Mercer’s “2019 Global Performance Management Study” found that just 2% of human resources leaders globally believe their existing performance management system delivers exceptional value.
“Performance management techniques like forced ranking, technology and continuous feedback have not achieved the desired impact,” said Lori Holsinger, PhD, global performance management study leader at Mercer. “There is no silver bullet — employees want a curated, customized experience tailored to their preferences and employers want a less laborious year-end process that is linked to other talent priorities.”
So, how will performance management transform in the future? Mercer levied three predictions on the topic:
- Managers as they are today will cease to exist and artificial intelligence (AI) will play a bigger role.
- Talent models will be segmented and aligned to each unit’s business cycle.
- Annual merit pay will come to an end.
The traditional style of feedback tends to come from a manager once or twice a year. However, many employees interact with several different groups throughout an organization, so Holsinger anticipates that organizations will be nimbler with how they try to guide employees, soliciting feedback from those different groups rather than one manager. To do so, they’ll leverage AI by scraping various databases for communication purposes.
“In the future, it’s really going to shift to a more accurate assessment of who an employee is connected to,” Holsinger said. “Those individuals then will be more connected and able to provide that feedback that’s meaningful.”
The second prediction, Holsinger said, is predicated on the idea that HR will become more dynamic in the future. HR will do this by developing talent models that are more templated, which will be especially important for startups and high-growth organizations, Holsinger said.
Ultimately, it comes down to HR having the capability to be flexible with goal setting, which is the most important element of performance management.
“The ability to communicate to employees that these are the priorities I need to focus on today or next week,” Holsinger said. “Using a more templated approach can really help HR support the business in a way that they need to be supported in order to take advantage of their most important asset — their employees.”
Lastly, Mercer sees a future bereft of merit pay — so what will replace it? Holsinger said algorithms will be used more readily to identify what the market competitive rate should be for a given job or skill cluster. So, rather than using a merit system, it will come down to market pricing and advanced performance metrics.
Holsinger said this approach will also touch recognition programs, predicting a program that allows high-performing employees to select a reward through a menu of options, such as a spa day or craft beer tour. The third element to this new system, Holsinger said, involves a revamped promotion system.
“It’s a combination of the potential that an employee has, the organization’s ability to match employees to those critical jobs in the future and make decisions that are really focused on those three factors: the criticality of the job, the performance of the employee and the potential of the employee,” Holsinger said. “Organizations will really be thinking about those three things when they think about promotions.”
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About the Author
Brett Christie is a staff writer at WorldatWork.