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.

 

Photo: https://www.flickr.com/photos/therussiansarehere/

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