The entire procedure takes up over a month as managers and HR executives scramble with paperwork or navigate through piles of online data to fill up an employee’s achievement-and-failure forms. As an annual staff review is … er… an annual affair, both managers and employees find it difficult to remember what actually happened during the year. Both typically come to the meeting ill prepared, with little meaningful goals to discuss. This makes the process more difficult and frustrates both the employee and manager.
In the end, neither the supervisor nor the subordinate seems satisfied. In fact, surveys and studies have found that attrition is in many cases a direct consequence of the way in which the performance management process is managed. In an era when most professionals have declared themselves social animals who love to do everything real time, doesn’t the annual review system look like a tool from a bygone era?
Recognising the shortcomings of a slipshoddy annual review, smart companies are moving to a more ongoing process—where periodic reviews are being used as a mechanism of participatory management and as a means for obtaining staff input into the planning and management of the company’s goals. Muninder Anand, director, information product solutions at Mercer, points out that the half-yearly performance review picked up as a big trend only three years ago as companies realised it is important to hold regular conversations with employees to win the war for talent. Research conducted by The Strategist shows a whole host of companies from across industries have already moved to a half-yearly appraisal cycle and the more ambitious ones are looking at a quarterly performance review system. The incentive is easy to spot: performance management systems (PMS) are being seen as a cutting edge talent retention solution to grapple with a young and increasingly restless workforce. Agrees Sameer Wadhawan, vice-president, HR & services, India & South West Asia, Coca-Cola India, “Earlier, appraisal was a tool for deciding increments. Today, it has become a tool for career development.”
Goal adjustments
While a half-year review may not lead to an increment or out-of-turn raise for the employee, it is largely about using the achievements in the interim to improve performance and delivery in the subsequent periods. Aditya Birla Group’s director, global HR & CEO, carbon black business Santrupt Misra points out that during the review process companies fail to listen to their employees reasonably. “Performance review is me-time for managers and subordinates and so we encourage conversations from time to time in a given year.” For Coca-Cola, “the focus area of the mid-year review is to really improve the quality of conversations between managers and their subordinates”.
According to Rajeshwar Tripathi, chief people officer, automotive & farm equipment sectors, Mahindra & Mahindra, a half-yearly assessment system helps in keeping track of an employee’s progress and take corrective measures, if needed. “For instance, we are open to the idea of readjusting goals if there are unfavourable external or internal circumstances. But there has to be solid ground as something like this will have a cascading effect.”
The company also encourages line managers and their subordinates to have monthly or quarterly conversations.
Companies are also open to the idea of goal readjustments—read scaling down targets—mid-year. Once in 2009 and again this year, Cadbury Kraft Foods brought down the targets of its sales force. Without getting into how and why of the process, Rajesh Ramanathan, director, human resources, Cadbury Kraft Foods, says, “Numbers are not cast in stone. We are open to the idea of taking employee targets up or down throughout the year. Experience has taught us that it helps to keep buffers in goal setting.”
At Hyundai Motor India, the mid-term review system introduced in 2010 helped remove glaring anomalies between individual ratings and supervisor ratings. That year the performance appraisal format in the company was broken down into two parts: business plan for each division and competency assessment. Both these aspects get equal importance in the final analysis. This system has helped employees align their goals with those of the organisation as measurement milestones were clearly defined. Says Sanjay Pillai, vice-president, human resources and general affairs, Hyundai Motor India, “After this system was introduced, there has been fewer cases of disgruntlement as employees know how they would be evaluated at the end of the year and the steps they should take to improve their rating.”
A discussion with the supervisor helps in course correction. An incident diary was introduced in 2010 for managers/supervisors where the manager is able to keep notes on the pluses and minuses of the employee during the course of the year and share the feedback with him during the review sessions. The result, says the company, is that the year-end self assessment has become more realistic and the performance appraisal closer to expectations. This has improved satisfaction levels among employees significantly, claims Pillai.
For its workforce of 80,000, HCL has an annual performance management system that supports the definition of individual, team and corporate objectives. This is followed by mid-year assessment on the objectives and then a year-end appraisal. The performance philosophy is driven by an individual’s need to excel; hence the system is called i4excel. Says Prithvi Shergill, chief human resources officer, HCL Technologies, “We differentiate the performance review process for our high performers as we ensure we provide them feedback more frequently and consider them for deployment to roles larger and more complex than what they are currently handling so as to align their career to organisational growth.”
Difficult transition
While the benefits of a periodic review are difficult to miss, the transition from an annual to a mid-year or quarterly review system is by no means an easy one and may take more than a year after the ball is set rolling. Take the case of Cadbury Kraft Foods. In 2006, the company started the shift to a half-yearly performance review system. The implementation began by initiating the transition as an informal process. By 2009, a three-pronged approach, dubbed ‘Managing people at Cadbury India’, was adopted to make the appraisal system more engaging for employees. As a first step, the company kicked off a comprehensive campaign that educated employees about the new system followed by a skill development programme to train the appraisers (line managers) for spot contribution (an ability/motivation matrix), performance review and effective feedback. The last leg of the process involved taking feedback from employees on the entire experience of the appraisal. Since then, every year, this feedback is used to improve the next cycle of appraisal.
Outdoor and adventure wear brand Woodland has learned a few lessons on performance review in the two decades of its existence. One big lesson, for instance, was that retail is one of the categories in which it’s impossible to quantify an employee’s performance on the basis of numbers only—factors like customer interaction, visual merchandising and participation in in-store events are crucial in adding footfalls. The company follows an annual appraisal system but tracks the progress of employees on a monthly basis, especially for its store personnel. As part of this, store personnel are allowed to rate each other to bring synergy. The ratings are approved by the store manager.
Earlier the company paid group incentives at the store level. This initiative failed as the company released that if a store did good numbers it was on the back of stellar performance by a handful of sales staff. But the benefits were equally divided among star and average performers. Around 2009, Woodland decided to move to a sales-target-per-employee model. Says Amol Dhillon, vice-president, strategy and planning, Woodland, “Voluntary engagement is important in our business. We follow a multi-layered appraisal review system that captures this and other aspects like team work and attitude of sales force at our stores.”
In some industries and functions, it is indeed a big challenge for the HR departments to come up with the right parameters for measuring the performance of employees across departments. For instance, in a media company, while it is easier to quantify the job done by an executive in the ad sales department by simply looking at the volume of business she brought, the same methodology cannot be used to review a reporter’s performance. To deal with such situations, media and entertainment company Network18 switched to a competency-based system in 2011. As part of this process, competencies are divided as common and function-specific competencies. After this, a list of deliverables is prepared. Says Ajit Singh Vig, HR head, Network18, “It was crucial to make these modifications in our review to bridge the gap between ‘skill’ and ‘will’ of our people. Also, we shifted the review process online this year allowing supervisors and their subordinates to edit goals if needed.”
Evidently, periodic review is a tricky affair and if your annual review system is itself in a mess, duplicating it several times in the year will only turn the review process into a bigger mess. However, done well, systematic review and feedback is the only way to avoid poor resource deployment and the costly and reactive problem-fixing on the fly.
In short, a sure-fire way to create a high performance workforce.
