ESG Metric: Employee turnover
Ease of implementation: Medium
Suitable for: All businesses
Suggested functional lead: HR
Summary
Every manager can have their own system of performance review, which allows for the performance review to be subjective to the manager and their standards. We suggest standardizing the perform review across the organisation to ensure consistency and fair evaluation of performance and promotions. Initially, decide on the evaluation method and performance measurement style. Once established, schedule performance reviews frequently and ensure they are followed up by a secondary reviewer to avoid bias reviewing. Continuously review the performance reviews outcomes and identify any trends that suggest favouritism or bias of certain groups of employees.
Background Information
A performance review is a meeting with the employee and their direct manager to identify area of growth, improvement and development plans. It includes discussions around promotion and pay, including contractual employment terminations. This performance management has been criticised over the last few years. It is seen as not frequent enough, focusing too heavy on past performances rather than future development, and single source feedback from one manager rather than colleagues and co-workers. However, when executed with the right mindset on future development and appraisal of current work, it can have a large impact on employee retention.
Losing employees can be extremely costly for a business, costing a company approximately 1.5-2 times their salary. A study surveyed 400 employees spanning across 3 generations to assess the importance of personal development on retention and productivity. The survey concluded that an increase in job-related training and development would influence 70% of respondents to stay at their jobs. It demonstrated that this was most significant for Millennials, with 87% of them finding training and development a key in remaining at their job. Similarly, a project at Middlesex University found that 74% of the 4,300 employees interviewed were not achieving their full potential because of the limited opportunities available for progression.
Implementation Steps
Decide on evaluation competencies method
Decide whether you would like to outline a set of standard competencies for all employees or different competencies based on role description. Whichever is applicable to your workforce, we suggest having some standard set of core competencies all employees are evaluated against. This introduces consistency and encourage inclusive corporate culture.
Determine performance measurement style
Determine whether to measure performance by matrix rating, no rating, short rating or long rating style. No rating includes commentary on competencies, while short rating will include short behaviour description such as ‘met expectations’ or ‘satisfactory’. Long rating style, on the other hand, outlines detailed descriptions on how a competency target was met and any additional comments. We suggest utilizing the matrix style as it encapsulates different rating criteria and commentary in a compact table, with the ability to highlight frequency of performance, how the performance was observed and any additional data to support it.
Schedule performance reviews
Once competency method and measurement style have been established, schedule performance reviews between managers and employees. Ensure they are performed a minimum of quarterly, and aim for monthly if possible.
Include secondary manager review or peer review
Managers may be bias to their employees as they have a close working relationship, which is why it is vital to include secondary manager or peer review to the performance review. This can allow for an average scoring from different reviewers rather than a single score from one potentially bias reviewer; the manager.
Review metrics to identify inconsistencies
The HR team should review the performance reviews to implement improvement and hold those accountable who are not following the new procedure.