Unlocking the Power of Performance Reviews: Why Cloud-based HR Systems Are Key

By Lorraine Nkomo, Certified Consultant – Sage 300 People and Sage Business Cloud Payroll Professional

In today’s business landscape, businesses rely on the Performance Appraisal Process as a reliable method to measure and enhance employee productivity and drive business growth.

However, it is crucial to question whether businesses are effectively managing and achieving the intended outcomes solely through the involvement of managers and team members during the Performance Reviews phase.

First, let’s have a look at what a Performance Appraisal is: It serves a dual purpose in today’s dynamic business environment. It entails conducting actionable evaluations of employee performance while also focusing on skill development aligned with individual Performance Contracts. This feedback holds intrinsic and extrinsic value for employees throughout this entire process.

Hence, businesses must recognise and address the risks associated with Performance Appraisals being perceived as insignificant by both managers and team members, as this undermines the strategic purpose of the entire process.

Performance Appraisal Process linked to a reward system?

Linking the Performance Appraisal process to the employee rewards system is the traditional and probably the most used strategy to positively engage employees in the process of managing their performance objectives.

One aspect that I have witnessed in the HR Field is that employees will not stay motivated if they are given no reason to and this does not necessarily have to be of monetary value. Although monetary compensation is highly valued, other rewards such as recognition, time off and a fair promotion are also considered valuable.

Where do most businesses miss the point?

For an effective Reward-based Performance Appraisal to take place, strategic involvement of other business stakeholders such as HR personnel and peers in this process will most likely add value and perceived fairness to the process.

While management by objectives continues to be a widely utilised strategy in the business world, my experience working with numerous HR clients has revealed a common practice among large organisations with over 500 employees. In these organisations, full control of Performance Reviews is often delegated to managers, including responsibilities such as performance ratings, results calibration, and communicating outcomes to employees.

It is worth noting that many of these managers face significant pressures due to their individual and role-specific deliverables. In line with the observations made by Mark Mortensen, it is evident that the task of conducting performance reviews is generally met with tension, stress, and anxiety.

In addition, due to the ‘reward’ that is attached to these Performance Review results, most employees are left demotivated as some do not attain the anticipated rewards: depending on the relationship they have with their manager with no or less involvement of other stakeholders to review and calibrate the results fairly. This process is mostly viewed as biased and frustrating.

A McKinsey survey indicates that over 50% of employees think their managers don’t get the performance review right. A Gallup study in support added that just 1 in 5 employees agreed that their company’s performance practices motivated them.

Lack of Proper Performance Management tools/Systems

As an HR Consultant, most clients that I have engaged with seeking to move from Excel spreadsheets to system-based Performance Appraisals, have the following challenges:

• Absence of transparency due to undefined traceable workflows during & after the performance appraisal phase
  
• Employees ‘Direct Managers have full control of the Performance Review process with less involvement of other senior stakeholders, which in turn allows biased ratings in the review process
  
• Possible data manipulation
  
• Limited access to accurate real-time & historical reports to manage progress

How businesses can get it right

Full commitment of all business stakeholders to participate and support Performance Management is one of the strategies organisations should invent to yield reasonable results during the Performance Appraisal process.

Team members and managers should be involved in this process, with the full support of both senior and peer stakeholders’ involvement to foster the effectiveness of the process, to motivate employees and in turn, maximising business growth.

Let’s be honest, top management’s commitment to improving the Performance Management Processes is critical as this involves ensuring the availability of good performance management systems/tools in the organisation.

Benefits of using a cloud-based HR solution to facilitate Performance Reviews:

1. Clearly defined workflows: A cloud-based HR system ensures clearly defined workflows for performance reviews. It allows managers to be in full control while also involving other reviewers in the process. This enables simultaneous participation and collaboration, streamlining the review process and increasing efficiency.
   

2. Increased credibility: By allowing senior stakeholders access to the performance management system, captured ratings can be reviewed and calibrated before the results are released to employees. This transparency and involvement of multiple reviewers enhance the credibility of the performance review process, not just for employees and managers but for the entire business.
   

3. Improved HR support: While the role of HR business partners has evolved to encompass broader responsibilities, effective performance management remains a crucial aspect of their role. With a cloud-based HR system, HR personnel can provide committed support in managing the review process. They can address and resolve any employee or manager grievances related to appraisals, thereby enhancing the value of the process and mitigating employee demotivation caused by perceived bias ratings, especially in cases where there may be strained relationships between employees and their managers.
   

4. Enhanced accessibility: Cloud-based HR systems offer greater accessibility compared to traditional, paper-based systems. Performance review data can be accessed and updated from anywhere, anytime, making it easier for employees and managers to provide timely feedback and track progress. This accessibility facilitates more frequent and meaningful performance conversations, fostering a culture of continuous improvement and development.
   

5. Data security and privacy: Cloud-based HR systems often provide robust security measures to protect sensitive performance data. They offer encryption, access controls, and regular data backups, ensuring the confidentiality and integrity of employee performance information. This instils confidence in both employees and managers, knowing that their performance data is securely stored and accessible only to authorised individuals.
   

6. Integration with other HR processes: Cloud-based HR systems can seamlessly integrate with other HR processes and modules, such as goal setting, competency management, and learning and development. This integration enhances the overall efficiency and effectiveness of the performance management process by connecting it to broader HR initiatives. It enables a holistic approach to talent management, aligning individual performance with organisational objectives.
   

7. Real-time tracking and analytics: With cloud-based HR systems, performance data can be captured and analysed in real-time. This allows for instant tracking of individual and team performance metrics, identifying trends, and providing valuable insights for decision-making. Real-time analytics enable agile performance management practices, enabling businesses to adapt quickly and optimise performance.
   

8. Scalability and flexibility: Cloud-based HR systems are highly scalable and flexible, accommodating business growth and changes. They can handle varying employee populations, multiple locations, and evolving performance management requirements. As businesses expand or undergo structural changes, a cloud-based system can adapt and support their evolving needs without requiring significant IT infrastructure investments.
   
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