Don’t Sacrifice Employee Upskilling for Productivity

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Reports that U.S. productivity was up 3% in the fourth quarter of 2023 were seen as good news for the economy. But to understand what’s really happening — and avoid the perils of misplaced confidence within C-suites across the country — it’s important to dig deeper.

Last year, businesses used more methods to track their employees’ productivity than in previous years. But businesses that stepped up their scrutiny of employee performance did not see bigger productivity gains. And in adopting all those new methods, they cut back on something even more important — growth and development — which will hurt them in the long run.

In our latest annual study of management trends, we surveyed more than 600 employees in the fourth quarter of 2023 across a wide range of industries and job functions. We also conducted a roundtable discussion with 15 leaders to gauge their priorities, challenges, and concerns.

We found that workers are broadly frustrated with the steps their companies are taking to track their output. Only 39% feel that their companies conduct a fair and consistent evaluation, a big drop from 48% in 2021. We also found that companies began using more tools last year to track their staffs’ output. Their approaches included evaluating business goals or OKRs (objectives and key results) throughout the year, having employees complete self-assessments, asking colleagues to provide feedback on one another, and more. The top reason for conducting these assessments, employees said, was to lift productivity.

But in taking these actions, organizations paid less attention to employee growth, development, and support. Less than half (46%) of employees said their organizations encouraged them to learn new skills, a 7-point drop from 2021. Skill development is essential for long-term productivity gains. As the Brookings Institution noted, a higher-skilled workforce is “less vulnerable to disruptions from coming technological innovations.”

Organizations also cut back on something else: ensuring that managers had conversations with employees about their growth. That figure dropped from 60% in 2019 to 50% last year. Our research found that when companies encourage these types of conversations on a regular basis, employees are three times more likely to give their business a positive net promoter score (NPS) and almost two and a half times more likely to rate their managers as effective.

A higher NPS and greater satisfaction with managers lead employees to stay with a company longer and potential candidates to want to work there.

The Winners’ Balancing Act

In conducting our research, we also looked into what businesses are doing to manage the challenge of effectively supporting employee development and productivity goals. Using case studies, we were able to identify approaches that work.

At some companies, performance management had become a check-the-box exercise, taking time and energy away from more important matters. But simply telling managers to ensure that their reports have time for training and to have regular conversations with them didn’t solve the problem. Understandably, managers needed greater guidance.

So some of those companies increased opportunities across the board for employees to learn new skills and ensured that time would be available to participate each week. They gave managers suggestions regarding how often they should plan to have meaningful conversations with staff members and how long they should last. It’s also important to ask employees what cadence they think works best.

The same goes for determining precisely what to talk about during these conversations. Often, managers are given no specific guidance about the key points to include in such meetings, so some companies have adopted tools that provide specific structures for these conversations. Based on input from both the manager and the employee, these tools lay out a list of talking points that should be included, such as questions about who on a team has which responsibilities and the employee’s aspirations for upskilling and career growth.

These steps can be powerful. At one company with 3,000 employees, these types of changes led to 14,000 one-on-one conversations within one year; subsequently, 8 out of 10 staff members reported having clarity on their goals and accountabilities, and the company saw an 8-point increase in highly engaged employees.

With that clarity in place, organizations must then align their performance evaluation practices to the goals themselves. Many organizations have no formal process for ensuring that employee goals are factored into how people are judged at review time. As Gallup reported recently, “Too often, employees are asked to do one thing and assessed on something else.”

We’ve seen how this can happen. Managers may help individual employees establish goals, but as projects come up during the year, it’s easy for them to instead take a more subjective look at the employee’s productivity level on a particular project. To avoid this problem, businesses should conduct surveys frequently that gauge employee perceptions of performance management practices.

We recommend conducting brief quarterly or semiannual surveys in which employees share what they really think about how their productivity is being tracked and whether they are receiving adequate support for development. A health care system in California went a step further and instructed managers to discuss the results of each survey with their teams. To close the loop, each successive survey asks employees whether their manager or leader talked with them about the previous survey’s findings.

It’s helpful to think of the process as a cycle that can either be vicious or virtuous. Confusion leads to unfair evaluations, worse results, and dissatisfied employees; clarity yields fairness, legitimate accountability, better results, and more satisfied employees.

The job market continues to be very strong, with companies clamoring for talent. To retain workers, organizations need to keep them happy in their jobs — and these kinds of management practices can go a long way toward making that happen.