Next Chapter of the Performance Ratings Debate

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No one with an interest in HR and organizational behavior is likely to have missed that there is a lot happening within the field of performance management right now. As covered rather extensively in a series of blog posts here in the fall, a pervasive trend over the last three or four years has been to get rid of the annual performance review (APR) and, most notably, the numerical performance ratings. The idea has been that this highly unpopular process, doubtful both in terms of accuracy and added business value, only takes a lot of time for managers and also is demotivating for basically all employees except the highest-performing ones.

Back in the fall, I cautioned that the scrapping of the APR – overdue and expected as it was – risked hiding the fact that the really difficult issue is still upon us. Because in reality, the task of evaluating employees’ performance has gotten no easier just because the ratings went out the window. And there is still a need to evaluate, if you e.g, want to differentiate some aspect of pay or benefits based on performance.

It should come as no surprise, then, that the “get rid of the ratings” movement has now encountered its first big backlash. In a study performed by CEB with 9,500 employees and 300 HR managers in global enterprises, it turns out that the scrapping of performance ratings often has not resulted in the expected outcomes. Most notably, the quality of the performance conversations that managers hold with employees often seems to drop, since managers have a harder time explaining what they are basing their judgements on and how, concretely, the employee should improve. This also tends to lead to lower employee engagement. What is perhaps even more conspicuous is that managers, while having significantly more time on their hands after the administrative beast of the APR is abolished, spend significantly less time on informal performance conversations with employees. The  drop, according to CEB’s report, is by an average of 10 hours per year.

What does this tell us? That once more a lot of companies have jumped on a bandwagon without thinking through the really difficult underlying issues. Some of those issues are:

  • What should take the place of APRs? Are we dumping formal differentiation of e.g. pay altogether (only likely to work in very “elite” organizations where there really are very few low performers), or do we need a new system to ensure fair and unbiased procedures?
  • How do we make sure that the additional time freed up by taking away the APR is used by managers to improve and enhance ongoing feedback?
  • Have we made sure that managers have the skills and tools necessary to provide effective ongoing coaching and feedback?
  • How do we handle the fact that managers will probably still be just as reluctant to handle performance deficits?

Instead, however, the focus has so far has been exclusively on ratings per se. And of course, they were an easy target to blame for all the deeper-seated problems with performance management. I fear we will now see an equally shallow discussion as the pendulum swings again: “Getting rid of the ratings was a mistake!”

Let us remember that there are good arguments to question the APR: The administrative burden of the process, its doubtful validity, its rigidity, and – not least – the inefficiency of feedback that is given merely once a year. However, just throwing it out is not going to solve any of the hard problems of performance management. Starting by going head-to-head with the above-listed bullet points is a better way to go.



Skills for the Digital Age: Let’s Hear It for the Good Old T Profile

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What kinds of skills and competencies are needed for the digital age? LinkedIn, industry press, and popular books abound with lists of things like “flexible thinking”, “learning agility”, and, of course, “tech savviness”. If you want to get beyond the usual catchphrases, however, it helps to try to discern some of the broader strokes in how work life is actually changing. One person who is great at doing so is Paul Evans, professor in organizational behavior at INSEAD Business School. When I listened to him at a talent management research conference in Copenhagen this past autumn, he brought up the following two megatrends:

  • The modularization of work. To an ever larger extent, organizations are decomposing intricate work processes into its constituent parts. This is primarily driven by the technological development: Parts of the chain might be taken over by algorighms or robots, which is why it makes more sense to disintegrate heavy parcels of work into smaller pieces. According to Evans, this is also visible in the actual structure of companies: In recent years, large companies have increasingly adopted multidimensional matrix organizations, which were once considered too c0mplex but are now made possible by digitalization. This has two main implications for employees: They end up having several bosses, and they are required to develop effective horizontal collaborations in order to perform well.
  • The diminishing role of authority. In this new type of complex organization, said Evans, it is seldom effective to rely on heavy reporting or managers telling people what to do. Especially when the primary product is knowledge and information, companies have a lot more to gain from adopting flat structures of peer production. We already see this in the tech sector with its self-organizing teams. What is important to note, however, is that this puts new demands on team members: First, the group as a whole needs to have enough knowledge to solve very complex problems on their own. Second, when there is little or no managerial steering, members need to be able to instead organize themselves according to social signals – meaning that social skills are more important than ever.

So, what does this mean for the skill set needed by tomorrow’s employees? Evans and his INSEAD colleague Eduardo Rodriguez-Montemayor develop their thinking around this in the report Global Talent Competitiveness Index 2017, which I have previously referred to. According to them, one could talk of a talent paradox: On the one hand, talent development is not specialized enough. Many employees lack the real edge that would make them hihgly attractive on the job market and could enable them to feed into cutting-edge knowledge work. But on the other hand, talent development is neither broad enough: People still work in clearly delimited silos and are not afforded the breadth required for effective collaboration.

In other words, in our “age of dualities”, as the authors write, there is no room for “either or”: People need to have deep, specialized skills and broad collaborative abilities. Perhaps surprisingly, a model of competency that is more than 30 years old turns out to summarize this very well: The T model, whose basic premise is that a well-rounded knowledge worker needs to have deep expertise in one area (the vertical bar of the T), in order to be able to really contribute to a creative process, but also broad collaborative skills and an ability to understand and communicate with people from other functions and backgrounds (the horizontal bar). The same idea was actually picked up by the European Commission’s Political Strategy Center in their report series EPSC Stategic Notes (no. 13, 2016). There, it was further pointed out that today’s education system falls short when it comes to helping the next generation’s talent to develop this kind of profile. Much more focus will have to be put on the application of knowledge and advanced collaboration skills, while still keeping very high standards when it comes to subject knowledge.

My guess is that we will see much more of T-shaped thinking in organizations’ talent management in the years to come, simply because it rhymes very well with the demands created by the digitalized knowledge economy. Who said an old model couldn’t be prophetic?