We’re (still) living in a changing world
A constant theme of HR management literature prior to 2020 was that the world of work was changing. Aging demographics in many markets, rapid advances in technology, a shift in generational attitudes toward work, and the ebbing tides of globalization were challenging HR organizations across all industries to adapt their strategies to recruit, manage, engage, develop and retain the best talent.
After the year we’ve all just had, it’s safe to say that we’ve experienced both a crash course in what challenges change can bring when it arrives unexpectedly and a road test of how successful we had all been in preparing ourselves for it. Conventional approaches to all aspects of HR were turned upside down – many companies had to embrace remote working for large numbers of employees overnight, and, for those with essential frontline workers still out in the field or on the shop floor, the constantly evolving protocols around social distancing, PPE and other hygiene and safety measures suddenly topped the agenda for every daily meeting. Depending on how their core businesses were impacted, HR departments had to quickly implement furloughs, re-deployments, or other measures to adapt to downturns and protect the overall business or to rapidly source and onboard new recruits, often remotely, to cope with a sudden surge of activity. They had to foster teamwork and collaboration using different formats and tools. They had to provide reassurance to an anxious workforce over what lay ahead in an uncertain environment. And they had to manage different types of stress and digital fatigue, continue to drive engagement, and to identify ways of measuring and boosting productivity with new remote working models.
The pandemic has also had a significant impact on performance management. From a short-term perspective, it forced many organizations to, at the very least, review the expectations and targets they had in place for much of their workforce. They have also had to assess whether their incentives and bonuses were calibrated correctly in a challenging economic environment, which brought significant financial headwinds for most sectors. It threw training and development programs – particularly those with a strong face-to-face/in-person component – into disarray. And it changed the dynamic of even the day-to-day feedback and coaching process between managers and their team members. From a longer-term perspective, it accelerated certain trends that were already in play before COVID-19. It also shone a light on some new skills that are likely to be essential for future leaders.
Everything and nothing has changed
As DHL’s most recent advertising campaign states, “everything and nothing has changed.” In some ways, the last year has sent shockwaves throughout the world that can’t help but alter some of our beliefs, perceptions, and ways of working. In many others, however, it has simply either reinforced some of the trends that were already being addressed by HR organizations or provided conditions in which companies can further evaluate and test how robust their systems and processes are in the face of change.
The underlying tenets of performance management have remained the same. Companies want to track and incentivize employees for how they deliver (or exceed) against their core work activities, while also monitoring and recognizing the qualities and skills that contribute to organizational success, to support professional development. At its essence, it is about turning goals into actions, inspiring people, and providing purpose and direction.
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How companies approach that has begun to evolve in recent years. Many have spent time assessing whether annual reviews are the right fit, how they can make the process more continuous, to what extent metrics and goals can and should be standardized, and, arguably most significantly, how the process can be tilted less toward the “rearview mirror” of performance and more toward the “windshield” of development. In this context, three trends had already played a key role in shaping DHL Supply Chain’s approach to performance management:
- Digitalization: The emergence of new technologies was already fundamentally transforming performance management. Thanks to advanced software and data analytics, HR now has an unparalleled ability to gather and analyze data across a broad range of metrics, and to correlate them to overall company performance. This is a huge asset in establishing standardized KPIs across different functions and tracking individual performances. It has also helped to manage productivity and performance in the socially distanced and remote environment we saw in 2020. In addition, digitalization is changing the nature of skills that we look for within our business, making change management, analysis, and even just a curiosity for new technologies and applications increasingly important. This in turn means that we have to adjust both our recruitment and our internal talent development practices – as well as our performance management systems and metrics – to focus on these skillsets and help future proof our business and workforce.
- Engagement: Engagement is one of the great “intangibles” in any business – challenging to measure but widely recognized as being one of the main factors in exceptional operating performance and higher customer satisfaction. While digitalization can help companies to better capture survey data and understand indicators of engagement, the actual driver of engagement is undoubtedly people. And in a business in which more than 85% of our 155,000 employees are front-line workers, we have come to recognize that a crucial role is played by line managers and supervisors. We have introduced Supervisor Academies to specifically target the development of this group of future leaders, but we have seen that it is also crucial to encourage regular interactions around performance. For those companies that still need to retain a formal performance management structure, in order to maintain a high level of standardization or because a component of their performance system is closely tied to the annual financial reporting structure, for example, supplementing annual reviews with mid-year reviews and regular performance dialogs can be an effective way of addressing this and driving engagement.
- Values: Business success is no longer being judged just on traditional financial metrics such as profitability, cash flow, or revenue growth, but also increasingly on non-financial metrics. Performance against environmental, social, and governance factors is now a major consideration for investors and customers. In a tight labor market, it is also becoming a key ingredient in attracting the next generation of recruits to join and stay with a business. Performance management systems need to be adapted to capture value-based performance and development, but they can also in parallel play an important role in driving a culture of values through a company. In 2018, we introduced a new framework of leadership attributes for all white-collar workers, built around working with qualities such as results orientation, purpose, and a positive attitude to change – what we at DHL call “Head, Heart, and Guts”. This reflected our commitment not just to developing common leadership qualities and skills to drive our business in the future, but also to embedding principles such as diversity and inclusion at every level. In 2020, these attributes have also undoubtedly helped to build the resilience of our company against the various challenges that have arisen every day.
How has COVID-19 changed the game?
The pandemic threw a number of curveballs into the game in 2020. While many things will likely revert to the way they were once the virus is brought under control, I see two trends that will “stick” and continue to shape performance management in the future.
- Ways of working: Remote working will play a bigger role in the working set-up of most companies than it did in the past. There will remain differences depending on the proportion of white-collar and blue-collar workers, but in cases where companies – or even particular workers – have identified a clear productivity gain from working from home, technology and digitalization will be an enabler of this trend. Performance management systems will need to adapt to this in terms of tracking productivity, maintaining coaching, mentoring, and development opportunities, and ensuring that engagement and values can continue to be reflected throughout the organization.
- Leading through a crisis: This applies to everyone in an organization – because a crisis such as the one we faced in 2020 can pose even an existential threat to those companies that are unable to step up and lead on behalf of their industry and customers. Just as many companies have revisited their strategic priorities and their attitudes to risk and resilience as a result of the pandemic, a number of core skills have also come to the fore that, while already on the radar of most HR professionals, were perhaps not fully appreciated in the pre-pandemic world. Employees’ ability to work in an environment of ambiguity and uncertainty, their adaptability to change, their problem-solving skills under pressure, their communications skills, and ability to develop and sustain personal connections with their colleagues is becoming more important. The transferability of these skills to other activities will undoubtedly be highly valued by employers who now have a higher sensitivity to risks and unexpected changes in the market.
In this constantly changing world, which has underscored once again in the last year just how unpredictable it can be, performance management will remain a constantly evolving discipline for the HR function. However, those companies who can strike the right balance between driving performance and developing the skills and values that address future trends – while remaining flexible to change – will be best positioned to emerge from the current pandemic with greater strength and future growth prospects.
Read more such stories from the February 2021 issue of our e-magazine on 'Shifting Paradigms in Performance Management'