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Continuous performance management comes with benefits, drawbacks

Many companies are ditching yearly performance reviews in favor of continuous performance management. The new method has its advantages, but comes with drawbacks as well.

Performance reviews are one of the most dreaded interactions managers can have with their direct reports. Depending on what the overall performance indicators show, meeting with an employee who has not met performance goals can be uncomfortable. While the goal of these meetings is to identify any challenges an employee is facing and provide feedback on their performance, annual reviews are often an HR formality to highlight poor performance and ensure that the employee is aware.

However, many companies have ditched yearly reviews because of research that supports its ineffectiveness, as employees have shown to be more productive if they receive frequent feedback about their performance. Companies like Adobe, GE and ConAgra are using continuous performance management to encourage frequent check-ins with employees, and they have experienced a reduction in turnover and increased performance.

What are the advantages of continuous performance management?

Continuous performance management allows managers to address any employee issues right away without the need to wait for the yearly review. It also reduces employee frustrations by allowing them to interact more frequently with their managers and gives them a platform to share their needs and concerns. Managers are also able to regularly remind employees of their responsibilities, goals and direction and intervene sooner if there is a problem.

Continuous performance management tools provide HR managers with a platform that allows them to track activities related to goals, interactions with direct reports, follow-up schedules and employee documents. Many of these tools are available in SaaS, mobile-friendly and web-based products and are intuitive and easy to use. These tools offer a quick and efficient way to rate, update and review the performance progress of employees through easy to view dashboards.

What are the disadvantages of continuous performance management?

One disadvantage some managers notice after moving to continuous performance management is the lack of adequate tools to measure employee performance. Despite the availability of tools like 15Five and ClearReview that track employee objectives and interactions, some managers still have challenges with creating measurable goals that must be monitored frequently. Additionally, while installation for these tools may be simple, there may be difficulties integrating with existing HR systems. This can cause duplicate data in multiple platforms, which may add more work for the HR team and managers.

Some continuous performance management tools have also created a new burden that forces managers to spend more time responding to and analyzing employee feedback. An employee comment such as "I don't feel that I am valued at my company" can mean many things, and managers then have to meet with the employee to determine what the issues are. However, they may then find out that the statement was not an accurate reflection of what that employee truly felt.

Another challenge with a more frequent review process is compensation. With annual reviews, a bonus is calculated by evaluating a year's worth of performance. Continuous performance reviews may make it more difficult to determine when an employee will receive a raise.

Changes to performance management frequency have come at a time when the workforce and work environment is changing. More companies are allowing employees to work from home, and the workforce now includes four generations of workers. Continuous performance management keeps employees engaged with their goals and provides them with timely feedback when things are not going well. While the model has proven its value, managers will have to make it their own and ensure that it works well for them.

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