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Reimagining Performance Management
Unlocking the Power of People and Teams

Performance management continues to be a hot topic, entering the world of mass media and getting the attention of the C-suite. Yet for all the headlines, few things in talent management have been as misunderstood or executed with less forethought. In recent years, much has been written about the knee-jerk reactions some organizations have had when struggling with performance management. Since then, the waters have only become murkier as more firms seem to be getting rid of ratings and “blowing things up.”

Not so fast.

First, we do need to face it — performance management continues to be in a sad state. Managers think of it as an administrative burden and continue to hide from uncomfortable conversations with employees. Leaders worry about the apparent disconnect between performance distribution and collaboration, and struggle to promote the process itself as valuable and motivating. And of course HR is on the receiving end of all the complaints and wonders if it’s even worth the hassle.

It shouldn’t come as a surprise, then, that some organizations have declared performance reviews and ratings as simply incomplete.

We’re often asked:

  • “What are other companies doing?”
  • “Are the headlines accurate?”
  • “How do we get managers to coach employees?”
  • “Can we eliminate ratings and still pay for performance?”
  • “What do Millennials really want?”

 

  • 46%
    Of employees think the way companies assess performance is effective. — 2016 Workforce Mindset Study
  • 62%
    Of financial services firms want to change their performance management approach.   — McLagan 2015 Performance Management Practices Study

For HR practitioners in the real world, it doesn’t help that media outlets are blaring that performance management is dead, or that supposed “thought leaders” cite obscure research that flies in the face of common sense and practical application.

  • Microsoft Kills Its Hated Stack Ranking — November 2013, Bloomberg Businessweek
  • In Big Move, Accenture Will Get Rid of Annual Performance Reviews and Rankings — July 2015, The Washington Post
  • How Millennials Forced GE to Scrap Performance Reviews — September 2015, National Journal
  • Goldman Sachs Overhauls Performance Management Reviews — May 2016, CNNMoney

It’s time to pull back the curtain on what’s happening, what employees really want, and how to win the war for talent through performance management that actually works.

Pulling Back the Curtain: A Seismic Change or Minor Tremor?

Let’s first address the specific hot-button issue of discarding performance ratings, and what many perceive as a “seismic change” in the performance management landscape. It’s simply not the case. Research has shown that only a small number of organizations have actually given up ratings, or even plan to. Studies conducted by McLagan and Radford in 2015 uncovered the percentage of companies that do not use performance ratings is just 10%. Of those that currently use ratings, only 8% are considering whether to drop the practice. Hardly a “seismic change.”

The 2018 Growth Divide study conducted by Reflektive uncovered that 46% of executives are conducting formal performance appraisals on an annual basis, yet satisfaction in the process continues to struggle. It’s not the ratings that cause such disruption and strife but the quality and frequency of the conversations that is the real tipping point.1

What Are Organizations Really Doing?

What about organizations that have actually gotten rid of ratings? First, be careful when reading headlines. They can sometimes overstate the case or even fail to capture what has actually changed. Organizations that claim to have “blown up” performance management fall into these categories:

Getting Real: What Do Employees Really Want?

Compounding the question of whether to get rid of ratings is the employees’ view. We assume that since they’re dissatisfied with performance management, we should blow it up. We also jump to the conclusion that since Millennials are “collaborative,” ratings would demotivate them.

Not so.

Our 2016 Workforce Mindset Study reveals that employees, especially high performers, want to know how they’re doing in relation to expectations of their roles, their managers’ expectations, and their personal development. This is particularly true of the younger generation of employees. For all the collaboration that characterizes Millennials, our data show that they are more interested in how they “score” relative to their peers than in feedback about absolute performance relative to some standard or goal.

If attracting and retaining high performers and Millennials is key to your talent strategy, it’s worth noting:

Our Point of View: Don’t Fall into the Trap of False Choice

Underlying the push to get rid of ratings is a set of false choices. Consider the assumptions behind these choices and whether there’s actually a better option.

One of the earliest incorrect assumptions put forward was that ratings get in the way of effective manager-and-employee conversations. We question whether choosing to eliminate ratings will lead to more frequent conversations. If managers were relieved of hours spent on performance management, should we assume they would spend those hours coaching employees? And why assume that assessing employees and coaching them are mutually exclusive? In fact, coaching relies on assessment.

How does one provide feedback without assessing performance?

Another false choice is quantification vs. humanization. These are not mutually exclusive, either. We constantly make evaluative judgments about the performance, skills, and attributes of those we work with and who work for us. We make judgments about whether a fellow employee “doesn’t have it,” “has it,” or “knocks it out of the park” every day. Is that dehumanizing?

The most common false choice we encounter is that we either can get rid of ratings or be stuck with bad performance management. Pause and ask, “Are these my only choices? What about actually fixing performance management to ensure it drives our business and talent strategy?”

Challenging convention is always healthy, and the energy around changing performance management will likely lead us all in a good direction. But misleading headlines and false choices will only get in the way. Organizations approaching these decisions thoughtfully will achieve improved outcomes.

False choices

Bad Performance Management OR No Performance Ratings
Quantification OR Humanization
Ratings OR Conversation

Here's What We Know Works

The real issue is not whether to eliminate performance ratings. It’s making performance management effective. Here’s how:

We Are Here to Unlock the Power of Your People and Teams

We start every client engagement with the following principle in mind: It’s about you and your talent. What is unique about your company? How do you view your people? What are you trying to accomplish?

Kincentric will help you get there

Getting performance management right requires a holistic approach — today more than ever. Siloed thinking leads to suboptimal design and unintended consequences. Our consulting brings expertise in talent process design, employee experience, compensation, HR technology, and change management. We combine all of this together seamlessly, providing end-to-end design and implementation support.

Process design

We partner with our clients to design a performance management process that drives results through:

  • Clear individual expectations and accountability
  • Capability built through effective feedback and learning
  • Understanding of individual performance
  • Increasing commitment levels based on appropriate rewards and recognition

We ensure the right balance between leveraging data and leading practices, while customizing and innovating solutions to meet our clients’ unique needs.

Education

Our proprietary education helps managers set goals, assess achievement, and provide feedback more effectively. The interactive training will help your managers feel more comfortable with the overall performance management process, increase their confidence, and allow them to be more accountable for making and delivering.

 

About the Authors

Senior Partner Leadership Assessment & Development Global Practice Leader
Senior Consultant Leadership Assessment & Development