Ventana Research Analyst Perspectives

In January of 2020, I was head of product innovation for a newly launched product in the human capital management technology space, targeting high-volume hiring. We had big ambitions for that year, tied to product development and sales, all documented during our annual goal-setting and performance review process. And then the pandemic hit, and everything changed overnight. Everything, that is, except for my annual goals, or those of my team, which had already been set in stone. When the annual review process came around, nothing we’d set forth earlier in the year was even applicable. How is a leader to evaluate and make compensation recommendations for a team member based on completely outdated criteria?

While 2020 is certainly an extreme example of the macro-economy impacting organizational and individual goals, it was not an anomaly. This is the fundamental challenge with annual performance reviews, and the primary reason organizations should consider moving to a continuous performance management cycle. In fact, our research leads us to assert that by 2026, three-quarters of organizations will have migrated from an annual performance management cycle to a continuous cycle in order to support an agile workplace, improve employee engagement and better manage and measure performance to shifting objectives and key results.

One of the main benefits of a continuous approach is that it allows for regular conversations between managers and employees about their work and progress. Instead of waiting until the end of the year to have a major discussion about what went well and what needs improvement, these conversations are spread out over time, so issues don't become overwhelming or lose relevance. It also allows for employees and managers to adjust their objectives and key results as needed in response to changing business conditions.

Another advantage is greater accuracy in measuring performance. Organizations gain visibility into individual contributions more frequently and accurately as opposed to once a year. By regularly monitoring each team member's performance, organizations can identify potential risks or high performers sooner, allowing them to adjust and course-correct when needed. Additionally, data gathered can give valuable insight into areas like productivity trends and project pacing, which can provide useful information for forecasting and planning.

Finally, perhaps one of the greatest benefits of a continuous performance management cycle is its ability to improve workplace morale. Employees feel seen and heard when they receive regular feedback and are given opportunities to grow within the organization. Not only does this lead to higher job satisfaction and motivation levels among employees, but it also reduces turnover rates by creating an environment where everyone feels valued and appreciated. In summary, it encourages healthier interactions and collaboration between teams, which ultimately leads to better outcomes for the entire organization.

One major complaint about the performance management process in general is the administrative nature of the tasks that go along with it. Fortunately, technology can ease that administrative burden, even in a continuous performance management cycle. With the right software in place, organizations can effectively monitor and measure employees’ progress over time as well as identify areas for improvement based on progress to goals. Prescriptive analytics tools provide timely and actionable data-driven insights into employee engagement and morale, allowing organizations to access key data points that inform decisions when it comes time to promote high-performing workers or address issues with those who aren’t meeting expectations. Moreover, these solutions can prompt managers in how to provide personalized coaching to their team members while enhancing collaboration and improving communication. Advances in performance management technology have turned what has historically been an administrative burden into a largely automated set of tools that enable managers to give timely and relevant ongoing performance feedback.

Performance management should always be a part of any successful organization. Employees crave and need goals to work toward rather just completing ungrounded tasks, and managers must engage and collaborate with their employees to understand progress to goals, adjust as necessary and provide a framework within which success is defined. Traditional performance review cycles do not allow for the agility in the workplace that is required in today’s competitive and digital working environments. By migrating to a continuous performance review schema, and implementing software that supports it, organizations ensure that managers have the necessary tools to support and engage their employees, manage goals to organizational objectives and redefine the process from an administrative, check-the-box task to an opportunity to promote performance and boost morale.

Regards,

Quincy Valencia