Rethinking performance management in Australia & New Zealand

What do you imagine when you hear the words “performance management?” Chances are, these words evoke anxiety, uncertainty, and perhaps even dread. And if you’re from Australia or New Zealand, you might even associate performance management with the process of “managing out” or exiting an underperforming employee.

However, performance management can be a powerful tool for increasing employee engagement, providing recognition, creating pathways for employee growth and development, and increasing retention. The misconception that performance management is the same as exiting an employee stands in the way of meaningful development conversations – the true purpose of performance management.

Unfortunately, in our experience working with over 4,000 companies worldwide, we’ve found that approaches to performance in Australia and New Zealand (ANZ) still lag significantly compared to approaches used by organizations in other regions like the United States. In fact, we’ve found that many organizations across ANZ are still managing their current process manually through word documents, excel spreadsheets, or HRIS add-ons that aren’t built-for-purpose with the employee experience front of mind. This can adversely impact trust in the process and the organizational justice around performance outcomes. On the bright side, this also means that there are many opportunities for ANZ companies to make high-impact changes that transform the performance process and the overall employee experience.

In this article, we’ll explain the case for rethinking performance management and look into the current state of performance in ANZ. We’ll also explain why evolving your perception of and approach to performance management will be vital to surviving and thriving in the future world of work.

The case for rethinking performance management in Australia and New Zealand

To put it very lightly, the past year and a half have been challenging for individuals and organizations worldwide. In the case of ANZ, the Delta variant, the prolonged closure of national borders, and The Great Resignation have all coincided in the last few months, exacerbating already tough talent and retention challenges.

The international travel ban has made it difficult or even impossible for employers to hire outside of ANZ, significantly reducing the available talent pool. 1 in 3 international students did not make it back to Australia before the borders closed. This is significant because 60 to 80% of international students intend to stay and work in their study destination after completing their studies.

As for current employees, the 2021 Gartner HR Survey reported that 24% of Australian employees are actively seeking new employment, with the top three reasons for leaving being work-life balance, manager quality, and respect.

Hays puts the number even higher, citing that 38% of Australian employees surveyed said they plan to look for a new job in the next 12 months. The top reasons were lack of promotion opportunities (43%), uncompetitive salary (39%), and poor management style and workplace culture (37%).

ANZ companies must adapt to their current and future employees’ expectations or risk losing their top talent in an already tight talent market. Evolving your organization’s approach to performance is one way to improve retention, performance, and engagement and show your workforce that you care about their personal growth and development. Ultimately, this will even improve overall business outcomes.

Understanding the differences

Let’s begin by introducing what we think performance management ideally is.

At Culture Amp, we define effective performance management as an ongoing, iterative cycle centered around fair, transparent, and accurate processes. As a part of the performance process, HR leaders and managers should continuously:

1. Align goals and expectations
2. Provide developmental coaching and feedback
3. Give recognition for successes (and redirection when needed)

It’s a system that involves performance measurement (looking backward) and performance development (looking forward).

In this way, performance management doesn’t just assess previous performance in an annual performance review. It also considers how people can develop in their role, career, and even personal goals by providing guidance at multiple, regular touchpoints throughout an employee’s tenure at the organization. Regular 1-on-1s with managers, ongoing conversations about goals and progress, self-reflections, and feedback from peers are all essential components of effective performance management.

In ANZ, however, we’ve found that the term “performance management” is often entangled with other concepts that are more limited in scope. This confusion is likely why some ANZ companies are reluctant to invest in a new, more modern performance process. Below are some of the processes that performance management is sometimes confused and/or combined with:

• Performance appraisal. Performance appraisals (also known as “performance reviews) focus on periodically assessing past performance to determine compensation and promotions. Performance appraisals often lack the developmental component.
• Performance improvement plan (PIP). According to SMRM, performance improvement plans are tools for helping low-performing and under-performing employees succeed. They are also known as “performance action plans.” For many employees, performance improvement plans are associated with being exited out of an organization.
• Personal growth plan: An up-and-coming concept, personal growth plans are centered on creating collaborative conversations between a direct report and their manager. Working together, the two parties create a shared plan for personal and professional growth (e.g., getting better at presenting).
  
  Nathan Ainsworth, Manager, Customer Success (APAC) at Culture Amp, explains, “Personal growth plans are often favored by HR teams looking to decouple development from performance. However, they can be challenging for managers, who often struggle to fit these conversations into the wider remuneration process.”

Performance management encompasses many but not all aspects of appraisals, improvement plans, and growth plans. As a concept, however, performance management is much more holistic, acknowledging and incorporating employees’ past, present, and future development to help drive continued growth and success.

As Nick Godenzi, Senior Customer Success Coach at Culture Amp, puts it, “By shifting to an ongoing performance discussion, as it is in performance management, all the incremental wins from regular conversations accumulate to be larger than what you’d get if you just sat down and had a one-hour discussion about the last six months with your direct report.”

Changing the status quo of performance in Australia & New Zealand

How performance is handled at your organization can significantly impact your employees’ decision to stay or leave. Here are some examples of how rethinking performance management can help you address the areas of discontent that lead to turnover:

• Offer clarity on growth and promotions. Ongoing and real-time feedback based on clearly defined goals/OKRs ensures that employees always know where they stand and what they need to do to make progress.
• Encourage a stronger connection between individuals and managers. By incorporating regular 1-on-1 conversations into your performance processes, your employees will have more opportunities to build relationships with their managers, thus promoting stronger relationships, trust, and alignment. Managers and direct reports can work through roadblocks, discuss feedback and development opportunities, and more during this time.
  
  Moreover, managers and leaders will have a better pulse on how their employees feel and whether they feel engaged at work. If managers are equipped and ask the right questions, it’s possible to predict and address pain points related to wellbeing, company culture, general issues of discontent, and more.
• Improve fairness and equity. Organizations can shift the process from being purely top-down by giving direct reports, not just a voice, but the space to share their contributions and aspirations through self-reflections. Organizations can further build trust in the process by incorporating 180° and 360° feedback via peers and managers to reduce bias and ensure objectivity.

As for compensation and benefits as a lever for retention, Didier Elzinga, CEO & Founder of Culture Amp, explains it best when he says, “It’s never useful to try and engage a person to stay if all they ask for is more money. If this is the case, you’ve already lost the battle because they’ve reduced their decision to a purely monetary transaction. If you do match their salary, they’ll be gone within six months when someone else increases that number.” This is, of course, assuming that your salary and promotion processes are fair.

There’s no need to reinvent the wheel

Reinventing performance management at your organization isn’t easy, but it’s certainly not “too difficult” to pull off, especially considering its increasing importance in today’s world of work. Retention is an issue for organizations worldwide, but even more so for countries like Australia and New Zealand that are experiencing shrinking talent pools. The pressure to make meaningful change and improve the employee experience is higher than ever, and rethinking performance management is one of the greatest windows of opportunity in ANZ. Luckily, tools and resources are available to help you craft an easy-to-manage performance process that supports both managers and employees in driving positive change.

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