In keeping with our BetterWorks tradition of connecting with today’s brightest and most influential thinkers, I recently had the opportunity to speak with Josh Bersin, Principal and Founder of Bersin by Deloitte, Deloitte Consulting LLP, to get his perspective about the changing role of human resources (HR), the evolution of goal setting, and the future of performance management.
Matt Hart: You have been tracking HR initiatives and processes over the years. How important have goals and goal alignment technologies been to companies?
Josh Bersin: Goals are critical to company success, and goal setting isn’t new. Many credit Jack Welch with looking at individual employee performance more closely. We’ve seen a number of software companies introduce cascading goal software, but they haven’t caught on widely because although these goal alignment features have provided an easier way to document goals, there isn’t a good understanding broadly of the value of goals nor how to manage them, and there certainly hasn’t been any real transparency into management or individual goals.
Matt: What has changed to make modern businesses more focused on goal setting?
Josh: Disruptive technologies. Agile software was the beginning of the era of greater transparency and continuous feedback. Now we have social media everywhere, which promotes even greater visibility into the everyday lives of everyone around us. The other trend driving this is a strong focus on analytics. Open discussion, regular check-ins, big data, and greater awareness are now part of every business and when you pair those activities with company-wide, quarterly goal setting processes—organizations can see 30-40 percent greater returns.
Matt: Do you think employees are on board? What about integration with existing HR systems?
Josh: Employees are tired of old HR systems. They’re hard to use and most were designed to be data management systems rather than systems of action. Because employees are quickly embracing new methods of self-instrumentation—the quantified-self movement—we’re seeing work environments pick it up. Employees like these products; they aren’t afraid of them and this is another recent, cultural change that we’ve seen among employees. Millennials and others who are used to having their personal information online are comfortable with high levels of transparency. They want interactive systems that work the way they do, not systems that simply capture and manage data.
Matt: Given new employee participation and interaction, what are companies doing in response?
Josh: They’re embracing the change, especially when it comes to performance management. Here’s a good example. Many companies have traditionally conducted talent reviews in secret. These meetings to stack-rank employees were always confidential discussions, by invitation only. Today, even the most conservative organizations are doing away with this process because they are finding that open discussions are more successful. Traditional performance management systems are obsolete in our world of greater transparency.
Matt: What are your thoughts on compensation as part of the performance management process?
Josh: I don’t know too many HR professionals that want to keep compensation tied to the performance management process. In ourGlobal Human Capital Trends 2014 study, we found just eight percent of organizations still find an annual performance review valuable. Unfortunately, businesses need a new methodology; a way to unravel the mess of interdependent processes that currently exist and that takes time. Compensation should be decoupled because the decision-making criteria is different for compensation than performance. For example, if someone is filling a critical skill set need, he or she might be paid more. That should be allowed. In the last year, we’ve seen several big companies drop annual performance reviews because they have been tied to too many processes.
Matt: What, besides compensation, might also be decoupled?
Josh: Development. HR teams can add tremendous value right now by helping their businesses do a better job with employee development and training. Unfortunately because development is often tied to compensation, the employees getting promoted are also getting more talent development. Wouldn’t it be more beneficial to the business if the lower performers, who might need more assistance, got the additional development hours?
Matt: Since we’re talking now specifically about HR’s role, how do you see it changing?
Josh: The HR role is a difficult one today because leaders are being asked to continue to do their job of making sure the business and employee interactions are fair, in compliance, and don’t create risk for the business. HR professionals are also now being asked to be innovators. I think HR teams can be great facilitators to their businesses without having to “own” every domain.
Matt: Do you think that applies to goal setting?
Josh: Personally, I think having lines of business responsible for goal setting and alignment with support from HR will likely yield the highest rates of success. Because employee engagement is already an HR domain, others think goal-setting strategies belong in HR, but I think they are separate and complementary. I think of what we’re discussing is work management and because of agile technologies, we’re seeing an emerging market and discipline for how we manage work on a day-to-day basis. That’s the new category and I suspect, we’ll all be tracking our daily work in software eventually. So when I think of day-to-day tasks, I think of business leaders leading them, not HR managing them.
Matt: I see the distinction. Because HR isn’t responsible for the actual work on a daily basis, business owners should be partnering with HR to manage it.
Josh: That’s right. I’d estimate that today only 15-20% of HR professionals are focused on day-to-day processes. Most are looking forward—weekly, monthly, and yearly. The challenge is it’s hard to track who is responsible for what without software. And most businesses don’t yet have the software in place to do that. It’s the opportunity for your business.
Matt: Any thoughts on time frames?
Josh: I think using software for goals will become part of our everyday jobs gradually – like email. If someone had told me when I started working that part of my job would be responding to 100s of emails everyday, I might have thought twice about taking the job. But work has evolved and a 100 emails might even be considered a light day now. Change will happen in this area gradually and because of the trends moving in that direction.
Matt: What are your thoughts on employee engagement?
Josh: We recently completed another report—The 5 Elements of a ‘Simply Irresistible’ Organization. We were looking for the factors related to people feeling most aligned and engaged. What we found, not surprisingly, was those who believed the corporation had a purpose and in those organizations where information was transparent, employees were most engaged.
Matt: One last question, what systems do you think are going to be critical to ‘Simply Irresistible’ organizations?
Josh: Whether it’s software like what you are creating or software for anything related to how people work, it has to be so useful that people want to use it. Businesses can’t introduce one more product that employees might or might not use. Any new enterprise platform has to provide immediate benefit to users. That’s the wave of the future for HR systems, too, and they’re getting there. We’re seeing the change from systems of record to systems of engagement, and the results are encouraging. Systems are no longer about the quantity of information in them – it’s quality that matters. When managers and employees use the same system, and both benefit from it, good things happen.