State of Employee Performance Management 2016 Global Edition- Preview

STATE OF EMPLOYEE PERFORMANCE MANAGEMENT 2016 GLOBAL EDITION IN PARTNERSHIP WITH

ABOUT THE KPI INSTITUTE The KPI Institute is a research institute specialised in business performance. It operates research programs in 12 practice domains ranging from strategy and KPIs to employee performance and from customer service to innovation performance.

Insights are disseminated through a variety of publications, subscriptions services and through a knowledge platform available to registered members. Support in deploying these insights in practice is offered globally through training and advisory services. The KPI Institute activity revolves around the following 10 pillars.

Learning Specialized training programs meant to shed light on the essential insights and practical tools that improve business performance.

Certification Certification Programs designed to support professionals to achieve business excellence in 12 different practice domains that range from strategic planning and performance management to data visualization and innovation.

Networking Access to a wide Community of Practice where professionals share their knowledge and expertise. The KPI Institute provides the perfect environment to keep up with the latest trends and events in the field of performance.

Events Conferences, forums and executive meetings reaching globally that bring new trends and developments, industry best practices and the most innovating solutions in today’s business environment.

Benchmarking Benchmarking studies that ensure you stay ahead of your competition, identifying opportunities to maximize results.

Awards The KPI Institute recognizes customers and partners that have excelled in driving business value through several award categories.

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Research The most comprehensive collection of resources, research studies and tools to enable organizations to be always at the top of the game in their industry.

Consulting By embedding research outcomes and practical experience from the business environment, The KPI Institute offers high quality advisory services to guide organizations towards achieving their ultimate vision.

Publications In-depth reports, articles and templates that enable you to keep up to date with industry trends and leaders.

Solutions Sustainable technology solutions to support business processes and ensure agility in working with data in today’s business environment.

State of Employee Performance Management in 2016

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ABOUT KPISOFT The revolutionary cloud app that is all about performance

KPISOFT Features

KPISOFT is a revolutionary cloud app that aligns and powers your organizational performance. For the first time, organizations can now have one single platform which connects organizational strategy to employee performance management and business reporting dashboards. KPISOFT is mobile ready with intuitive and extremely easy to use features which meet the needs of small, medium and large companies.

Alignment Made Easy

Multi device ready

Organizational KPIs cascaded down to each unit and employee Individual scorecards allow you to link employees directly to organizational goals Proactive Performance Reviews Conduct regular reviews of milestone achievements Identify performance bottlenecks and fix them early Holistic Feedback Tools

Any size. 10 to 1,000,000 employees

Identify individual competency gaps and development needs for every employee Evaluate employees in any model: 90-degrees, 180-degrees, or 360-degrees, including customer and vendor feedback Collaborate In Context

Avail real time visibility

Built on a best practice framework

Never dig for history again: Discussions linked directly to organizational goals and milestones, eliminating the redundancies of copy and pasting old conversations Use third-party conferencing functionality to collaborate anywhere, at anytime Flexible Calibration Tools Smart automation generates initial ratings for all of your benchmarks

Global support

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Custom calibration allows you to account for outside factors, changing milestones, and other individual needs

State of Employee Performance Management in 2016

Global Edition

Performance On The Go Push notifications mean regular performance updates delivered straight to your inbox Third-party teleconferencing tools make it easy to collaborate even when you’re not in the office Analytics Integrate all of your organizational source systems Create an endless stream of performance analytics from across the company Intuitive User Experience Context-based learning: Get on-board quickly with the context-based “Show me Around” tour and “Show me how” videos Push-based user interface allows the most relevant data to be pushed to the user at exactly the right time Multi-national Support Data Security: KPISOFT supports data compliance issues faced

by MNCs with tiered information access across functions and hierarchies Country-based cultural sensitivities: Design customized performance programs based on policies set by your global headquarters Complex reporting matrices: Map complex reporting matrices between different countries and their functional HQ For more information, visit: www.kpisoft.com

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INTRODUCTION State of Employee Performance Management 2016 Global Edition is an international research study conducted by The KPI Institute in partnership with KPISOFT. The report consolidates the opinions of 1,000 professionals from around the world. By observing the way employee appraisals systems have evolved over time, we can say that progress is rather steady, compared to the degree to which workforce generations have changed over the last decades.

State of Employee Performance Management 2016 Global Edition looks into 34 topics, covering a large spectrum of perspectives, as follows: Relevance of employee performance management Assesses the importance given by professionals to this matter, as well as the actual priority of appraisal systems in organizations.

The Millennial generation is challenging traditional appraisal systems. Human Resources professionals have to design an employee performance management system that meets the needs of a more creative, autonomous and specialized workforce, than ever before.

Employee performance management configuration Collects data on the most common tools used by organizations to manage such a system.

From a broad perspective, The KPI Institute’ specialists envision the future of performance management systems as a framework that is no longer focused on control and the evaluation process itself, but on employees. This employee centered system should be characterized by:

Governance Clarifies responsibilities and the coordination of employee performance management systems within an organization.

Involving staff members in the process of establishing the appraisal framework; Promoting performance discussions; Building a feedback culture; Shifting from annual evaluations to permanent discussions that create impact on how the individual works; Using technology to capture data and gain access to performance results in real-time; Focusing on the individual, of finding ways to maximize the potential of each employee; Implementing initiatives to engage employees and gamification schemes; Diversifying rewards and recognitions policies, going beyond traditional bonus structures.

The KPI Institute assists organizations with transforming their employee appraisal system and building the next best practices in individual performance management. Our constant research in this area is meant to highlight latest trends in employee performance management, as well as, indicate future directions.

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Timing Highlights planning, accessing and reporting frequency of employee performance data.

RESEARCH METHODOLOGY The survey was conducted at international level and it involved the members of The KPI Institute Community, which currently exceeds 79,000 professionals.

Survey items: 34 topic related items + 12 demographics; Survey type: descriptive, quantitative (administered online), based on primary data; Scaling type: LIKERT Scale measuring either positive or negative response for each statement; Respondents: 1547; Data processing: 1001 validated responses out of 1547; Data collection: January-February 2016.

Performance culture Looks at how the individual performance management system is integrated within the organizational culture.

Pay-for-performance Reflects upon the popularity of different reward types.

Software solution Indicates employee performance management software features that are important for users.

Satisfaction Reveals satisfaction drivers for employees in relation to individual performance management systems.

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SURVEY FINDINGS RELEVANCE OF EMPLOYEE PERFORMANCE

Fig. 1: Managing performance through structured performance appraisal system – Is useful to The research study reveals a large and great level of usefulness related to the adequacy of managing employee performance through a structured performance appraisal system at all three levels of interest, namely the employee, the relationship between manager and employee, and the organizational level, among the majority of professionals (34-37% - to a large extent and 24-33% - to a great extent).

3% You as an employee 10% 20% Your manager in the relationship with you at individual level

5%

11%

3% Your organisation as an entity 11%

Only 10 to 11% of the participants to the survey claimed limited value for using a structured appraisal system.

Not at all

Fig. 2: Managing performance through structured performance appraisal system – Is important to

2% 8% You as an employee

Regarding the importance of managing employee performance through a structured performance appraisal system, in all three areas of interest, the majority of respondents consider this aspect to be of large or great importance (36-38% - to a large extent and 24-34% - to a great extent).

Also, worth mentioning is the fact that, only 8% to 10% of professionals considered a structured appraisal system to be of limited importance.

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State of Employee Performance Management in 2016

Global Edition

Limited

Your manager in the relationship with you at individual level Your organisation as an entity Not at all

Limited

34%

26%

33%

34%

23%

37%

Moderate

Large

20%

24% 26%

Great

36%

34%

4% 10% 2% 9%

25% 25%

Moderate

37% 38%

Large

24% 27%

Great

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SURVEY FINDINGS EMPLOYEE PERFORMANCE MANAGEMENT SYSTEM CONFIGURATION

Evaluate employee performance Give feedback to employees based on their performance

Fig. 7: Organizational usage of employee performance plans and appraisals Performance plans and appraisal systems are most commonly used to evaluate, to give feedback and, as means to justify financial incentives.

Allocate bonuses

Almost half of the respondents claim employee performance plans are used to monitor employee professional development (47%), while 32% of respondents focus on the ranking feature of such a system.

Monitor employee professional development Support organizational performance

Organizations participating in the survey, believe that employee performance plans and performance appraisals are lesser used to support overall organizational performance (41%) and to inform promotion decisions (36%).

Inform promotion decisions

87% 72% 54% 52%

Increase salaries

47% 41% 36%

Rank employees by performance Other Not in use

32% 4% 2%

Setting and assessing individual objectives

Fig. 8.1: Constituent parts of employee performance management systems in organizations – Most popular tools Results show that the vast majority of organizations (75%) are focusing on setting and assessing individual objectives as part of their employee performance management system. More than half of the organizations participating in this study consider performance criteria/ KPIs to be relevant for this systems (68%). Competencies assessment (58%) and individual meetings to assess employee performance (56%) are also commonly practiced by the organizations partaking in the study. Self-assessments are enacted in 53% of cases.

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State of Employee Performance Management in 2016

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75%

Performance criteria / KPIs at individual level Competencies assessment Individual meetings to assess employee performance

68% 58% 56%

Self-assessment

53%

Behaviors assessment

52%

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SURVEY FINDINGS GOVERNANCE

Fig. 11: Departmental responsibility of the employee performance system Results show that in the majority of situations (approximately 77% of cases), an employee performance system falls under the responsibility of the Human Resources department.

The second most common situation is the one in which, the Strategy Office manages, not only organizational performance, but also the individual performance management system.

Fig. 12: Employee Performance Plan is established…

On a more granular level, the responsibility to develop the employee performance plans is mainly shared between employees and managers (62%).

For 21% of the respondents, employee performance plans are established exclusively by managers, without the involvement of company employees.

In as little as 10% of cases, these instruments are developed by the Human Resources team.

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State of Employee Performance Management in 2016

77%

Human Resources

Global Edition

Performance / Strategy Management Office Other Rewards and Compensation team within HR

9% 8% 5%

By employees and managers after consultations By managers without employees’ contribution By the Human Resources team

62% 21% 10%

Other

4%

By employees without managers’ contribution

3%

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SURVEY FINDINGS TIMING

Fig. 15: Meetings schedule for planning the Employee Performance Plan and appraising company performance (employee level KPIs, behavior and competencies) Survey findings indicate that 40% of organizations have an annual employee performance planning meeting. Bi-annual meetings seem to be second most common in appraising company performance.

For 5% of the participants to this study, there are no formal meetings in place, while performance management is treated more like an on-going process of performance discussions and feedback.

40%

Annually

36%

Twice a year

10%

Quarterly

5%

Informally, ongoing Monthly

4%

Other

4%

Weekly

1%

Fig. 16: Frequency of accessing the employee performance plan Once established, the employee performance plan is either accessed twice a year (34%) or on an annual basis (27%). It can be noticed that the frequency of establishing and evaluating performance, revealed by the previous graphic, presents high similarities with the frequency of accessing data.

However, by looking at the most popular choice in both cases, it seems that, although evaluations take place once a year, employee performance plans are accessed twice within 12 months.

Twice a year

Survey findings also indicate a reduced interest in looking at performance data with other occasions than the formal meetings established during the employee performance management cycle.

Other

More frequent access to data, for example, on a monthly basis, is common for only 11% of respondents, while weekly or daily frequencies seem to be even more isolated events (1-2%).

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State of Employee Performance Management in 2016

Global Edition

34% 27%

Annually 20%

Quarterly 11%

Monthly 6%

Daily

2%

Weekly

1%

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SURVEY FINDINGS PERFORMANCE CULTURE

Fig. 18: Relationship between training and employee performance management implementation In 38% of cases, organizations plan yearly refresher sessions in their training calendar on matters that relate to the employee performance management process, with the scope of improving competencies in managing individual performance.

Training (in the form of once-off events) is also considered necessary by 33% of organizations, but only when major changes to the employee management system are incurred.

Refresher sessions are scheduled every year in the training calendar

38%

Once-off events when major changes are done to the employee performance management system

33% 29%

No training is provided

Results show that 29% of the organizations participating in the survey do not have a training component that is integrated in their employee performance management implementation plan.

Online portal to disseminate relevant documents on the internal management of employee performance

Fig. 19: Techniques related to performance management used by organizations in communicating with employees Almost half of the organizations (44%) questioned prefer to disseminate online relevant documents related to performance management. Another significant proportion makes use of one on one coaching sessions (33%), information sessions on performance management topics (32%) or offline techniques, such as a handbook (31%).

One on one coaching sessions on individual performance

33%

Information sessions on performance management topics

32%

Educational materials on employee performance management topics

Global Edition

23% 15%

Information displays in the physical environment Other

9%

Community of practice meetings

9%

Competitions between teams

State of Employee Performance Management in 2016

31%

Employee performance management system manual

Competitions between employees

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44%

6% 5%

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SURVEY FINDINGS PAY FOR PERFORMANCE

Individual performance-based bonus or salary increase

Fig. 20: Methods of rewarding performance in organizations Survey results point out to the fact that individual performance-based bonus or salary increases, are the most popular (69%) methods to reward employee performance by far. Organizational performance bonuses come in second place, having that only 23% of respondents admitted to being part of this particular reward scheme.

Organizational performance bonus Competencies-based bonus or salary increase Individual performance-based bonus or salary increase Commissions Organizational performance bonus Bonus for contributions to process improvement or innovation Competencies-based bonus or salary increase Team bonus

Less common methods of rewarding performance are innovation bonuses, team bonuses or behaviors-based bonuses. However, a considerable percentage of respondents (32%) selected options like profit sharing, stock option plans, financial rewards given for extra working time or financial rewards that are offered on subjective assessments, that are not connected to individual performance.

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State of Employee Performance Management in 2016

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69%

Commissions Behaviors-based bonus Bonus for contributions to process improvement or innovation Other Team bonus Behaviors-based bonus Other

23% 17% 69%

16% 14%

23%

17% 12% 16% 10% 14%

32%

12% 10% 32%

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SURVEY FINDINGS SOFTWARE SOLUTION

Approximately 63% of the organizations considered are using software provided by Microsoft (Excel or Word) for developing and managing employee performance plans and appraisals.

43%

Microsoft Excel

Fig. 25: Main software solution for managing employee performance plans and appraisals

Dedicated employee performance management software

37% of the organizations surveyed are using a dedicated employee performance management software.

37% 20%

Microsoft Word

Average = 4,63

Fig. 26: Satisfaction level with software solution

High level of satisfaction (8 to 10)

The level of satisfaction with the current software solution for performance management among employees is low to moderate (average value 4,63).

Despite the popularity of Microsoft Excel and Microsoft Word, dedicated employee performance management software usually offers a more efficient database integration and data processing capability.

21%

Medium level of satisfaction (5 to 7)

39%

Low level of saytisfaction (1 to 4)

40%

Fig. 27: What do you like the most about the software solution used for managing employee performance in your organization?

Top 3 most appreciated features:: 1. Simple 2. Performance 3. Flexible

SIMPLE SIMPLE SIMPLE

PERFORMANCE SIMPLE

Other features mentioned were user-friendly, structured, clear, integration, global solution and customizable.

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State of Employee Performance Management in 2016

PERFORMANCE PERFORMANCE

Global Edition

FLEXIBLE FLEXIBLE SIMPLE FLEXIBLE PERFORMANCE PERFORMANCE FLEXIBLE FLEXIBLE

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SURVEY FINDINGS SATISFACTION

Fig. 32: Employees’ satisfaction level with their employee performance management system Respondents indicate a moderate level of satisfaction (average 5,26) with their employee performance management system. Only a small percentage of professionals (23%) rated their satisfaction level at 8 or above.

This indicates that there is room for improvement for most organizations, in terms of employee performance management systems and practices.

Fig. 33: How well are the following points addressed by your organization?

Survey findings indicate consistent satisfaction levels with all points considered (average between 4,94 and 5,22).

However, the highest satisfaction levels were identified for employee engagement, employee performance system design and the connection between employee learning and performance.

High level of satisfaction (8 to 10)

23%

Medium level of satisfaction (5 to 7)

40%

Low level of saytisfaction (1 to 4)

37%

Average = 5,26

Employee engagement

5,22

Employee performance system design

5,07

The link between employee learning and performance

5,04

The frequency of employee feedback on performance

4,97

Buy-in from staff and/or management in the operation of the employee performance system

4,94 1

5,5

10

Average

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CONCLUSIONS After analyzing employee performance management from multiple perspectives, including the manner in which appraisals are perceived by professionals, current practices of global organizations, as well as, their outcomes on employee satisfaction, the following conclusions have been highlighted: Employee Performance Management Systems are considered to be distinctly important, as reflected by the high priority with which organizations look upon this matter.

While at international level there has been a lot of criticism in the media lately, related to the bureaucratic and time consuming processes of traditional appraisal systems, only 22% of professionals questioned share this belief. Most of the participants to the survey (42%) look at the employee performance management system, as a means of rewarding and assisting with everyday activities, and not as a purposeless procedure.

Usage levels for employee performance management system are high (75% of organizations questioned) and the top 3 most common constituents of a performance plans are KPIs, competencies and behaviors. The responsibility to structure and coordinate a formal employee performance management system, as revealed by this study, belongs to the Human Resources Department (77%).

Looking at the tools, the governance system and timing criteria revealed by this report, it can be concluded that the current employee performance management practices, are rather traditional, being based on the conventional annual or biannual appraisal cycle. Performance data is rarely accessed on other occasions than those established through formal planning and/or evaluation meetings.

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Communication seems to predominantly rely on the online environment, however also, on “one on one� coaching sessions, on information sessions on performance management topics, as well as, on employee performance manuals.

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State of Employee Performance Management in 2016

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