We get it – we’ve been talking about performance management for what feels like forever. But we’re starting to wonder whether we’ve actually improved anything and whether alternative practices have made a positive impact.
Have we gone too far in this experiment? Have we not gone far enough? And what do employees think about all these changes? Do they even care at all?
These are some of the very questions that prompted us to take another look at performance management. Over the last few months we’ve been reading the literature, hosting round tables, talking with organizational PM leaders, and collecting survey data, and we wanted to bring you along in that journey.
Based on the data we’ve seen and our conversations to date, three things have emerged:
- Formal evaluations aren’t dead – at least not everywhere.
- Employee perspectives are not fully captured.
- Simplification reigns supreme.
Formal evaluations aren’t dead – at least not everywhere
Based on our current data, a majority of organizations still use formal ratings to evaluate performance. Though, some of the more progressive organizations we have spoken to have removed ratings all together. To be clear, ratings come in many forms (e.g., labels, numbers), and though this looks different across organizations, there doesn’t seem to be a mass movement to eliminate this component of performance management.
This aligns with our data, suggesting that the evaluation of performance and fair compensation are still the primary reasons organizations engage in performance management and that many organizations still believe the most efficient and effective way to accomplish these is through formal evaluations.
When formal ratings have been removed, organizations usually cite the inability of ratings to drive behavior and performance change as the primary reason for their elimination. These organizations also tend to reference work done by The NeuroLeadership Institute on the threat employees perceive when formal ratings are introduced. In addition, these organizations tend to have cultures that attract top talent, have a high performing workforce, and have the resources and capabilities to enact large-scale changes.
While these companies have removed formal ratings systems, they still recognize the need to hold individuals accountable to how they perform. As one executive put it:
“No ratings doesn’t mean no accountability.”
To that end, they are finding alternative ways to understand performance levels including
- Identifying those in top talent and/or those that need to be coached or exited from the organization
- Ranking employees in each team or unit
- Summarizing check-in conversations, at year-end, to determine if any actions need to be taken with the individual
Employee perspectives are not fully captured
While the organizations that have removed ratings have shared with us positive impact to this approach, we aren’t sure organizations have yet captured how this impacts employees. Some organizations point to improved engagement scores as proof that a new approach works and a select few have looked into what employees like about the current process. Yet, these aren’t necessarily the same as understanding the impact of removing evaluations on employee perceptions (e.g., trust, fairness, transparency).
In our survey, we asked individual contributors to tell us how the removal of ratings has impacted the organization. To date, while only a small percentage of respondents answered this question, it is not as positive as the story we heard from organizational leaders. The survey responses indicate that removing ratings might have increased the frequency and focus on feedback, but it has also increased the confusion as to how and why individuals are assessed and held accountable.
Simplification reigns supreme
As alluded to earlier, many organizations we spoke to – regardless of whether they still implement formal evaluations – are quick to recognize their desire to simplify the evaluation process, if not the entire approach. This includes practices such as
- Allowing employees and managers to determine when and how often to discuss performance and development, with the expectation that conversation should happen throughout the year
- Giving managers more control over the distribution of monetary rewards, including merit increases and bonus
- Focusing on the most important parts of the process (e.g., goals, feedback, evaluation) and removing everything else
- Leveraging simple technology that does not require redundant input, but instead captures the most important aspects of ongoing discussions on performance or development
- Determining the data that is absolutely necessary for managers and employees to have access to and sharing that in a manner that is clear, understandable, and points the individual toward action
Overall, the trends we’re seeing (and hearing) now seem to indicate that formal ratings are here to stay and that only a relatively small percentage of organizations are removing them. However, we are hearing organizations, across the board, asking for simpler processes that have more impact. They acknowledge that performance feedback relies heavily on the relationship between the manager and employee to know what is best and organizations want to give employees and managers what they need when they need it – without the unnecessary extras.