When Cornerstone OnDemand decided to take America’s pulse on job satisfaction near the end of 2011, the results came as somewhat of a shock (Editor’s note: The author works for Cornerstone). After all, the country was, and still is, trying to rebound from the 2008 recession. While unemployment rates are improving compared to previous months, they are still in the mid- to high 8 percent range. And when President Barack Obama delivered his State of the Union address in January, the focus was on jobs.
Yet, even with that as the context, the survey, done in September 2011 in a partnership with Harris Interactive, revealed roughly 21 million Americans are planning to change jobs in the next 12 months. Even with jobs tight, American workers are not happy. Harris interviewed 2,141 U.S. adults aged 18 and older, of whom 1,143 were employed full or part time.
Factor in the cost of employee turnover, which can be up to 250 percent of the annual salary per departing employee, and U.S. employers unprepared for such an exodus can expect to pay a steep price tag — an estimated $2 trillion on employee churn in 2012 (Figure 1).
The irony is that some in top management seem to cling to the idea that the last few years of dire economic news and high unemployment have instilled fear in employees and bred complacency in managers. Cornerstone’s research refutes that notion. Executives who believe that are asking for trouble because the war for talent is far from over.
For example, the Cornerstone survey revealed that 50 percent of employed U.S. adults who experienced their employer’s review process feel more valued by the company when they receive a performance review focused on helping them succeed in their role. However, when describing their job within the past six months, only 37 percent said they have been given useful feedback from their manager/employer (Figure 2).
Managers who simply go through the motions with performance appraisals risk a lower rate of employee retention and business success. According to the research, performance management should be about developing and engaging employees to help them succeed and stay aligned with the organization’s goals.
The Evolution of Performance Management
Based on survey results, organizations do not have to abandon their current performance management processes. Rather, the objective is to evolve the process, investing in the right tools to support the way people work today and meet the needs of tomorrow’s workforce.
The nature of work in the 21st century changed. Companies have moved away from heavy industry jobs, for example, toward service industries and knowledge-based workplaces. In many of those jobs, complex interactions with others are part of the work environment. In this new workforce, employers typically need their people to be self-directed to complete work that is far more specialized and technical than the assembly line work of the past.
With this in mind, talent leaders should reconsider traditional performance management processes. They tend to be transactional, static, almost assembly line in nature. And, as the Cornerstone/Harris survey results revealed, performance reviews don’t often lead to measures that improve performance. Sixteen percent of those surveyed said their employer’s review process doesn’t provide them with useful, actionable information; another 16 percent said it was a waste of everyone’s time.
Performance management should no longer be a one-time event. It should be about providing more frequent feedback and making performance actionable through learning tools. The result of that concept will be employees who not only improve their skills, but potentially improve their status within the organization. There also will be the added benefits of improved productivity, employee engagement and higher retention rates — all of which are beneficial to the bottom line.
At the same time, organizations need to blend traditional performance technology solutions for goal setting and appraisals with social media to make these processes more interactive, ongoing, transparent and feedback-based.
Effective performance management is also about getting feedback from the right people at the right time. According to those surveyed, 43 percent said peer feedback and opinions would be the most valuable to them, but only 21 percent of respondents indicated that peers provide feedback during their employer’s performance review process (Figure 3).
While a lot of organizations are set up as hierarchies, work gets done in more of a matrix-based structure. With this in mind, it makes sense to allow for reviews from peers, project leaders or clients who people work with on a daily basis. It gives employees the helpful feedback they need, and it gives managers better insight for more meaningful discussions with their direct reports.
Skills Shortage: Who’s to Blame?
In an October article in the Wall Street Journal titled “Why Companies Aren’t Getting the Employees They Need,” talent management expert Peter Cappelli took aim at the chronic underemployment in the U.S. economy. He argued that the perception of a shortage of skilled workers in the U.S. is an illusion. It’s not the fault of the national education system, he said. Instead, employers and their hiring practices and failure to invest properly in employee skills and alignment are to blame.
The Cornerstone/Harris survey highlighted some other conditions that underscore some of Cappelli’s ideas about what he calls the “false skills shortage” in America.
Cappelli said U.S. employees don’t have the skills because employers don’t train them anymore. Apprenticeship and management training programs have disappeared, he wrote, and on-the-job training is rare as well. This is supported by the Cornerstone survey data, which found that only 23 percent indicated they are provided with tools, resources or a development plan to help them improve their performance; and 7 percent indicated they had been assigned a personal development plan to help improve upon their performance as an outcome of a performance review process (Figure 4).
At a time when companies are challenged with finding skilled workers, the Cornerstone/Harris research, particularly the high numbers of those considering a job change, shows that moving from transactional performance management to a more actionable, frequent performance management strategy may help turn the tide. Those same statistics demonstrate the importance of investing in employee development to build strong talent pools, recruit from within and encourage talent mobility within the organization. If not, talent managers will soon have their top performers seeking career advancement elsewhere.
The good news is employers can use the performance management tools at their disposal to address these issues. This includes more frequent discussions with employees about career goals, increased just-in-time feedback and a clear explanation of how performance results are connected to business objectives.
Employee engagement and happiness start with being in a great place to work, but continue with offering employees a clear sense of alignment with the business and a sense of possibility within the organization: “Is what I’m doing for this company making any difference whatsoever? Why am I performing these tasks? And where can I grow internally if I can demonstrate success in this role?”
Create Company Champions
Times are tough, but that doesn’t mean employees are too scared to find new workplaces where engagement and talent management are the rule rather than the exception. They are looking for better jobs. Employers who turn a deaf ear to employees’ needs and concerns when it comes to performance management and development processes risk the loss of valuable talent and a negative impact on employee satisfaction and productivity.
The survey results show that performance appraisals in a vacuum are not enough. Employers need to make appraisals that lead to tangible, actionable outcomes — especially training and development to close talent gaps. This requires a number of shifts: from annual reviews to ongoing, more frequent feedback; from transactional, checking-of-the-boxes type reviews to a more interactional and transparent experience; and from one that is informed solely by a manager to one that is more feedback-based and involves the right people at the right time.
Investing in employees and providing them with convenient access to resources and tools to improve performance and achieve their career goals will not only result in happier and more engaged people, but also higher retention rates. But even more important, it can empower people to become champions within a company.
Julie Norquist Roy is vice president of marketing for Cornerstone OnDemand. She can be reached at email@example.com.