2015 was, in many ways, a landmark year for HR technology, employee engagement and workforce optimization. It wasn’t a landmark year because one HR technology vendor did one thing or another, but because it marked a fundamental change in how enterprises make use of performance management.
Enterprises are moving away from subjectively evaluating their employees to looking at objective, data-driven employee performance management; this in turn is driving changes in how goals are set and managed and, eventually, it is changing corporate culture.
Here are the five main elements that are driving this change, set to become more pronounced as 2016 progresses:
1. Performance reviews are a thing of the past
2015 was the year when large companies changed course, affecting HR practices that had previously defined the HR industry. Both Deloitte and Accenture announced they will be doing away with the performance review. Suddenly rating all employees and placing them on a bell curve (“rank and yank”), to determine their salaries and job prospects, no longer seemed like a good idea.
Why? Because many companies came to the conclusion that performance reviews consume too much time and resources while providing little value, sometimes alienating employees. Often, ratings are overly subjective. As an aside, most of us believe we are above average (it’s called “Illusory Superiority”): getting ranked at work challenges this self-perception, leaving employees with a sense of alienation.
Another issue with performance reviews is that they relate to year-old goals that have become stale. Yet goal setting and performance isn’t a once-a-year business, it is something that changes often. As a result, evaluation based on past performance doesn’t make much sense.
Performance reviews create too much of a focus on the past, while if companies focused on real time goals, they could coach employees and help them develop.
That’s how employee evaluation (=the performance review) came to be replaced by employee development (=real-time tracking and coaching, relative to clear short-term objectives and goals). Suddenly the balance shifted to setting goals right, not measuring compliance with goals that were set a year ago.
2. 2015 was the year of goal setting
As they moved away from the performance review, organizations began looking at goal setting and goal tracking – a better way of managing performance. OKR (Objectives and Key Results) is a method of setting and tracking workplace objectives, pioneered at Intel and used by Google, Linkedin, Twitter and others.
In 2015 articles appeared with titles such as “This is the internal grading system Google uses for its employees – and you should use it too”. Moving to OKRs means that management is about coaching and not goal-setting (since goals are easily defined, communicated and tracked), about development and not about drilling tasks to employees. It also aligns employees with corporate objectives, since goals are a function of corporate objectives. The method also results in transparency, since OKRs show employees how they are doing in real time, based on objective and transparent data and often times shows them the OKRs of the employees around them.
3. The Internet of Things and the Workplace
The Internet of Things isn’t only about machines and sensors communicating their status or predicting what you’ll have for tomorrow’s lunch. The Internet of Things also extends into people’s lives – think of the fitness tracker. Tracking “steps taken” makes you take more steps. Focusing on continuous improvement actually makes you improve. So, if there is a fitbit for life, can’t you have a fitbit for work? Again, similarly to the OKR approach described below, tracking performance in real time provides real time feedback to the employee about how they are doing, encouraging motivation and self-reflection, eventually driving better work performance. It also gives management a great opportunity for coaching – emphasizing the elements that can be corrected, and doing so in real time, not post facto.
4. People analytics
In 2015 Josh Bersin wrote an article titled “the geeks have arrived”, on the subject of people analytics. Its main point is that HR is beginning to use analytics to understand and manage workforce performance. HR is no longer a fuzzy business: it is beginning to use data science to manage the workforce. Yet this isn’t Taylorism – counting steps or actions at work – since the core is less about evaluation (since the performance review is dying) and more about employee development, showing employees how they can improve their performance.
In 2015, Millennials have become the largest generation in the workforce; they are expected to become 50% of the workforce by 2020. This will force the workforce to accommodate a generation that expects transparency and is more digital than any generation before it.
Millennials are less comfortable with hierarchies, expect information sharing and constant feedback. In other words, they are about to change cultures, with transparency and constant feedback. Tracking goals and focusing on continuous improvement feels natural to them.
Workforce optimization and Gamification in 2016?
So what does the above bode for workforce gamification and optimization in 2016?
All these trends are addressed through the vision of workforce optimization and gamification. Gamification begins by setting goals – tracking workforce performance KPIs, such as call handle time, conversion, customer satisfaction and more. The point is that while free-form OKR may be suitable for knowledge workers, transactional employees, like call center employees, need a definition of daily KPIs. KPIs can be set to define ranges of “good” performance, while the overall score drives a balanced achievement of KPIs.
Using gamification (with many game mechanics made to drive engagement) has the same impact on performance: a drive to continuously improve, a clear indication of areas for improvement and a fair and transparent culture.
It also frees management from being task enforcers or “evaluators” into being coaches, as the real time data from gamification allows them to coach employees to better performance, based on their real time results.