Traditionally, performance management considered big projects and employee interactions with management and often involved an annual performance review. With modern tools, however, employees are demanding more structure and regular feedback to grow their skills and improve opportunities for promotion. 

Since “The Great Resignation,” companies have struggled to attract and retain top talent. Many business leaders have shifted the benefits they offer their workers, including creating a stronger and more positive company culture. Handling performance management in ways the younger generation relates to requires overhauling the entire process. 

How to Improve Performance Management Systems in the Modern Workplace

The U.S. Chamber of Commerce called the labor shortage "The Great Reshuffle." People are less willing to stay in roles they find unfulfilling or where they are underappreciated for their hard work. As of 2023, around 30.5 million workers had voluntarily resigned by the third quarter. 

While some sectors, such as food service and hospitality, saw the most staff loss, all industries can benefit by improving employee morale and retaining top talent and companywide knowledge. Here are some ways to give the modern workforce what it wants while keeping an eye on performance and other productivity metrics. 

Lose the Annual Review

Workers intensely dislike the annual performance review for several reasons. Companies often tie the review to raises, meaning they must wait 12 months before seeing an increase that may or may not be decent. Managers also tend to focus on big mistakes rather than celebrating the wins along the way. Avoiding regular feedback sessions can leave employees feeling disconnected and misunderstood.

Instead, managers should meet monthly or quarterly with employees to discuss the growth they’ve seen and let the workers share areas they’d like to improve. While a poorly performing staff member may need a bit of redirection, only focusing on the negative is a certain way to lose skilled people. 

Make Pay More Competitive

As inflation rose 7% in the last two years, many workers earned an amount that failed to match their previous income. If you’ve traditionally offered a raise only annually, your employees may struggle to pay bills and buy groceries. Someone worried about where they’ll get their next meal isn’t likely to focus exclusively on the task at hand.

Maslow’s Hierarchy of Needs shows that basic physical comfort and safety must first be taken care of before people can focus on higher-order skills, such as developing a new talent, improving their mental capabilities or striving to do better at their jobs. 

If you notice someone struggling, call them in and offer them a slight increase in pay for a job well done. Your company may pay out a bit more at the moment but will benefit from increased worker loyalty and productivity. 

Take a 360-Degree Approach

Traditional performance reviews involve a manager going over a list of objectives with the employee. The problem with such a narrow focus is that it doesn’t showcase what someone does across multiple responsibilities. Few jobs involve a single task, so the review should focus on a more holistic view of performance. 

Gather data from artificial intelligence (AI) reports based on strict numbers and tasks, and also consider feedback from co-workers, managers, project specialists and clients the person works with throughout the review period. 

Soft Skills

A frequently overlooked area during reviews is soft skills, such as communication or how well someone gets along with others and contributes as a team player. Hard workers may feel taken advantage of if they pitch in to help others or meet a big project deadline and then be reprimanded for needing more time on an individual task. 

Management must look at the soft skills an experienced worker brings to the table and develop a plan to help them grow in these areas, as it benefits the entire team. 

One top-tier resume skill you should look for from new employees is the ability to be a team player. A project may require them to work with people from different departments and backgrounds. They must be able to listen and communicate while respecting the other person’s position. 

Be Transparent

Most employees feel blindsided when told they have a weakness. Even those who appreciate feedback may wonder why they weren’t told until they went into their performance review when it might impact a raise or bonus. 

One thing that can help is being upfront about the exact expectations in each area of the worker’s job responsibilities. Get as specific as possible about what goals they should meet.

At the same time, management must listen to workers about what is and isn’t possible. You may want them to double their output, but if it is impossible to do so and still return a high-quality finished product, management must adjust the expectations on numbers or quality. Communicate continuously about goals and desired outcomes so employees know what to do.

Collaborate on SMART Goals

Specific and measurable goals allow workers to make changes and improve over time. Take a collaborative approach when setting objectives with employees. Ideally, they’ll have short- and long-term ones to give them focus.

Meet regularly to discuss what they can do to achieve the touch points they’ve set for themselves. Offer support in the form of training, resources, education and mentorship. Communication should be free and open. Workers should feel they can approach leadership for advice, help and ideas throughout the workweek. 

Focus on Outcomes

Younger workers just coming of age are unique to the workforce. They have creative and technical ideas others may not have tried. However, they do things a bit differently. They may focus more on doing the project to the best of their ability than on how much time something takes. While you can teach them time management skills and encourage experience, which naturally speeds things up, leadership must also adjust how it defines excellence.

Look at the outcomes of a project rather than how long a task took to overhaul performance management and adapt to a changing workforce. Someone who consistently turns in high-quality work that clients rave over is worth more than shoddy work completed in half the time. While there must be a balance, companies should also look at all the factors that determine employee performance and appreciate the positives while offering assistance to improve the negatives.