Research Report Bersin by Deloitte
The revolution in performance management practices (moving from an annual to continuous model) is finally being supported by a new breed of performance management software vendors.
Prediction 4: A New Generation of Performance Management Tools Will Emerge
This prediction has already come true. Today, driven by the power of innovation, dozens of new companies are trying to reinvent the performance management tools market. These companies are not just creating things from scratch—they are responding to a huge gap in the market.
Let me give you some perspective. Over the last 15 years, companies have shifted from a very top-down, process-driven approach to employee performance management (and annual appraisals) to a much more agile, continuous, feedback-based approach. Much of this is driven by the need to engage and empower young demanding employees, but much is also driven by a shift in management thinking.
As Figure 9 illustrates, we are in a new world of management. Employees want to be “empowered” and “inspired,” not told what to do. They want to provide feedback to their managers, not wait for a year to receive feedback from their managers. They want to discuss their goals on a regular basis, share them with others, and track progress from peers.
All of these changes, plus a trend away from forced rankings and numeric ratings, have essentially created a whole new market for performance management systems. This revolution is still in its early phases, with most companies implementing things like regular checkins, OKR (objectives and key results) or agile goal practices, continuous coaching, and even models in which employees have one “sponsor” and another “project manager.”
These changes in how we manage people have primarily been positive. Companies like Adobe can now prove that the redesign of its performance process has directly increased retention, engagement, and innovation. But guess what? The big software vendors (such as Oracle, SuccessFactors, Workday, Cornerstone OnDemand, etc.) do not have the software yet.
In some ways, this trend (which we have been writing about for quite some time) has left the incumbent HR software providers “flat-footed.” They see the opportunity and they see the need, but frankly they have not moved fast enough to capitalize on the change. (Read more about this in our HR Technology Disruptions report.24)
In addition to these process changes, something else is going on. Today’s performance management practices are being integrated with disciplines, like engagement surveys, social recognition, career management, and continuous learning. The whole process of “managing and assessing performance” is one of setting goals, discussing progress, and coaching people to improve. As part of that process, we want to capture feedback (for the leader), plan for the next role, and help people to plan their careers.
This new world is being invented before our eyes. As I research and talk with more companies, I find that the process is coming together, something like the illustration in Figure 11.
This new world shifts the whole focus on software tools away from forms and year-end discussions toward tools that let us share and update goals, set development plans and plan next jobs, and of course assess end-of year results.
The end-of-year discussion is not going away nor is the need to set compensation each year. But now, rather than link the whole process to a simple “rating,” the process is more data-driven. It includes feedback and a year of goals discussions, and of course potential and career goals in the process. A senior HR manager told me that his company has essentially done away with nine-box grids (performance versus potential), because of the old-fashioned idea that everyone has some measurable amount of “potential” is really silly. We all have potential to do more and new things, but we have to personalize the process.
So part of this new world is also building tools for many nine-box grids, evaluating people based on social recognition and feedback, and even comparing people’s compensation with external benchmarks (which can now easily be obtained online) as we discuss their annual raises.
I will not try to write a book about this topic in this report; but suffice to say that, in 2017, new vendors will break away from “the pack” and become the next “big HR platforms” out there. This will likely be a complex and somewhat brutal war between software companies, but the stakes are high and the market is enormous. We list many of the vendors in this new disruptive market in our HR Technology Disruptions report.25
By the way, the red herring discussion about “ratings” is finally dying down. While many articles have discussed how companies like Adobe, NY Life, Microsoft, and Goldman Sachs are “doing away with ratings,” this really is not the core issue. The core change is moving away from the annual, manager-driven process toward one that is continuous, developmental, open, and team-centric.
HR Technology Disruptions for 2017: Nine Trends Reinventing the HR Software Market, Bersin by Deloitte / Josh Bersin, 2016.
HR Technology Disruptions for 2017: Nine Trends Reinventing the HR Software Market, Bersin by Deloitte / Josh Bersin, 2016.REGISTER NOW