During the past five years, real-time performance management has moved from a vague alternative of the traditional end-of-year appraisal system to a growing human resource trend — a proven performance management system with real business benefits. While many companies still are experimenting with the different tools and software available, there is a clear mindset shift in how employee performances should be measured and evaluated, and companies of all sizes and across different industries are starting to take notice.

The performance management revolution

According to Deloitte research, “the performance management revolution is in full flight,” as companies look for alternatives to the traditional end-of-year appraisal designed in the 1970s. Their “2017 Global Human Capital Trends” research shows 82 percent of companies reported that performance evaluations were “not worth the time.”

Instead of holding people accountable for past behaviors, this new alternative approach is based on ongoing dialogue and shared accountability between an employee and his direct manager. Regular informal meetings are set up for managers to provide coaching using frequent input on employee’s contributions throughout the year. The year-end annual review is not replaced but discussions are more meaningful and part of regular and forward-looking conversations about personal development.

Why use real time?

As might be expected, large technology companies have led the way in the transition to real-time performance management, but they also have been joined by firms from various industries, including manufacturing and professional services, as well as smaller firms looking for more flexibility and agility in managing internal performance.

“This is a huge trend,” says CEO of TINYpulse  and YPO member David Niu. “Three years ago, it was in vogue to talk about blowing up the annual performance review but there was no substitute. With the rise of a millennial workforce accustomed to getting quick feedback, as well as new technology, there is a clear movement toward continuous evaluation.”

YPO member and President of EmPower HR Scott Carter , whose company services small- and medium-sized businesses with all aspects of HR, from payroll to strategic services, agrees that the trend is accelerating in line with a new way of working. “Frequency is increasing and so I think real time is where it is going, especially with the learning style of the younger demographic,” says Carter. “Everything is real time. Appraisals are going more quarterly and monthly, and for the more cutting-edge companies, in real time.”

Manager as coach and mentor

Niu stresses the importance of coaching in implementing the new performance process. “Right now, there is a lot of experimentation but we recommend standardizing one-on-one weekly basis coaching to employees who already created SMART (specific, measurable, agreed upon, realistic and time-based) accountabilities. If the performance is below or not matched, the direct manager asks how can I help you get back on track?”

He adds that having continuous coaching to monitor and provide quick feedback changes the conversation to a more forward-looking one with input and suggestions coming from other peers in the employee’s network. While most of his clients are large technology companies, he believes ongoing coaching can be applied by any company regardless of industry or size.

Niu’s experience to date also shows little or no resistance to this coaching aspect. “People love real-time assessment. This is part of having engaged employees,” says Niu. “Rarely is there direct report resistance. They want more feedback and face time. Resistance might be from managers but if senior executives have a learning or coaching mentality, this new way of thinking will apply from top to bottom.”

Technology, culture and accountability

As might be expected, technology plays an important role in the process change, allowing managers to centralize and review data using intuitive software or apps.

“Simple and accessible technology is necessary to provide and aggregate real-time feedback. But more important is the cultural shift. Most apps available today have a rating component, and a numeric scale might be distracting if the employee is too focused on the numbers instead of how to improve,” says Carter.

He also believes if a company starts with an employee-customer-shareholder approach, for example, serving your employee and customers first and financial results will follow, then the transition will be easier.

Another factor in ensuring the success of this new, more inclusive performance management process is the role of employees. “If employees want real-time feedback, they must also ask for feedback from peers and take more initiative,” says Carter. “A leader is really an accountability coach or partner but the employees need to take ownership of their development plan and careers. Where I (often) see businesses fall down is when they put a lot of focus on the responsibility of leaders but ignore the importance of employee accountability and ownership.”