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Bill Howatt is the chief research and development officer of work force productivity with Morneau Shepell in Toronto, and founder of TalOp in Kentville, N.S.

Every leader's business success is dependent on their people's success. Leaders can't achieve results by themselves; they need their people to fully engage, buy into the corporate mission and be committed to achieve desired results each and every day.

One way leaders can support employees' success, efficiency and productivity is to use performance management systems provided by their human resources department.

How confident are you that your current performance management system is helping to achieve targeted business results?

Annual performance appraisals often are at the core of a performance management system. Large organizations have human resources information systems that facilitate the performance appraisal process.

A typical employee performance appraisal experience consists of one meeting a year when employees are given a formal performance appraisal with their yearly results. Some organizations include mid-year check-ins within their model to gather feedback on business goals and learning objectives results that are fed to the performance appraisal scoring process.

Typically, the manager and the employee both have some prep work before the appraisal meeting. The prep tasks are defined by the type of performance appraisal being done. An appraisal might include two hours' preparation for both employee and manager, followed by a one-hour meeting, for a total of five hours. This number could be higher or lower, depending on the organization.

For this example, it's reasonable to estimate the evaluation period for one year of work requires a five-hour investment per employee, at minimum. In an organization with 5,000 employees this would be approximately 25,000 hours. Using an average hourly rate with benefits of $60 as a plug, completing one cycle of performance appraisals for this organization costs approximately $1.5-million, not including IT, space and other costs.

Performance appraisals for many organizations fall on a calendar like Thanksgiving, where there's a lot of work done in a short period to get through the event.

Do you ever ask how performance appraisals are being objectively evaluated to measure their impact on your organization's results, culture, return on investment and employees' work experience?

The reality is that not enough organizations are doing evidence-based evaluations of their performance management systems and appraisals. This is a bit odd, considering the average HR leader in the above example could not simply ask for a budget item of $1.5-million based on some notion. Without the why question being answered, many senior leaders have given performance appraisal systems a pass based on the concept that they make sense, but without evidence of impact.

However, there is a movement to rethink performance appraisals with respect to their value, impact and return on investment.

Every day is an opportunity to learn, achieve a result and get feedback. This is congruent to the coach who can build increased trust between employees and managers and provide more opportunity for ongoing learning and development.

There appears to be a growing trend of large organizations that are looking to drop the traditional performance appraisal single-score approach. Most of the large accounting/consulting firms report they are dropping the traditional annual performance review. As well, the Harvard Review reported that 30 large companies dropped their old system and now around 70 per cent of all companies are reconsidering their performance management strategy.

The next generation seems to be leveraging coaching concepts and focusing on each day as an opportunity for development and learning to provide input, versus doing an appraisal just once a year. Such a dynamic system makes more sense than a static evaluation once a year for an employee who works on average 220 days a year.

Next-generation performance management systems

The next generation of performance management systems appears to be aligned with a coaching approach. Employees are encouraged to be active in their learning and seek feedback to evaluate their progress and growth daily, not once a year. Leaders in this model are encouraged and trained to obtain coaching skills that facilitate two-way conversations.

Such new performance management systems are used to evaluate performance and training needs and increase collaboration between employees and managers. They support attraction, retention, career and succession planning, promotion and, in some cases, compensation.

Using a coaching approach can help employees have better accountability for their actions and results. This type of model requires leaders who are active and interested in their employees' success and results daily.

This next-generation model can also reduce employees' stress because it promotes increased conversation and more opportunities for self-advocating and problem solving. The model can align health, engagement and productivity by integrating programs (e.g., performance management, employee wellness, mental health, occupational health and safety, training and development) to maximize employees' experience and performance across their lifecycle.

In the end, most HR strategies and tactical programs have one common goal: to maximize employees' ability to perform to their full potential in their assigned functions in a safe manner.

Finally, the next-generation performance management, when done properly, will include an evidence-based evaluation framework that measures the impact of what is working and why. As Deming suggested, quality is a moving target.

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