For many HR leaders, the Covid-19 pandemic has brought with it a series of realisations. Evidence from the experiences of the 1,700 certified Top Employers worldwide during 2020 suggests, in particular, they have become acutely aware of the power of employee-centricity in driving performance: there’s an acceptance of flexibility around the idea of the workplace, where and how work roles are carried out, and the value of giving staff greater freedom and opportunities to be more entrepreneurial.
A striking finding from the research was how levels of customer satisfaction enjoyed by Top Employers in the UK were increasing in spite of the Covid-19 crisis, and the disruption and adversity created. Two-thirds reported increases in customer satisfaction levels, with only 1% reporting a decrease over the same period. 68% reported improved revenue growth (compared with 61% the previous year) and 56% a hike in profitability (up from 49% in 2019).
A driving force behind that success was a revolution in performance levels. Accelerated change in practices and innovation around performance management was already delivering tangible business outcomes. Clear Review’s UK Performance Management Report, undertaken just before the pandemic, showed that among organisations more widely, over 70% were still using annual appraisals, despite years of concern around their impact in improving performance. Barely a quarter had moved to a continuous model, although the vast majority (92%) of HR professionals agreed that this was an area they needed to address “in the next 12–18 months”.
A sense of urgency around the need for change has been growing. The evidence from Top Employers suggests at least three new areas of focus: an improvement in the attention given to talent through performance management, to engagement strategy and practice, and the high priority being given to diversity and inclusion.
Senior leaders were found to be actively involving themselves in the performance management system (99% consistently doing so); there was a high level of availability of coaching (87%) for managers who needed more support to help them to help others in their team and, crucially, in making sure that performance objectives were linked directly to business strategy. What is changing most in terms of process is the attention to detail when delivering personal development plans. This has been made possible by the growing importance of technology in delivering personalisation. This trend will continue worldwide, as well as in the UK. McKinsey and Co research reports that nearly two-thirds (63%) of leaders expect to spend the same amount or more on “IT-staff augmentation” in the coming months. Much of this will be invested in the other possibilities that technology creates, including feedback and recognition software, that can be shared at all levels of the organisation, alongside a more sophisticated use of data analytics.
Among Top Employers, 84% say that all employees have the opportunity to create and follow up on their PDPs supported by technology. At this stage, 42% have performance management technology allows them to conduct cross-analyses, look at year-on-year comparisons and identify trends and opportunities. More employers are looking at the need for linking performance and productivity. With remote working now widespread, some employees may need to be given time in the short term to regain and exceed prior levels of performance. In turn there is a stronger case for transitioning to an outcome-based performance management system, complete with a new set of KPIs.
Beyond formal processes, there has been more attention on staff engagement – and on what additional forms of flexibility and empowerment can be used to enhance performance. Among Top Employers, 83% have a defined engagement strategy that details how they will measure engagement and follow up; 80% measure employee engagement annually – and 69% use more regular ‘pulse’ surveys. 61% expect managers to be working towards KPIs for improving employee engagement. 89% involve employees in creating action plans on engagement.
The use of personalised rewards schemes is one avenue being explored by Top Employers. Personalised schemes rooted in flexibility and employee experience – some even allowing employees to design their own packages – are an opportunity to create competitive advantage in the war for talent. Employers who can’t afford the highest base salaries will be able to offer bespoke working arrangements (such as remote working, flexi-hours, task-based not hours-based roles) or increase the variable element of pay.
But engagement surveys highlight development and career development as the key areas where employees are looking for improvements – exactly the kind of offerings most affected by this period of uncertainty and the need to focus on core operations. Top Employers are looking to take the lead in re-skilling the workforce to make it more resilient to change: giving employees the skills, fortitude and ability to be redeployed elsewhere in future times of difficulty, lessening the need for these companies to make abrupt layoffs and salary cuts. For example, global intelligent power management company Eaton has set up an internal marketplace for ‘stretch’ gig and short-term assignments, offering flexible opportunities for employees to grow their careers in line with both individual aspirations and business requirements. In this way Eaton has been able to build agile teams from a mix of skills and keep a wider range of people motivated by the opportunities available. LTI UK is using Artificial Intelligence to predict future skills needs and uses a career vacancy system that provides full visibility: for hiring managers the visibility of currently available employees, and for employees the upcoming vacancies.
Performance management has been in a rut for many years, caught up in a traditional cycle of formal annual reviews. The re-focusing of priorities has accelerated radical change. The break in routines and the urgent need for high levels of performance and engagement, will allow ideas to flourish that are more in line with new ways of working, built on a new world of employee independence and internal entrepreneurialism.
Phil Sproston CMgr FCMI, ACIPD is Region Manager UK & Ireland for Top Employers Institute, helping organisations to highlight and benchmark their great people practices, and improve their employer branding.