I recently spent a day with ADP’s senior leaders for their annual analyst day in their NYC Innovation Lab. As always, it was an exceptionally well-run event with wonderful access to ADP’s CEO, Maria Black, and her executive team. If you want some continuity in ADP’s story, RedThread members can check out last year’s ADP Road Report.

Here are my high-level key takeaways from the day:

• Consistent revenue growth: ADP grew 9% in revenue in FY2023 to $18 billion and experienced a 10% increase in employer services bookings growth. The company has more than 1 million clients and serves 80% of the Fortune 500.
• A marked change in leadership tone: ADP’s CEO, Maria Black, and its President of Global Product Innovation, Sreeni Kutam, who both started their roles within the last year (though they are ADP veterans), are setting a new tone. Given the day's conversations, I interpreted that tone to be more open, curious, and, dare I say it… human. This tone was underscored by Maria’s opening comments, where she stated that ADP is “Growing stronger, smarter, and with purpose.”
• A cleaner go-to-market approach: ADP had a much more precise set of strategic priorities than it shared last year, namely that it will “Lead with best-in-class HCM technology; Provide unmatched expertise and outsourcing; and Benefit our clients with our global scale.” Further, ADP is dramatically simplifying its product offerings, with its Next Gen HCM as a centerpiece of the new approach. In addition, it is placing a big bet on international growth.
• Large investments in Next Gen HCM: ADP invested in its payroll capabilities, implementation speed, and effectiveness, and it bought a company, Sora, which helps stitch together workflows. ADP also invested in its talent management capabilities and will continue to do so throughout next year. Though Next Gen’s growth isn’t as strong as I would have anticipated, it is still growing steadily, and we expect it to grow faster next year.
• AI is everywhere: ADP demonstrated a range of examples of where and how it integrates artificial intelligence capabilities of the generative and non-generative types. Their marquee offering is ADP Assist, which is a Gen AI-enabled chatbot. Leaders talked frequently about the importance of data security, ethics, and responsibility when it comes to AI.
• A few things were missing: It is impossible to cover everything in a single analyst day, but there were a few things that were discussed at length last year that were largely missing from this year’s session: diversity, equity, inclusion, and belonging (DEIB) and information on what’s happened with the Voice of the Employee survey. Further, we didn’t get much information on what learning and skills capabilities will look like.

With that said, let’s dive into the details.

Note: The full blog was publicly available for 48 hours, after which point it became available only to RedThread members. Sign up to become a member at https://members.redthreadresearch.com.

This morning, Perceptyx, an employee experience, engagement, and voice vendor, announced it acquired Humu, an employee engagement vendor best known for using science-based “nudges” (and for being founded by ex-Google CHRO Laszlo Bock).

For those of you counting, this is the fourth acquisition by Perceptyx in 3 years (the last 3 being Waggl, CultureIQ, and Cultivate). Given the surface-level similarity between Humu and Perceptyx – both vendors in the employee engagement / experience / voice space – you might be wondering what Perceptyx is thinking in making this acquisition. Let’s dive in and explore this deal together.

At a high level, here’s what you need to know about this acquisition:

• The greatest weakness of any employee engagement / experience / voice vendor is that they typically only measure those things – they generally struggle when it comes to showing they are driving change. Perceptyx is acquiring Humu to help it fill that gap in its capabilities.
• Humu’s value to Perceptyx is entirely tied up in its nudge system, including its behavioral content, science, sequencing, etc.
• The Humu acquisition helps round out Perceptyx’s product vision and continue its shift from a measurement and monitoring solution to one that also enables the mobilization of those insights at scale.
• This acquisition is indicative of a broader shift we anticipate will come in this space: moving from EE / EX / Voice measurement and monitoring to these solutions also mobilizing and motivating change.

In this blog, I cover:

• What employee engagement, experience, and voice vendors have done traditionally and where they have fallen short
• Who these specific vendors (Perceptyx and Humu) are and what they’ve done to date
• What we should expect from Perceptyx after the Humu acquisition

Note: This blog was publicly available for 48 hours, after which point it became available only to RedThread members. Sign up to become a member at https://members.redthreadresearch.com.

*Note, since I wrote this, UKG acquired Immedis, a global multi-country payroll provider. Since our ThreadHeads tends to focus on payroll not as much as other topics, I didn't cover global payroll much in this blog, though it is obviously an area of focus for UKG.*

A few weeks ago, I attended the spring 2023 UKG Analyst Event in Boston. For those of you who have not been following along on the latest from UKG, you should check out Priyanka Mehrotra's summary of UKG’s 2022 Aspire Analyst Event from last November.

Here’s the TL;DR for this UKG event:

• Continued commitment to its unified, values-aligned vision. UKG demonstrated an aligned approach in some very specific ways, including internal alignment (clear vision, mission, values), data alignment (by way of a single profile and data set for each customer, regardless of platform), the sunsetting of a lot of older products, and the integration of cross-UKG data into the Great Place to Work (GPTW) Hub and the Hub’s inclusion into UKG’s broader selling motion.
• Adjustments to better respond to customers. UKG has made a number of changes to better respond to customers, such as formally expanding UKG Ready to service up to 500 customers and making UKG Pro available to all organizations above that threshold. In addition, UKG is focusing heavily on frontline workers, who are a critical population for its customers. Further, UKG has implemented more than 2,000 customer requests into its software. Finally, they have developed new customer service pods to better meet customers’ needs.
• Investing in innovation. UKG had a lot of announcements on this front. They provided a lot more details on their recently announced strategic alliance with Google Cloud. Further, they shared more details on how FleX, which is a meshing technology underpinning UKG platforms, is enabling them to innovate and stand-up new products quickly. Finally, we heard a lot about UKG’s current use of AI and their plans for generative AI, which leverage both the Google Cloud partnership and FleX.

Note: This blog was publicly available for 48 hours, after which point it became available only to RedThread members. Sign up to become a member at https://members.redthreadresearch.com.

A few weeks ago, I attended the Oracle Applications and Industry Analyst Summit in Redwood Shores, CA (blissfully less than 30 minutes from home). This blog summarizes what I think you all would most like to know from the event, but the high-level summary is below:

TL;DR:

• Oracle attributes its growth to new customer acquisition versus a land-and-expand approach from other parts of their business
• Oracle has embarked on significant UX, speed, and responsivity investments that make the product look and feel more consumer-grade
• Oracle is taking a pragmatic and relatively conservative approach to generative AI

New customer acquisition driving growth

Previous Oracle metrics have indicated strong growth and the Oracle team indicated that much of this growth is coming from new customer acquisition (versus a land-and-expand approach from other parts of their business). The session was dotted with examples of customers that transitioned from both SAP and Workday (an interesting contrast from the Workday session in March, where customers’ previous HCM providers went unmentioned). The team also mentioned that a lot of their growth is coming from EMEA and Latin America.

Oracle’s broad messaging around why they are achieving that growth came down to three key points:

• Everything customers need
• Innovation that matters
• Committed to customers’ success

On the first point, Oracle shared a summary image of its portfolio of applications and infrastructure (see Figure 1). I’m sharing it here since I haven’t previously written about Oracle for our ThreadHeads, and some of you may be unfamiliar with the full breadth of Oracle’s offerings.

Figure 1: Oracle’s portfolio of applications and infrastructure | Source: Oracle, 2023.

When asked specifically why they are winning, the team stated they have “clear, non-arguable product and service differentiation.” Specifically, they called out:

• The pace of innovation and adoption
• Oracle ME elevating employee experience
• Mobile-responsive front-end
• “A complete, fully connected candidate journey”
• “Intelligent” automation
• Personalization without customization
• “Native, mature HR HelpDesk and case management”
• Natively developed payroll options, scale, and ability to handle complexity

Further, the team called out that they have invested in the following within Oracle HCM Cloud:

• Strategic integrator (SI) and independent software vendor (ISV) partner ecosystem expansion
• Global payroll
• App and platform extensibility
• Near-zero planned quarterly maintenance downtime
• Employee experience
• A modern platform, including improved security, performance, availability
• Redwood UX experience
• AI/ML and Generative AI

In addition, as many of you may know, Oracle has a very strong industry focus, and they featured many stories from the following industries:

• Healthcare
• Financial services
• Communications and professional services
• Consumer packaged goods and groceries
• Gaming, hospitality, and quick-serve
• Industrial manufacturing and logistics

Finally, the Oracle team talked a lot about customer success, indicating their “reference-ability and advocacy are at an all-time high.” They also specifically called out their customer community and the conversion of customer ideas to product, adding that roughly 80% of their roadmap is sourced through customer collaboration (see Figure 2).

Figure 2: Summary of Oracle’s Cloud Customer Connect Community | Source: Oracle, 2023.

My take

Oracle’s primary message is that they are gaining net-new customers and this is a result of greater customer satisfaction. This is interesting, in that Oracle’s strength over the years has not necessarily been customer satisfaction. Oracle is investing in accelerating time to value for customers and providing more resources for them through templates, learning resource centers, and a strong customer community. At the summit, we didn’t see any meaningful numbers such as NPS, though they did have a few happy customers there to speak to us. Given that this is the first Oracle I’ve attended in a long time, I will look forward to future opportunities to better understand and assess customer satisfaction.

UX, Speed, and Responsivity Investments

Oracle has significantly invested in its Redwood design and development system. This is designed to be a modern UX, which the team characterizes as a “collective reinvention of how Oracle customers interact with technology and consume information.” The components of this design system are listed in Figure 3. Oracle indicated that within 9-12 months they will have completed their comprehensive UX upgrade.

Figure 3: Summary of Oracle’s Redwood Design System | Source: Oracle, 2023.

Examples of the new UX are in Figure 4 and samples of the new Redwood pages and flows are in Figure 5.

Figure 4: Examples of the new Redwood UX in Oracle HCM | Source: Oracle, 2023.

Figure 5: Sample New Redwood Pages & Flows | Source: Oracle, 2023.

A consistent theme throughout the discussion on product improvements was product responsivity, availability, and speed. For example:

• Greater responsiveness: With the new UX, Oracle now is leveraging single page applications, meaning there is a micro-application built within a single web page. This makes it highly performant and stable, and results in a more seamless and responsive experience for users.
• Accelerated performance: The team mentioned their speed is 30% faster than previously. This also extends to search (see Figure 6).
• Improved availability: The team stated they now currently have a 99.9% SLA for uptime. The team specifically called out that their 90^th percentile downtime is just 2 hours per quarter. This contrasts with 5-6 years ago when that number was estimated at around 16-17 hours on average, and 24 hours for large customers. It also contrasts favorably to the planned downtime of other major vendors in this area who today require 4 or more hours each week. Expect Oracle to have the average downtime cut to 20 minutes per quarter next year.

Figure 6: Summary of Improvements in Oracle Search | Source: Oracle, 2023.

My take

Most of these improvements are designed to reduce friction in the Oracle user experience. This is a good thing, especially as it relates to consumer-grade UX, speed, and responsivity. Users expect this as table stakes from their Work Tech software and Oracle is making sure it will be present moving forward.

The most notable improvement comes from the improved downtime numbers, which are expected to further improve. Downtime is something most users don’t see unless it meaningfully impacts their day-to-day. Oracle is investing to make sure it doesn’t.

All that said, based on what I saw, it doesn't appear investments are pushing the needle on innovation. As far as I can tell, none of this is going to change how work is done or dramatically simplify it. In the future, I hope to see more from Oracle on this front.

A pragmatic and conservative approach to generative AI

Oracle is taking a highly pragmatic and conservative approach to generative AI. As shown in Figure 7, they see a relatively small overlap between the problems that AI is currently good at solving and those that businesses need to solve today.

Figure 7: Schematic of the overlap between generative AI capabilities and business problems | Source: Oracle, 2023.

The Oracle team’s plan for evolving the use of generative AI is shown in Figure 8. As you can see, their initial focus is on assisted authoring, summarization, and suggestions.

Figure 8: Schematic of how Oracle sees the evolution of generative AI use cases in applications | Source: Oracle, 2023.

The Oracle team sees a virtuous cycle from combining generative AI and existing AI, as shown in Figure 9.

Figure 9: How Oracle sees generative AI and existing AI working together | Source: Oracle, 2023.

The team plans to continue to invest in their product’s AI competencies by focusing on the below areas:

Figure 10: Summary of Oracle’s AI capabilities focus, now and next | Source: Oracle, 2023.

Finally, Oracle articulated its “radically practical approach to AI” as the following:

• Allow user and use cases to determine technology
• Start with a baseline, simple model; iterate
• Assess potential negative impact and implement guardrails
• Build features for specific use cases; leverage for general AI services
• Validate with real-world data and users in collaboration with customers

My take

Of all the recent analyst briefings I have attended, Oracle was one of the most conservative when it comes to generative and next-gen AI, as particularly illustrated by Figure 7.

While I am always for practicality, this seems like a time to dream, not to allow existing users (who do not understand the tech nearly as well as Oracle’s technologists, I would wager) to drive the discussion on what they should do. To be clear, I am not one to encourage anyone to chase bright and shiny objects – but I am one to encourage people to fundamentally rethink existing work and processes in an effort to simplify and improve. I’d like to see Oracle doing more of that.

One thing I did appreciate, though, was Oracle’s awareness of the need to earn customer trust when it comes to new LLM capabilities and training on traceable data. I’d like to see Oracle be more clear on what these two things mean for them and how we will see them show up to support ethical AI efforts.

Final takeaways

I was pleased to spend time with Oracle’s executives and look forward to additional deep dives on products that are of particular interest to our ThreadHeads, such as their learning and performance products. I am also looking forward to opportunities to get to know more of Oracle’s customers and to better understand the value they get from their Oracle implementations.

In early March, I attended Workday’s annual Innovation Summit, rebranded to be the AI (artificial intelligence) and ML (machine learning) Innovation Summit, at Cavallo Point Lodge in Sausalito, CA (Twitter hashtag: #WDAYSUMMIT). Between the event and Workday’s recent announcements of FY23 results and executive changes, here is the TL;DR of this event:

• Delivering strong growth: At last year’s summit, Workday stated they would attain 20% YOY growth until they hit $10 billion in revenue. True to its word, Workday hit total 2023 revenue of $6.22 billion, representing 21% YOY growth, with subscription revenues up 22.5%. As part of this, Workday surpassed the 10,000-customer mark and added new HCM customers such as Allstate, Mercedes Benz, and Cracker Barrel. Workday also focused more on the retail industry (and thus frontline workers), with more than 50% of retail organizations in the Fortune 500 selecting Workday.
• Doubling down on AI and ML: Beginning in 2014, Workday began investing in its AI and ML capabilities, and those investments are increasingly coming to fruition. Throughout the last few years, Workday has woven those capabilities throughout its platform, so AI and ML are used naturally throughout its applications (as opposed to being layered on top). This shows up notably in Workday’s Skills Cloud, as well as many of its other solutions, such as Recruiting, Workforce Optimization and Scheduling, VNDLY, and other applications. This focus on innovation will undoubtedly continue, as Sayan Chakraborty, who is an expert in AI and also leads the Product and Technology Organization, was recently announced as co-president.
• Changing leadership and evolving approaches: An unspoken theme of the Summit was the changing leadership and approach at Workday. Right before Christmas 2022, Workday announced the appointment of Carl Eschenbach to Co-CEO. Eschenbach, a 5-year member of Workday’s Board, was a partner at VC-firm Sequoia Capital and an operator at VMWare. Workday has also brought on other external executives in the last ~6 months, such as Angelique de Vries as President of EMEA (from Salesforce) and Rani Johnson as CIO (from Cloud Software Group). Executive changes always make you ask, “why?”. Our hypothesis is that these changes reflect a belief that Workday’s leadership and approach need to change to achieve its audacious growth goals.

Note: This blog was publicly available for 48 hours, after which point it became available only to RedThread members. Sign up to become a member at https://members.redthreadresearch.com.

Learning Methods Tool

 
This tool displays different learning methods and how much employees rely on them. Methods are organized according to RedThread's employee development framework. To learn more about choosing learning methods that fit read the associated report, Choosing Learning Methods that "Fit" Your Org.

Explore the tool by:

• Filtering by demographics to see percentage of respondents rely on methods by data cut.
• Clicking the circular arrow to clear filters and start over.
• Hovering over any field to see a definition of that term.

In our most recent roundtable, we brought together leaders and practitioners from various industries and organizations to understand their experiences with using skills, including what they've learned and what they're still trying to figure out.

Key takeaways

We centered our conversation around 4 topics: Use cases, Systems, Adoption, and Culture. Below are 4 key takeaways and quotes that reflect essential themes for how participants and their organizations think about and use skills.

Measuring skill proficiency allows leaders to gain insight into their organization

Measuring skill proficiency allows organizations to understand their workforce and make informed decisions. Participants talked both about using skills to define job levels and move employees around the organization. Many kept coming back to the idea that getting clear on employees’ proficiency is critical to applying skills in their organization.

One leader described how they measure proficiencies to understand what people know and determine where they can grow. Others talked about how they’re thinking about the purpose of skills first and measuring skill proficiencies second.

"Skills for development is a tough nut to crack – we need to tie to proficiency levels – this allows us to be more future focus vs. only thinking about the mobility piece." – Roundtable Participant

When using tech to identify and assess skills, build in opportunities for human observation

One major piece of advice we heard in our roundtable was to layer in opportunities for human observation when using tech systems to assess and identify skills. Participants called out the need for balance between the insights gained from tech and the insights gained from human interactions and conversations.

Many mentioned that there is a big difference between someone self-identifying that they have a skill and seeing how it is being applied. Human observation provides a level of oversight in verifying skills that systems may not be able to provide.

"As we put systems in place, HR/leader role is changing, and so are the conversations around skills. It becomes, "Hey, you learned this skill, and you assess yourself at X level; tell me about it; what does that proficiency mean to you?" It puts more weight on people than in the past, making it a much more collaborative conversation." – Roundtable Participant

Organizations are balancing 2 perspectives on skills: the enterprise and the individual

Many participants described how their organizations are balancing enterprise and individual perspectives on skills. Organizations may see skills as a way to enable quicker decisions on succession plans, career mobility, and even who to hire. Individuals may see skills as a concrete way to develop their careers in a particular direction. The challenge is trying to find common ground between these 2 needs.

"The organization is defining skills for a specific role, which is different maybe from me as an individual choosing, defining, and deciding where I want to go and how to grow. There is a question of how you harmonize both of those together." – Roundtable Participant

Managers are in a unique position to impact whether employees use skills

Often, managers are the key driver of employees adopting and using skills successfully. For example, participants talked about how managers should help employees make time for new skills to be used and developed, provide opportunities to use new skills, and have open conversations about how employees would like to develop. To do this successfully, there may be a need for manager training and education about skills.

"Managers are communication linchpins (around skills)." – Roundtable Participant

A special thanks

Thank you to all who participated and shared their experiences. We welcome your suggestions, thoughts, and feedback at [email protected].

 

 

On June 24, the U.S. Supreme Court overturned the Roe vs. Wade ruling, leaving many companies scrambling. In response, we convened a roundtable of leaders on June 30 to discuss these challenges and identify possible solutions.

Specifically, we discussed 3 questions:

• How organizations are communicating about Roe vs. Wade, both internally and externally
• How organizations can support those affected by this reversal
• What are some of the broader implications for talent attraction, retention, and employee experience

Key takeaways

There is a general sense of fear resulting in a slow or lack of response from organizations on the issue

Companies had been quick and vocal about expressing their support for social issues in the recent past, such as the Black Lives Matter (#BLM) movement. Yet, many have stayed silent on this issue both internally and externally due to a few reasons:

• While some groups and individuals expect their employers to take a stand on the issue, others prefer to avoid political discussions at work.
• Many companies have offices across the globe. Taking a stand on a U.S.-based issue that does not impact large parts of the organization has deterred many leaders from speaking out publicly.
• Many leaders are afraid of expressing a personal view or explicitly showing support or dissent for the ruling. Instead, they are limiting their response to acknowledging differing beliefs.

However, there is also a general fear of repercussions from staying silent on the issue. Employees have an increased level of expectations from their employers to take a stand, mainly because many organizations have been vocal about political issues in the recent past.

Many companies are focusing on the healthcare aspect of the issue

Many companies, unwilling to take a political stance on the topic, are using language that promotes healthcare access for employees to show their support. Because the overturn of the ruling changed laws overnight in some states, many HR leaders are not clear on the current benefits available to employees and how they will change in the future. Participants mentioned the lack of communication from their insurance companies, making it hard for organizations to share information with employees resulting in confusion and fear.

Some companies are finding other ways of helping their employees, such as:

• Expanding benefits to include travel expense coverage
• Communicating that the health and safety of their employees is their top priority
• Working with their benefits provider to ensure that all employees, regardless of location, have access to the healthcare they need

Some are also providing mental health and wellbeing support by:

• Encouraging conversations led by employee or business resource groups (E / BRGs) with guidelines on how to start a conversation on the topic, and set expectations around sharing, listening, and respecting each other
• Opening up forums and town halls for communications with leadership
• Promoting employee assistance programs (EAPs) for emotional support, including crisis lines offered to employees in need
• Bringing in external facilitators to guide discussion and hold courageous conversations without repercussions

Privacy is a concern, but many are not thinking about it

There are serious legal implications that could emerge from the data collected on employees, but few companies are thinking about it or addressing it right now. Data tracking on employees who request medical support could lead to privacy concerns around access and usage. Similarly, reimbursements for travel expenses that require disclosure of travel purposes could also result in privacy challenges.

One of the ways companies can prevent such challenges is by using a third-party administrator for travel reimbursements or stipends which would ensure privacy for employees. Additionally, companies can restrict access to sensitive data such as biometrics. Finally, some organizations are revisiting their paid time off (PTO) policies to remove the distinction between sick time and PTOs and help afford employees privacy when applying for a leave without disclosing the specific reasons.

It’s too soon to know the broader impact on organizations

Participants agreed that while there will certainly be some implications for organizations based on how they approach this issue, it is too early to tell whether they will be long-term and significant. Over time, companies could find themselves asking questions such as:

• Is this impacting the experience different populations have within the company?
• Is talent attraction impacted because of it?
• Has it impacted our attrition in the long term?
• Do we see this affecting our brand?

Organizations are aware that any communications regarding the overturn will affect their company culture over time.

Thank you to all who participated and shared their experiences. We welcome your suggestions, thoughts, and feedback at [email protected].

As organizations move toward hybrid work, they need to ensure that employees can perform as effectively as possible and managers can support them fairly. To do this, leaders must make sure performance management works for all in this new hybrid work world.

There are 3 levers that are critical for today’s performance: Culture, Capability of managers, and Connection.

This infographic highlights key findings from our report: Performance Management for Hybrid Work. Read the full report to find out why the "3Cs" are critical for performance management and what are the specific practices under each lever that organizations should focus on.

Click on the individual images below for an expanded view. As always, we'd love your feedback at [email protected].

 

 

Download this report[/button]

Many of us are beginning to return to the office (RTO). Who could have imagined it would take more than 2 years? What an experience we've lived through. So, it's safe to say none of us are the same as when those first shelter-in-place orders were announced in early 2020.

For one thing, we've collectively lived through a grand experiment in remote working. And, as it should be with any experiment, we've learned a lot. For example, we've seen that:

• Certain work can get done better in distributed environments than in the office
• Not all work needs to be done synchronously
• Through improvements in technology and process, we can work in new and often more effective ways
• People can be much more self-directed and effective than many had imagined

We've also been reminded of just how much humans are social creatures. This has been reinforced by situations where in-person work interactions truly allow us to flourish. After 2-plus long years, there’s an incredible attraction to be together again with our teams—to create together, rejoice in being alive together—in a physical workplace.

Now’s the time for us to move to the next phase of the experiment—hybrid working. As we enter this period, the question becomes,

How can we keep the goodness of both situations—distributed (remote) and in-person work—while enabling our people and organizations to perform effectively?

While we have many components to do this, one area that many organizations are overlooking is performance management.

In this report, we focus on a few things:

• The critical levers for performance management (PM) and how they've evolved thus far since the start of the pandemic
• Why those specific levers are especially critical to hybrid work
• How to audit your organization's current practices and get started

This research is based on a number of different studies we've done over the years on PM, as well as the results of our 2021 survey of employees and HR leaders on performance management. See the appendices for the nitty-gritty methodology. This report gives you the data, insights, and practical suggestions you need to prepare your organization for this next grand experiment.

Performance management: Critical to the hybrid work experiment

PM is always important—it:

• Touches every employee in the organization
• Provides clarity on goals, objectives, and performance
• Influences incentives

While important, PM is far from perfect—its limitations and potential biases have been documented by many.

Unfortunately, many biases will likely be exacerbated in a hybrid work setting (see Figure 1). For example, managers may be susceptible to proximity bias when assessing performance if some employees are in the office more than others. To potentially overcome these biases, employees may begin to come into the office more often, even if it’s not where they get their best work done.

To ensure that employees can perform as effectively as possible—and managers can support them fairly—leaders need to make sure PM works for all in this new hybrid work world.

While this might feel a bit daunting (or not even be on your radar at all), let us assure you this is possible. After all, we've just been through a global pandemic and have learned some important lessons that we can apply to the future. Not only that, our RedThread data show that some organizations and managers have already adjusted their practices to better suit a hybrid work environment. So, your organization may already be further ahead than you know.

Introducing the new 3C model

While a wide range of practices can be considered essential when desiging performance management for hybrid work, the question, of course, becomes:

Which practices and behaviors matter most?

When we first conducted this study in 2019, we introduced a model that organizations needed to focus on most to drive PM. The model was comprised of 3 levers:

• Culture. Promotes the values and norms of the organization to drive organizational performance and engagement
• Capability of managers. Plays a role in creating the right environment to drive individual performance
• Clarity. Enables individuals to understand their contribution—in the present and the future—to drive engagement

Our latest research provides an updated model of 3 levers that organizations need to focus on when it comes to PM in current times. As readers can notice in Figure 2, some elements of the old model remain important, while others have evolved.

The 3 levers that organizations should focus on in a hybrid world are:

Culture. A culture that clearly promotes the organization's values and prioritizes people became an even bigger priority for leaders during the crises of the past 2 years. As companies look to implement new ways of working once again, they need to maintain their efforts to reinforce a high-performance culture. This lever has evolved in 2 important ways when compared with the 2019 version:

1. Culture now includes the new subfactor of “clarity” (that was its own separate lever in 2019). A high-performing culture must now provide employees with clarity around their goals and performance.
2. Another subfactor from our 2019 model, “future-focus,” is now renamed “fostering growth.” Organizations need to provide opportunities that help employees grow in their current roles and no longer view development as future-oriented.

Capability of managers. Few others have played a more impactful role in employee experience and performance during the pandemic than managers. Leaders will continue to rely on managers for their culture-building efforts and to empower employees to perform effectively in the future.

Connection. This is a new lever that organizations need to focus on. The pandemic and subsequent changes in work made the annual performance conversations obsolete for many. Several of these companies increased employee check-ins during the pandemic, which resulted in improved levels of engagement for many. Moving forward, enabling connections between employees, their managers, and the broader organization will be essential to employee performance.

Beyond our data, real-world stories also reflect the criticality of culture, capability of managers, and connections. Over the past few years, several companies have revisited their PM processes to understand what’s working and what needs changing—to ensure continued performance and career development.

A culture of continuous feedback and check-ins, along with clarity and alignment around expectations, are welcomed and encouraged widely. The latest example comes from Google, which recently did away with its biannual performance reviews. The new approach, Googler Reviews and Development (GRAD), involves feedback and check-ins throughout the year, twice-a-year promotions, investments in internal mobility, and once-a-year formal performance reviews.

Why should organizations use the 3C model?

Focusing on the 3Cs positively impacts several talent and business outcomes that leaders care about. Our findings revealed that companies—which focus on culture, capability of managers, and connection—are more likely to have:

• High engagement. Organizations that focus on the 3Cs are 1.6 times more likely to have high engagement. We know that employee engagement impacts retention, productivity, turnover, and employee health. It became a top priority for leaders during the pandemic—and continues to be critical as companies figure out their next chapter around planning work.
• Met business goals. Companies that focused on the 3 levers were 1.5 times more likely to have met their business goals in 2021. The pandemic has made it challenging for companies to set business objectives and even more difficult to achieve them as the instability continues. For companies looking not just to survive—but to be successful during such times—and instill confidence in their stakeholders, it’s critical to meet their business goals.
• High NPS scores. Organizations that focus on culture, connection, and capability of managers are 4 times more likely to receive a positive NPS from their employees. The rise of the “Great Resignation” has focused companies on improving employee loyalty. Similar to employee engagement, NPS data give organizations a general sense of how employees feel—meaning a low score, especially during a crisis, can be terrible news.
• High manager effectiveness. Companies that score high on culture, connection, and capability of managers are 3 times more likely to have employees who rate their managers as effective. Managers impact an employee’s engagement to a great extent. Managers also play a central role in their employees’ development and career journeys—making it imperative that managers possess the capabilities required to enable effective performance.

The 3 levers in our model (see Figure 3) can impact one, a few, or all of the critical outcomes mentioned above. For example, our data show that organizations should focus on building manager capabilities if they want to drive higher engagement, NPS, and manager effectiveness, in addition to meeting their current business goals. Organizations should consider connection-building if they only want to impact manager effectiveness.

Depending on which outcomes organizations want to drive, they should focus on 1, 2, or all 3 levers. In Figure 3, we look at each of these levers and the outcomes they influence.

In the following sections, we take a deeper dive into each of these 3 levers, discuss why they’re important, and look at how some PM practices should change to better fit the hybrid world of work.

Culture

Culture is the shared assumptions, values, and behaviors that determine how people do things within a company which helps them and organizations thrive. When redesigning PM, organizations should look at how each of these—assumptions, values, and behaviors—impact current practices.

In this section, we take a closer look at culture:

• What it is and why it matters
• Role of culture
• Highest priority practices to change

What it is & why it matters

When we looked at the importance of culture as a lever, we found that it significantly impacts all the talent and business outcomes that organizations care about. As we see in Figure 4, organizations that focus on culture experience significant positive results with NPS, manager effectiveness, past business performance, and employee engagement.

Additionally, in comparing 2021 data with 2019, we notice that culture's impact on employee engagement has grown significantly. In 2019, we found that organizations which did well in creating a high-performing culture were 32% more likely to experience high employee engagement. In 2021, this likelihood nearly doubled to 63% (see Figure 5).

 

Role of culture

While culture is extremely important, it can be hard to pinpoint exactly what aspects of culture matter most for PM. Our 2019 research revealed 3 cultural elements⎯feedback, fairness, and future-focus⎯that organizations needed to focus on to drive performance. However, organizations must now rethink culture for hybrid work—and our new model reflects this change. To build a high-performing culture for a hybrid world of work, organizations must continue to do what they’re already doing—and provide employees with focus and clarity around their goals. (See Figure 6)

A few things to note about the culture lever in 2021 when compared with 2019:

1. Clarity, an independent lever in 2019, is now a critical aspect of the culture lever. Culture took on new meaning during the pandemic. With remote work, companies have had to:

• Become explicit about the work that needs to be done
• Show how it ties to the company’s overall mission and goals
• Provide employees with the support and resources to do it

This means that organizations can’t rely on individual managers' varying capabilities and enthusiasm to provide clear goals and feedback. Instead, organizations must have a cultural competency around clear goals and feedback—so that, if employees don’t get what they need, then they’re empowered to ask for it. As such, our analysis revealed that “clarity” is now a part of organizational culture.

2. Growth continues to be an important part of culture, but is no longer solely future-oriented. As mentioned earlier, we renamed the subfactor “future-focus” from our 2019 model to “fostering growth.” In 2021, we saw a new urgency overtake upskilling and continuous L&D (as they apply to PM) as employees encountered both complex and mundane challenges that they hadn’t faced before the pandemic. For this reason, we no longer see growth and development in the performance context as being about preparing for the future, but rather as essential to executing the job today.

As organizations look to put in place practices and processes for hybrid work, they must consider these 4 areas under culture—feedback, fairness, fostering growth, and focus and clarity—as guiding lights for driving performance.

We know there’s a greater likelihood of new and existing biases creeping up in a work setting in which some portion of the workforce is remote. Organizations that are rethinking their culture should intentionally design and implement practices that address these biases. Specifically—by promoting a culture of fairness and trust—organizations can avoid halo / horn bias, whereby good or bad traits can dominate perceptions. Similarly—by encouraging feedback and emphasizing clarity—organizations can make sure that managers receive constant information and feedback on employee performance, thereby avoiding proximity, primacy, and centrality biases.

For example, Salesforce implemented “Flex Team Agreements” after receiving feedback from employees that they needed greater flexibility. These agreements are broken down into 3 levels—office-flexible, home-based, and office-based—and help provide clarity to employees on what's most important for them, including how many days a week they come into the office and what kind of work they’ll continue to do at home.

Teams can also decide how they communicate and what behaviors are most important to them. For instance, the Employee Success team agreed to “no meeting Fridays” and monthly wellbeing days. The team also prioritizes in-person meetings twice a year, volunteer days, and end-of-quarter celebrations to keep everyone feeling connected.

Similarly, IBM was able to build trust and psychological safety by replacing a system of once-a-year performance conversations with a culture of continuous feedback. Based on input from employees, the company put in place a new performance development process called “Checkpoint”—where feedback is self-driven and centered around providing a more holistic evaluation of employees.

To ensure strategy alignment across departments, offices, and countries, 5 key dimensions—or core values—were created:

• Business results
• Client success
• Innovation
• Skills
• Responsibility to others

In addition, IBM partnered with a PM technology solution to have one platform for check-ins, feedback requests, and goal-setting. The company has been able to move past traditional questions like, “Did you accomplish your yearly objectives?” to questions like, “How are we performing? What are the skills needed? How does this impact my career?”

Highest priority practices to change

So, what are the specific practices that lead to a high-performing culture? Depending on the outcomes that leaders want to influence, our data revealed specific practices which are important.

Figure 7 breaks down the specific culture practices used by high-performing organizations. While there are certainly more practices which organizations can adopt, we include only those that have a significant impact on outcomes.

Real-World Threads

Patagonia redesigns performance management with a focus on culture

When Patagonia decided to redesign its PM process, leaders wanted to make sure that the changes aligned with the company's strong culture of being a place at which people were proud to work. The existing PM approach was traditional top-down and rigid—whereas the company’s culture was more bottom-up, open, collaborative, and heavy on authenticity.

The company decided on 3 design principles to guide its reinvention of performance at Patagonia—more dynamic, more democratized, and more data. To make it dynamic, the company put in place 3 new performance tools:

• Quarterly stretch goals
• Quarterly check-in conversations
• Continuous crowdsourced feedback

Each tool (stretch goals, check-ins, and feedback) was built to allow employees to drive the process, while managers provide support and help them improve. Managers took on the roles of guide, coach, and advocate on behalf of their employees. To enable more data usage, the company integrated digital tools that collect data on the frequency of feedback, and networks of people giving and receiving feedback.

Employees still meet with their managers in the first month of the new fiscal year and set a few high-level, yearly targets—but they avoid getting too detailed about them (see Figure 8). After that, employees begin using the 3 optional (but highly recommended) performance tools.

In the first month of each new quarter, employees write 3–5 quarterly stretch goals. Then they ask for feedback from their peers and managers using digital tools. In the first month of a new quarter, they use the digital platform to fill out a check-in form that guides them through self-reflection questions. Finally, they schedule a 30- to 60-minute check-in meeting with their manager.

By applying this "regenerative performance" approach, the company has created an ongoing cycle that supports continuous growth and performance improvement year over year.

Capability of managers

Given the spotlight on managers during the pandemic, it comes as no surprise that capability of managers continues to be a crucial lever for driving performance management.

In this section, we take a closer look at this lever:

• What it is and why it matters
• Role of capability of managers
• Highest priority practices to change

What it is & why it matters

Organizations are increasingly relying on managers to:

• Support employee wellbeing and health
• Provide clarity to employees about the work that needs to be done
• Communicate company commitments and priorities
• Help employees effectively work virtually

Our data (see Figure 9) reveal that organizations, which focused on building manager capabilities, were highly rated by their employees on NPS, manager effectiveness, engagement, and the likelihood of meeting business goals in 2021.

Role of the capability of managers

Managers play a central role in making hybrid work successful. Similar to conditions during the pandemic—shifting priorities, work practices, and differing experiences of employees—require organizations to rely on managers to lead effectively. This is especially true as companies think about making sure the new working conditions are fair and equitable for everyone.

Findings from our data indicate the evolving nature of the manager’s role in today’s work environment. As we see in Figure 10, in addition to providing coaching, exhibiting candor, and clearing barriers for employees⎯as it was important for them to do in 2019⎯managers must also now exhibit confidence and care.

The addition of confidence and care for managers’ capabilities isn’t surprising for a few reasons:

• Having confidence in employees and trusting them are fundamental elements for a thriving work environment, especially in times of crisis and upheaval. Our Responsive Manager study revealed that—among the behaviors adopted by managers in organizations that are highly responsive to disruptions—trust and showing respect toward employees greatly impact enabling effectiveness. For example, the computing company NVIDIA exhibits confidence and trust in its employees with its “the project is the boss” philosophy. This approach leaves it up to the employees (and their schedules) to decide when work is completed, as long as the project is finished as expected.
• Care, a practice that has become extremely important over the past 2 years, is now seen as foundational to a manager’s role. Managers need to be supportive, flexible, and inclusive to help employees feel a sense of stability and empowerment, along with feeling valued, during a time of crisis. For example, one of Microsoft's steps to be successful at hybrid work is to encourage managers to care for employees’ unique needs in and outside of work, and their career aspirations and goals. “Care” is part of the company’s manager framework that was introduced a few years ago and on which the company continues to lean heavily.

Organizations must double-down and invest even more in manager capabilities as they move toward hybrid work environments for a few reasons:

• Preventing biases. Managers—who fail to recognize work that lacks a direct line of sight (between the manager and employee) and continue to promote those they physically see in the office—will inadvertently exacerbate the common PM biases in a hybrid work setting.
• Managing split teams. Hybrid work means teams with employees who might have different work schedules and days when they come into the office versus working from home. This means taking into account the different needs and challenges that can arise unexpectedly and on short notice. Companies need managers who are able to effectively solve these challenges while displaying consideration and care.
• Overseeing employee wellbeing. According to one study, 56% of employees report improvements to their mental health as a result of the hybrid work environment—and managers played an important role in that during the pandemic. As companies set long-term policies around hybrid work, they need managers to be responsible for leading this charge.

Highest priority practices to change

So, where should organizations focus? Our data revealed specific practices and behaviors that managers should look to adopt.

In Figure 11, we list them along with the specific talent and business outcomes they impact. While organizations can adopt several other practices, we include here only those that have a significant effect on the outcomes.

Real-World Threads

Zillow equips managers to better support their teams

In order to better assist their managers during the pandemic, Zillow, an online real-estate company, set up cohorts of managers across the organization. The purpose of the cohorts was to allow managers to engage in rotating 1:1 conversations with their peers to troubleshoot their current managerial challenges.

These conversations offered safe opportunities to engage in vulnerable conversations that focused on how managers can commit to specific actions to support the wellbeing of their team. Managers were able to practice empathy with their peers, ask specific questions to understand their challenges, and articulate their own circumstances in response to probes.

As a result, the conversations offered managers the opportunity to fail in a safe space and be better prepared to help their employees. This also promoted a coaching culture within the company, with managers offering each other ideas and advice outside of structured times.

Clarus Commerce consistently reinforces trust & confidence in its employees

The philosophy at Clarus Commerce, a small advertising and marketing company, resembles that of a winning sports team. The leadership works to:

• Hire good people
• Train them through practice and preparation
• Coach teammates to back up each other
• Learn from their mistakes
• Accept wins and losses together

Once the new hires are ready, leadership lets the players play.

Once play begins, or the new hires have proven they’re capable of tackling projects on their own, managers will only step in a limited number of times. The field of play at Clarus is set by goals and budgets. Within these boundaries, it’s up to the workers to execute. This empowerment enables the company to move quickly according to conditions on the ground and diligently to meet changing customer needs.

Connection

Much has been said about the importance of connection-building during the past 2 years. As such, we weren’t surprised (although excited!) to see it emerge as a lever in our new model.

In this section, we take a closer look at the connection lever:

• What it is and why it matters
• Role of connection
• Highest priority practices to change

What it is & why it matters

Connection surfaced as a modern PM lever for a few reasons:

• Genuine relationships within a company can help to create a workforce that’s generally more satisfied and less stressed
• Research shows that a top challenge among remote workers is loneliness—add to that ambiguity over expectations and goals due to a lack of frequent conversations—and it’s a sure-shot recipe for a disengaged and unproductive workforce
• Bonding connections (within-group interactions) and bridging connections (across-group interactions) that are important for collaboration and innovation deteriorated from the virtual work environment during the pandemic—organizations need to be intentional about rebuilding these connections to drive growth

One of the primary ways that leaders build a connection with their employees is through check-ins. Our research shows that the frequency of daily check-ins increased by 8% from 2019 to 2021, while that of monthly structured conversations increased by 10% from 2019 to 2021 (Figure 12).

These increases in conversations (connections) occurred for the following reasons:

• Organizations shifted to more continuous goal-setting approaches that required frequent conversations between managers and employees
• Leaders feared that employees might feel cut off from company culture—resulting in a greater effort to engage employees through frequent check-ins
• Managers lacked previous levels of visibility into an employee’s work—resulting in managers speaking with their team on a more regular basis
• The informal means used before the pandemic to provide “in-the-moment" feedback to employees disappeared—leading managers to set more frequent conversations

As many organizations implement policies that require the workforce to return to the office for some portion of the week, it’ll be tempting for managers to let go of these habits—this would be unwise.

Our findings reveal that 70% of employees want more daily or weekly check-ins than they’re having with their managers. Although low as compared with other levers, connection has a significant positive impact on manager effectiveness (see Figure 13).

Organizations with ineffective managers could end up losing critical talent. While the impact isn’t necessarily high, we believe it’s just as important because of how it impacts other PM levers for a few reasons:

1. Companies need to foster connections through regular and frequent conversations. This is especially critical to empowering managers to build trust and show candor with their employees. This can have a positive impact on the capability of manager lever, too.
2. A culture of feedback and clarity requires frequent conversations. Quick check-ins are a great way for managers to give “in-the-moment feedback,” and clarify employee goals and expectations. This can have a significant impact on the culture lever as well.

Role of connection

We believe that building and managing connections will continue to be important—if not more so—as hybrid work becomes a reality for many. A few reasons for this include:

• Addressing the “fear of missing out” (FOMO). Employees who continue to work entirely from home or for some portion of the week might experience anxiety due to the fear of missing critical information or being left out of important decisions. Frequent check-ins with their managers can provide opportunities for employees to discuss and address such concerns, as well as alleviate their sense of FOMO.
• Staying connected. Employees need to feel connected with their workplace and a part of the company culture—which can be challenging to maintain in a hybrid work environment. Connections built through informal check-ins can assuage some of the fears and feelings of being disconnected.
• Avoiding bias and discrimination. Because remote work offers a better experience for women and people of color, they’re more likely to prefer working from home than others. Organizations must provide and promote opportunities for frequent conversations between employees and managers in a hybrid workplace setting to avoid proximity bias from creeping in. Regular conversations can help address concerns, provide the necessary support, and ensure they’re not forgotten or passed over for development opportunities.

Figure 14 provides an overview of this third lever in our PM model.

Highest priority practices to change

As we mentioned earlier, connection's impact on organizational outcomes is low as compared with other PM levers. However, organizations mustn’t ignore this lever for a few reasons:

• Employees want more conversations. Our survey findings show that about 70% of employees want more daily or weekly check-ins than they currently have
• Companies need connections to drive the other levers. Those wanting to implement a culture of clarity, feedback, and coaching will find it hard to succeed without implementing processes that encourage frequent conversations and communications between managers and employees

So, what are the specific practices on which organizations focus? Our data reveal one practice that organizations should look to adopt¾quick check-ins. In Figure 15, we outline the practice and the outcome it impacts.

Real-World Threads

Spotlight adopts more frequent conversations between employees & managers

Before COVID-19, Spotlight, an analyst relations firm, had a PM process in place that consisted of employees and managers having development conversations on an annual or biannual basis. Once the pandemic hit and employees shifted to a remote work environment, a clear need surfaced for more frequent development conversations. Company leaders received feedback from employees asking for more frequent conversations and 1:1s with their managers.

As a result of this feedback, the company:

• Executed focus groups to understand the specific pain points around its current performance management process as experienced by managers and direct reports
• Researched practices instituted by other companies to address similar pain points
• Leveraged technology to make the process easier and execute the changes

Because of these steps, Spotlight was able to redesign its PM process—so it’s now comprised of practices, such as providing continuous feedback, weekly check-ins, and monthly 1:1s with managers.

Early results from these efforts show that employees generally report a more positive experience with their managers. The company has seen an increase in employee scores on questions around employee relationships with their managers, their levels of trust toward them, and development investment from them.

UCHealth makes conversations an integral part of its PM process

UCHealth’s mission is to improve lives through learning, healing, discovery, and human connection. The healthcare system of hospitals and facilities wants everyone who connects with the organization to have a positive experience, thus making UCHealth an attractive employer in a tight marketplace. The company believes that relationships are the most potent and essential lever which leaders can pull to influence behaviors, align employees’ work, and inspire the workforce.

Over 2 years, the company collected data to understand its Employee Value Proposition (EVP) and found 2 things that mattered most to employees and for retention:

• Personal, instead of transactional, relationships
• Opportunity for growth

Unfortunately, the existing PM process eroded the company’s EVP as it didn’t help employees focus on growth, improve performance, or build connections with leaders. Instead, it focused on:

• Evaluating performance to provide ratings for merit-based pay increases and bonuses
• Giving feedback on past performance
• Satisfying regulatory and legal requirements and internal processes

After collecting feedback and data through conversations and forums, the organization decided to revamp its PM process. The overall objective was to design a process that:

• Supports retention
• Encourages relationships rather than being transactional
• Helps grow and move talent
• Provides a forum for comparative rating for merit-based raises
• Aligns with UCHealth’s overall objectives and mission

In 2019, the Organizational Development and Learning Services team revamped the process to reduce the administrative burden. The following year, it decided to formally shift the focus of performance reviews from evaluation to “Career Conversations” around professional development. “Career Conversations” drive inspiring discussions between employees and their managers about the employee’s performance, growth, and opportunities at UCHealth. They’re mandated for everyone and framed around 3 core sections for all leaders and employees.

Managers begin by asking employees if they’re willing to take on extra and challenging work. Starting with this section allows the organization to focus the bulk of the conversation on discussing growth and career development. Questions in this section are not rated, and encourage useful dialogue between employees and managers. The following 2 sections cover discussions around whether the employee is getting their current job right and if they are a good teammate. The organization evaluates these sections on a 5-point rating scale.

Overall, the new process provides equal opportunity to all employees to manage their development, while simultaneously fulfilling the need for comparative ratings to inform the annual merit pay increase and bonuses.

UCHealth emphasizes that leaders go beyond transactional relationships, and build deep and meaningful connections with employees. It also invests in helping leaders build interpersonal skills—and holds them accountable for meaningful conversations with employees throughout the year through “Career Conversations”, stay interviews, and other informal check-ins.

Because of the critical role that managers play in the new process, the organization:

• Helps managers improve their interpersonal skills by building deep connections and relationships
• Provides resources, such as formalized learning opportunities and courses, to help leaders hold conversations
• Provides opportunities to role-play different scenarios to help leaders prepare for difficult conversations

“The challenge of the next decade for organizations will be to figure out how to create a space where individuals can feel heard, aligned, and part of something bigger while still getting the work done.”

—Matthew Gosney, Vice President of Organizational Development and Learning Services

By designing a PM process that puts an onus on building connections and holding meaningful conversations around growth and development, UCHealth is actively working on addressing this challenge and fulfilling its overall mission.

And the results are proof that these efforts are working. The organization improved its internal promotion rate significantly from 37% to 67% over the last 5 years, with considerable improvement over the previous 2 years. The organization is on track to achieve what it sees as the ideal mix of internal versus external hiring.

A secondary benefit of these efforts is improved representation in the company’s talent pipeline. The organization improved its Black, Indigenous, and people of color (BIPOC) representation in its talent pipeline by 40% in the last 2 years. It also tracks performance metrics around ratings and promotions on the backend, and analyzes them by demographic data to identify biases and discrimination.

What now? Getting started

Now that we know which practices and areas impact performance management, how can organizations get started on applying these across the organization? Different companies have different needs, which means they might focus more on some areas and practices versus others.

One thing is certain—performance management as we know it no longer works.

Companies that redesigned their PM processes in the recent past already see the benefits of doing so. According to our data, in organizations with redesigned PM processes (within the last 2 years), 56% of employees believe their evaluation process is fair and consistent, as compared with only 36% of employees in organizations that haven’t redesigned their PM processes (see Figure 16).

So, what should organizations do? In Figure 17, we outline the 5 steps organizations can take to kick-start their modern PM journey.

Step 1: Identify what matters most

While most organizations will agree that engagement, NPS, meeting business goals, and manager effectiveness are all important outcomes they want to drive—each company will differ in which of these outcomes matters the most, given where their individual business is today. This is why the first step to redesigning your PM process should be identifying the outcome you want to impact most.

Our research shows that engagement is one of the primary reasons organizations conduct performance management—and this has changed significantly over the past 2 years. As shown in Figure 18, almost 45% of organizations reportedly managed performance to engage employees in 2021, as compared with only 26% in 2019.

You can better identify your priority areas by:

• Clarifying your organization’s philosophy for PM—specifically answering the following questions:
  • What are we hoping to achieve by managing performance?
  • How does that tie to our organization’s overall values and purpose?
• Pinpointing the desired state or the specific outcomes your organization needs to achieve

• Specifying what the success of PM practices should look like and how it can be measured

For example, a U.K.-based IT consulting company with a history of acquiring many companies follows a very clear philosophy when it comes to performance management. The company conducts PM to help employees understand:

• Where they currently stand
• Where the company needs them to be
• How they can get there

Even though the company made changes to its practices around manager check-ins and goals over the past 2 years due to the pandemic, the overall purpose of managing performance didn’t change.

Step 2: Determine gaps in the current approach & with the 3C model

The next step is to take inventory of the existing practices within the organization, identify the ones that map to the areas you want to impact, and identify the gaps.

“Voice gap” is the difference between how much voice and input workers feel they ought to have versus how much they actually have¾that exists between workers and leadership when it comes to topics that impact them in the workplace. Employees want to participate in decision-making around policies and practices that affect them, such as performance management. Therefore 2 of the most important things for organizations to do in this step are to collect feedback and be open to discussions.

Organizations can execute this in several ways. Figure 19 offers a few steps that we’ve outlined.

For example, Old Mutual Wealth decided to set a customer-centric strategy to ensure the company meets its business goals and recovers from the financial crisis. The company realized that it needed to leverage performance management to bring the new strategy to life. Leadership identified organization-wide, customer-first behaviors that were incorporated into employee performance reviews, manager feedback systems, and an all-employee survey.

The changes spawned a new culture throughout the organization in which everyone took responsibility for their decisions—starting with the CEO, who clearly said that nobody would be blamed for giving him bad news. Within 12 months, 90% of the firm’s U.K. and European insurance books were replaced by new products aligned with the board’s vision. And Old Mutual’s share price more than doubled in 5 years.

Step 3: Ideate & brainstorm solutions

Once the gaps are identified, you may find it tempting to start work on adding in the missing practices needed to drive performance and to weed out the ones that go against the desired state.

We recommend against doing this—in favor of taking some time to be sure you understand the root cause and gain others’ input before moving forward. Specifically, organizations can take these actions at this stage:

• Identify root causes of the reasons for the gaps in performance practices
• Brainstorm potential approaches to address the root causes
• Test out assumptions on what the implications of those potential approaches would be
• Consider different variations of practices that could potentially work
• Conduct research to understand practices adopted by others with similar challenges
• Do a technology audit to understand how it’s currently used and identify any opportunities for leveraging it more effectively

When it comes to technology, many organizations look to fix a process with technology—but remember: If you simply automate a bad process, then you’re enabling the organization to do bad things faster. Technology should help managers and leaders have better conversations, and provide timely feedback—instead of turning these into tasks for managers to check off their lists. As pointed out by a leader during our research, if managers don’t understand their role in enabling performance and conversations, and giving feedback, then no amount or kind of technology will matter.

Once covered, these steps should make it easy for your organization to narrow down the areas to focus on, allowing it to quickly identify the specific practices needed. Practices for different outcomes should be coordinated and should reinforce each other.

For example, Behavioral Learning Center Inc., a healthcare organization, improved employee engagement and enabled manager effectiveness by adopting a culture of feedback and clarity. New practices adopted by the organization allowed managers to assess and provide continuous feedback to their employees flexibly and frictionlessly.

Managers can also complete evaluations and on-field assessments using smartphone apps, along with initiating feedback as soon as a project is complete. After implementing the tool for real-time feedback, the company witnessed a marked increase in employee engagement, with a decrease of 30% in voluntary turnover.

Step 4: Socialize & refine focus areas

Once the practices and outcomes are identified, the next step is to get feedback. Organizations must continue to refine the focus areas by soliciting feedback on what is and isn’t working. Again, organizations should seek input from employees and managers about their pain points with the new process and the challenges they face.

For example, when an IT consulting company decided in early 2022 to change its performance appraisal process and the role managers play, the company made sure it had support and buy-in from executive leadership. The affirmation from the top helped socialize and communicate the importance of the changes to the other leaders.

The company also refined its focus areas by coaching less tenured managers to ensure they have the necessary skills to lead their teams. In addition to providing training and courses for them, the company looked toward the more experienced and senior managers to support these efforts.

Another essential element to sharing information and continued refinement is using data and insights to track and identify areas of improvement. In 2019, Infosys began using analytics to drive manager enablement in the company.

The company designed “MaQ” (Manager Quotient), a tool to empower the manager community to meet their current and future challenges in a personalized way. The end objective was to make MaQ the one-stop shop for all managers—to find out how they’re doing as managers, as well as chart and track their L&D paths to improve their managerial styles.

Within 12 months, more than 51% of its people managers were using MaQ to either view their assessments or learn small nuggets on managerial effectiveness.

Step 5: Communicate & manage change

Communication must start at the top and be reinforced at every level. Organizations should use different channels on hand to socialize the message around those practices and behaviors that need to be changed. These messages must clearly explain why this is important, and how they align with the business objectives and priorities. The communications should cover 3 core areas (see Figure 20).

Many organizations see the PM designing process as once and done. If the past 2 years have taught us anything, it’s that you can never be entirely prepared for what comes next. With hybrid work as the preferred option for many, organizations will constantly have to be vigilant and monitor those areas that will define their next steps.

To that end, we encourage organizations to focus on how they can continue to make PM relevant for the future—and enable employees to perform to the best of their abilities in a constantly changing environment. This means organizations need to put in place a plan to ensure which practices and processes are revisited and reviewed regularly. Decisions to revisit or reform PM practices can be driven by several factors, such as response to a crisis, declining employee productivity and engagement levels, or a change in leadership.

At a minimum, organizations must always keep a check on the “employee pulse” to understand the value they’re getting from the existing processes. By making sure they’re checking with employees and regularly collecting their feedback, organizations can determine which areas they’ll potentially need to focus on and the steps that can help them get there.

Conclusion

With rising consumer prices, talks of an impending recession, a national baby formula shortage in the U.S., and mass shootings, the first half of 2022 has been rocky for many of us, to say the least. The pandemic has blurred the lines between personal and professional, and there’s little evidence of things returning to how they were 2 years ago. Companies looking to retain and develop their talent will likely find themselves pressed to do more to help employees address challenges. One such thing that companies can do is build a PM process that is fair, transparent, and free of bias.

By focusing on culture, building manager capabilities, and encouraging connections, organizations can better engage employees and improve manager effectiveness while meeting their business goals. Organizations should proactively plan and integrate these practices when designing performance management for hybrid work.

Given the ongoing and upcoming changes surrounding the workplace and hybrid working, many organizations will likely revisit their existing PM practices. Whether they listen to their employees and implement processes that ultimately help them develop and perform their best remains to be seen.