7 Performance Management Trends That Will Dominate 2023

Traditional performance management is a process that very few professionals find useful. Managers feel dissatisfied with how they’re set up and conducted, while HR leaders believe the process doesn’t gather useful information.

In addition, employees don’t think they’re being listened to and want more chances for professional development and growth opportunities. So, it’s time for business leaders to make some changes.

Regardless of how your organization handles annual performance reviews and employee engagement, you need to have a plan which accounts for both. Staying informed with the latest trends and research will yield higher employee satisfaction and performance.

Let’s take a closer look at some of the biggest trends in performance management that are ready to emerge in 2023.

1. Aligning personal goals with business objectives

It’s become increasingly apparent that employees feel like they’re treated as just that, with research from Gartner finding 82% want to be seen as people, not just workers. Consequently, HR leaders need to incorporate personal goals into the performance management process.

Employees want to see their ideas and feedback bear fruit, so by establishing a direct link between their contributions and the company’s overall objectives, you’ll create an environment where staff are comfortable to be honest and open in discussing their personal goals.

Offering employees opportunities to learn or develop skills not directly related to their role is beneficial for both parties. On one hand, your staff will earn the responsibility of self-assessing their performance, building trust and a level of transparency that was previously missing. Meanwhile, the entire team will be working together towards one shared goal.

2. Overhauling how feedback is communicated

Employee feedback isn’t spontaneous. Often, it signifies part of a wider issue that needs to be addressed. One of the best ways to understand problems within your organization is to actively listen to your staff. With that in mind, the fact that 70% of employees feel they have little to no influence at their company is problematic.

The same research shows that staff feel unheard by their HR and leadership teams, with approximately half of respondents claiming their concerns aren’t actioned. Moreover, 84% of employees don’t think employers action feedback effectively to drive change.

In 2023, HR will be looking to communicate how employee feedback will be collected and implemented. By doing so, organizations will show their people what’s in it for them and why they should be invested in their company.

3. Moving to a project-based performance system

This year has already seen many organizations switch to a project-based working model, as opposed to the traditional, yearly approach. Employees are now looking to their leadership teams for feedback after every project they complete. Furthermore, they’re expecting to see a clear link between annual reviews and compensation.

Regularly evaluating employee performance is beneficial for several reasons. In particular, it means that leaders will have an opportunity to make resourcing and staffing decisions as projects finish. A few other reasons for shifting toward a project-based work model include:

• The ability to assess staff based on their achieved outcomes
• Explicitly outlining how performance will affect employees’ pay
• Consistently delivering constructive feedback

4. Automating feedback and development

Performance management has always been one of the more challenging HR tasks. If a company doesn’t have an effective, fair process to evaluate performance, there’s a significant risk of negatively affecting employee morale and motivation.

There are multiple challenges associated with traditional performance management, including a lack of transparency and report accuracy. As a result, automated performance management systems have been gaining traction over the last few years. The greatest advantage of these tools is that the system elicits involvement from the employee and visualizes a data-driven insight into their performance that’s objectively fair.

5. Focusing on empathy in performance reviews

If an employee is taking on a new role, experiences a personal tragedy or struggles to communicate with a colleague, their output will decrease. Consideration of contextual factors such as these will inform a more empathetic brand of performance review.

Despite most organizations recognizing the importance of empathy, companies find it difficult to incorporate within their practice. In a corporate context, the lack of processes outlined with this in mind creates an ‘empathy gap’ between employees and their leadership teams.

Research shows there’s a correlation between outlooks, with 79% of chief executives admitting they struggle to be empathetic and approximately one in three employees believing their bosses don’t show sensitivity.

6. Adapting to remote and hybrid work models

As organizations continue to settle into remote and hybrid working patterns following the pandemic, leaders will be monitoring the performance of teams as a whole. Both the dynamics of a team and its progress against objectives will be assessed.

Furthermore, companies that have already implemented standard processes and tools to capture remote employee performance could be doing more. According to HR professionals, many current systems are inadequate for improving employee performance.

7. Putting data at the center of performance management

Despite a pressing need for empathy, managers and HR professionals can’t just make key decisions based on gut feelings. Instead, organizations will move to a data-driven approach. For most, this will involve using data that’s already available for more than decisions such as staffing and compensation.

However, companies should unlock the potential of their data and use it to inform annual appraisals. Getting to the bottom of the numbers is the key to promoting employee wellbeing, performance, development and motivation. Subsequently, companies will see higher levels of retainment and an overall increase in output.