Stopping the Exodus

Findings from the Cornerstone OnDemand / Harris Employee Performance Management Study

The last few years of dire economic news and high unemployment have instilled fear in employees and bred complacency in managers. A recent article in CFO magazine quotes Leigh Branham, a consultant at Keep the People: “I have a friend who is a CEO, and he says all of his CEO friends are high-fiving each other because the war for talent is over and employees are tree-hugging their jobs,” Branham says. “Personally, I don’t think that’s a lot to celebrate. It just disguises disengagement.”

Of course, all that would change if there was actually mobility in the workplace.

Significant employee churn is precisely what Cornerstone OnDemand's recent employee survey (with Harris Interactive) is predicting will happen within the next year. The research finds that 15 percent of those surveyed plan to leave their current job within the next twelve months.

That’s an estimated 21 million Americans and a potential price tag of $2 trillion to U.S. employers in 2012.*

Performance Management. The Root of the Problem?

Our survey findings go further to suggest that the cause of this exodus – and the solution – may be rooted in the employee performance management process, including the annual performance review ritual that many organizations are going through at this very moment.

Cornerstone’s survey reveals that half (50%) of employed U.S. adults who have experienced their employer’s review process feel more valued by the company when they receive a performance review that is focused on helping them succeed in their role.

That’s great, but wait -- of those same people surveyed, when describing their job within the past six months:

• Only 37% said they’ve been given useful feedback from their manager/employer;

• Only 34% indicated that they’ve received training and development to help them better perform their job;

• Only 32% said that their performance goals are aligned with their company’s business objectives; and

• Only 20% have established career goals with their manager/employer.

The Scaffolding Is Broken

As we’ve commented in this blog and elsewhere, the nature of work in the 21st century changed. The majority of U.S. job growth this century has come from jobs requiring complex interactions with other people.

In this new workforce, employers typically need their people to be self-directed and self-motivated in completing work that is far more specialized and technical than “assembly line” work of the past. And this is not just a knowledge work vs. manufacturing work kind of debate.

We’ve also previously referred to the work of management expert Gary Hamel. He contends that, “New problems demand new principles. Put bluntly, there’s simply no way to build tomorrow’s essential organization capabilities – resilience, innovation and employee engagement – atop scaffolding of 20th century management principles.”

A major part of this 20th century “scaffolding” is the traditional performance review. But does the performance review of today actually do what it is intended to do – which is to help improve a person’s job performance -- or is it simply an annual rite of passage that people endure for raises, bonuses and promotions?

Is The Performance Review As We Know It Dead? 

Absolutely not.  But it does need to evolve with the way people work today and the needs of tomorrow’s workforce.  Yes, there’s been more talk about social reviews, but that alone is not an answer.

Failing to evolve employee performance appraisal is a dangerous notion and one that directly impacts employee retention, satisfaction, productivity, engagement and more. 
On the flip side, employees who receive meaningful, actionable feedback and have access to training, resources and tools to improve their performance and reach their career goals are happier, more fulfilled and become champions for your company.

The goal, then, is to evolve the performance management process broadly around a few core principles:

Interim feedback is more helpful to employees trying to make sense of their achievements and contributions in a job role.

The Cornerstone/Harris poll found that typical performance assessments are just not helpful:

• Only a third (34%) said the feedback they receive helps them improve their performance and succeed in their role

• Only 23% indicated that the feedback they receive will help them advance in their careers

2. Moving from transactional reviews (checking the boxes with little intent beyond compliance) to interactional, transparent and feedback-based appraisal.

The Cornerstone/Harris poll found that too many performance review processes are murky: only a fourth (25%) of those surveyed indicated they are given specific examples of their work to support the feedback they receive.

The research also points to current reviews as being inaccurate. Of employed U.S. adults who have experienced their employer’s performance review process less than half (45%) said the feedback they receive is a fair and accurate representation of their performance.

3. Get feedback from the right people at the right time.

The Cornerstone/Harris poll found that peer-based or social feedback is a rare occurrence:

• 53% said no one other than their manager/employer provides feedback during their performance review process

• Only 21% indicated that peers provide feedback during the review process – but 43% said peer feedback and opinions would be the most valuable to them in the review process

• Only 13% receive feedback from project leaders

4. Performance appraisal in a vacuum is not enough. Make appraisals lead to tangible, actionable outcomes (especially training and development to close gaps).

The Cornerstone/Harris poll finds that performance reviews don’t often lead to measures for actually improving performance or closing identified gaps:

• Only 23% are provided with tools, resources and/or a development plan to help them improve their performance

• 16% not only said their employer’s review process doesn’t provide them with useful, actionable information, but another 16% said it was a waste of everyone’s time

About the Survey

Harris Interactive^® fielded the study on behalf of Cornerstone OnDemand from September 20-22, 2011 via its QuickQuery^SM online omnibus service, interviewing 2,141 U.S. adults aged 18 years and older, of whom 1,143 were employed full/part time. Data were weighted using propensity score weighting to be representative of the total U.S. adult population on the basis of region, age within gender, education, household income, race/ethnicity and propensity to be online.

For a comprehensive report of the findings, please visit the survey results page.  

 *Sources and statistics

• Number of employed people in the U.S.: 140,025,000 (http://www.bls.gov/news.release/empsit.t01.htm)
   
• 15 percent will leave within a year: 21,003,750 (Cornerstone OnDemand / Harris Interactive research)
   
• Average wage index for 2010: $41,673.83 (http://www.ssa.gov/oact/cola/awidevelop.html)
   
• Number of firms in the U.S.: 21,351,320 (http://www.census.gov/econ/smallbus.html)
   
• Average cost to recruit and train one employee is estimated at 2.5 times an employee’s salary = $104,184.57 (Deloitte 2009: “Managing Talent in a Turbulent Economy: Clearing the Hurdles to Recovery”)
   
• Overall cost to U.S. businesses = $2,188,266,662,138