Aon recently concluded its inaugural, and one-of-a-kind ‘Performance Pulse of India Inc.’ study. 154 companies participated across various industry sectors.
Performance Pulse of India Inc. is a study to understand evolution of performance management practices in India. The report captures current practices and key trends across entire performance cycle, starting with performance planning followed by review, feedback, and linkages with other systems.
The study highlighted that performance management is the top priority for CHROs in the next 2-3 years. Performance appraisals have seen maximum disruption with 66% of participating companies making changes in the last one year
The top three areas where changes are being made are performance process, technology platform and alignment of appraisal process with business strategy. Interestingly, these are also the areas that have attracted media buzz. Whether this influenced organizations to believe in these trends and "hop on the bandwagon" or these were “thoughtful disruptions” critical to drive business results in their context is the moot question.
Let us take a pause and reflect on what really triggered these changes and if they are creating the desired impact for the organizations.
Bell curve’s efficacy is under question, but organizations are missing the big picture
Formal ratings and bell curve have been integral to the performance management process from almost its very inception. They are looked as Siamese twins with a common fate. However, the study reveals that CHROs still seem to have faith in ratings/labels; whereas, bell curve is under severe scrutiny
The story of two numbers: Organizations seem to be divided on whether or not to have a bell curve. We found some common perspectives on this:
1. 58% organizations highlighted that they currently follow the bell curve. For these organizations we did a reality check around satisfaction levels towards bell curve.
2. 42% organizations highlighted that they don’t follow the bell curve. This includes the organizations that never had bell curve (23%) and the organizations that removed bell curve (19%). We analyzed the key reasons highlighted by organizations to remove
the bell curve and evaluated these reasons with a business/engagement lens.
Even though organizations are removing bell curve with all the right intentions, it is not translating into intended outcomes for all organizations.
The me-too vs. the one with a solid foundation: We analyzed two sets of organizations which have removed bell curve and witnessed either positive or declining business performance. Interestingly, managerial capability and accountability made all the difference. Removing bell curve is a process decision which is easy to implement.
However, to ensure its effectiveness, organizations need to build a solid foundation and strengthen their managerial muscle.
No formal ratings/labels means less man hours? Think again: Organizations doing away with ratings have often cited savings of millions of person hours during appraisal process. These assertions have led other organizations into believing that getting rid of such a system will enable their managers and HR teams to reclaim time.
We evaluated the organizations that removed ratings/ labels and found that there’s transition of time investment from having fruitless follow ups and forced end of the year conversations to more structured, frequent and developmental conversations.
Differentiation is here to stay: The factor that remains sacrosanct for all the organizations is their intent to differentiate individual performances. 77% organizations mentioned ‘Differentiating individual performance’ as the top enabler in achieving business objectives. Key highlights:
Even a comparison of the organizations that have bell curve and that removed bell curve showcases that 80% organizations falling in either of the categories highlighted ‘Differentiating individual performance’ as the key enabler. Thus, the core objective of being able to appropriately reward and retain high performers still seems to be center stage.
System & Technology - A Catalyst. Not the Core Ingredient
The new flavor of the season: The HR technology marketplace is booming and is on the rise with multiple offerings of cloud-based solutions, mobile apps, etc. Adopting the best available technology solutions has become ubiquitous. Even the organizations that have technology platforms are planning to make further changes within the next 1-3 years. Below is a snapshot of technology adoption for performance appraisal process:
Technology is ‘Necessary’ But Not ‘Sufficient’ to Drive High Performance: Technology enables efficient delivery of HR processes and a platform to drive analytics. While there are a plethora of alternatives for implementation of performance management tools, the question really is whether such tools make a difference to the efficacy of the entire system.
The study reveals that ‘technology enablement’ is ranked 16th among a list of 17 enablers; making it one of the lowest ranked factors ‘enabling’ organizations to drive performance.
Importantly, it is ranked 1st on ‘challenges’ coming in the way of driving performance. While almost 80% organizations that participated in the study have a technology platform, only 15% of these organizations are hyper growth*.Thus, technology seems to be a hygiene factor. Its presence might not have a positive impact; however, its absence might have an adverse impact.
The Success Recipe – Key Levers Besides Technology: Mere technology presence won’t suffice growth. Technology is like the ‘top note’ of a perfume; it represents the first impression but loses its fragrance quickly. A ‘base note’, on the other hand, is the core of the perfume and provides the lasting impression. There are additional factors that enable high performance. We analyzed the hyper growth* organizations that have technology platforms in place and figured that the key enablers highlighted by these organizations are:
System & Technology - A Catalyst. Not the Core Ingredient
Technology continues to get attention, but is not the only missing piece of the puzzle
Expand the definition of ‘strategic alignment’ to impact business performance
Here is a strange fact that there seems to be a clear gap in CHROs’ perception about their organizations’ ability to align performance management with business strategies and the actual implementation. While 85% CHROs believe that the way they manage performance helps them in enabling business objectives, it does not have a direct correlation with business performance.
The new normal: The colloquial understanding of the term ‘strategic alignment’ seems to be omnipresent now. Almost all organizations cascade their business priorities to employee goals, encourage at least twice a year manager-employee connects, drive differentiation in rewards and communicate their vision/mission statements. These are no longer avant-garde concepts; rather, they have permeated every level of the competitive landscape.
There’s more - Learnings from hyper growth companies: Hyper growth organizations have undergone the transformative growth journey and it is interesting to see their interpretation of the term ‘strategic alignment’. Let us look at what really helps them to stay ahead of the curve.
Holistic goals: Besides cascading business priorities into employee goals, hyper growth organizations also have crisp, concise and clear performance goals to make sure employees have clear understanding of expectations. Also, they look at performance with a holistic lens involving both ‘what’ (business goals) and ‘how’ (behavioral competencies/values)
Holistic evaluation: Besides ensuring employee manager conversations, hyper growth organizations enable comprehensive feedback and ensure managers spend atleast 40-60 minutes time during each connect to hear employee’s perspective, share feedback and provide feedforward suggestions
Holistic rewards: Hyper growth organizations use combination of monetary and non-monetary rewards such as such as career opportunities, training & development, job enrichment, etc.
Transparent communication: This is the glue which binds everything together. 70% of hyper growth organizations actively promote ‘transparent communication’ as compared to 40% of other organizations. This reinforces fairness and trust amongst employees towards the performance appraisal process
Fundamentals vs. Fads
The frequency of pulse (performance) has increased for India Inc in 2017-18 with majority of organizations striving to strengthen their process, technology and strategic alignment.
While some organizations seem to be ‘excited’ to have this unique opportunity to be agile and continuously push the envelope to match the pace of change in the external environment; others are ‘nervous’ to be left behind and are jumping on the bandwagon.They seem to be holding wrong end of the stick with very few organizations focusing on strengthening its managerial and HR capability.
Our view - While the urge to adopt market practices would always be there, it might be worthwhile to understand the complete lay of the land. More importantly, appreciate one’s own organization’s context and strengthen the foundation before taking the plunge.
Senior Consultant & SME– Organization Effectiveness
Consultant – Insights and Innovation