The argument: Traditional performance appraisals don't improve performance.
Your performance management system should not include performance appraisals because science has shown that they don't improve performance, or do they? It depends on who you ask.
By M. Tamra Chandler
CEO and Founding Partner, PeopleFirm
Edwards Deming, James Juran, Peter Drucker, Daniel Pink, David Rock, Marcus Buckingham, and Samuel Culbert all have decried traditional performance management, pointing out that the methods organizations have employed for decades simply do not work. For too long we've ignored these voices who have challenged the status quo and the body of research on driving performance for both organizations and individuals.
Science tells us that there is scant evidence that traditional performance management leads to improved performance. In my book on the topic, I outline the "eight fatal flaws" of traditional performance management, and I highlight this finding in Fatal Flaw #1, "A theory without evidence is just a bad theory." More often than not, traditional performance management methods fail to deliver improved performance for individuals or their organizations. In fact, many of our traditional practices have been shown to be unproductive, or in some cases, even counterproductive.
Virtually everyone involved in the traditional performance review process hates it. So why are we so committed to something we see as a necessary evil at best? My research has revealed three key concerns that keep most organizations stuck in this rut:
- We're unclear on how to determine rewards without ratings.
- We don't trust our managers to handle a less-prescriptive or formulaic approach.
- We believe our leaders will never give up traditional methods.
Constrained by these fears, we cling to an archaic and inefficient process that offers negligible returns. Fortunately, people are beginning to see the light. And those who have taken the leap of faith and rebooted performance management are now reaping the benefits.
If you're ready to move forward, you're surely wondering what to do instead and how to manage those three concerns. Start by educating yourself and those around you, including those leaders who are fixed in their ways. There are good resources available that can help you build a foundation of science-based knowledge about what works and what doesn't.
Next, get comfortable with the idea that there is not a generic solution that you can simply plug into your old solution's place and call it a day. It's going to take some time and effort to answer the question of what to do instead for your organization. The good news is that the process of designing a new approach to performance management is an opportunity to engage your people in a meaningful way, transform your culture, and, ultimately, springboard your organization into finally seeing the results you are trying to achieve.
Begin with the end in mind. Ask your team, "What outcomes and experiences are we trying to achieve with performance management?" My research has shown there are three universal outcomes of strong performance programs, interrelated goals that should guide the development of any sound performance program:
- Develop people.
- Reward equitably.
- Drive organizational performance.
How those goals are prioritized will differ from organization to organization. So, too, will the way each organization sets about making them a reality. Yet any high-performing company will have some level of focus on each of these goals as part of its performance solution.
By Brian Kropp
HR Practice Leader, CEB, now Gartner
Many individuals—both in HR and not—will agree that traditional review processes are time-consuming, overly administrative, and disconnected from day-to-day work. More importantly, they don't necessarily improve employee performance. In an effort to make the performance management process better, we've seen major companies try to evolve their performance management systems, and for some organizations this has meant eliminating quantitative performance ratings or dismantling the entire performance review system.
However, the performance management process—including ratings—is a necessary tool for companies that want to improve performance and drive growth.
With regards to quantitative performance ratings, CEB, now Gartner, surveyed more than 9,000 managers and employees across 18 countries and found that isolating the impact of removing ratings decreases manager conversation quality by 14 percent. Additionally, employee engagement dipped by 6 percent because managers are unable to do the very things that are effective in engaging employees: setting expectations, leading clear performance and development conversations, and providing appropriate rewards and recognition.
Eliminating performance reviews also can make it harder for employees to understand how pay raises and performance connect. Managers may find it difficult to link pay decisions to individual contributions and, therefore, explain how pay decisions are made. Companies that have broken this link also are starting to find that managers are becoming discriminatory in their pay decisions. This can be especially detrimental to employee engagement, which can have a big impact because engaged workers are more likely to stay with their company, work beyond the minimum, and feel enthusiastic about their role.
The answer is not to eliminate performance reviews, it's to do them better. There are several meaningful ways companies can adjust their performance management process to improve outcomes:
Evaluate your current performance management system. Company leaders should spend time determining which tools—ratings, feedback frequency, conversation approach, incentive alignment—best support the organization's strategy. A company that is seeking innovation may wish to design a different review process than one in a turnaround scenario.
Provide ongoing, not episodic, performance feedback. Increasing the frequency of informal performance conversations is critical. That enables managers to provide more timely feedback to employees and to course-correct in real time based on recent organizational changes or past performance. In fact, more informal conversations around performance can improve employee performance by up to 12 percent. To make this easier, companies can leverage technology solutions to provide more continuous feedback and avoid the challenge of setting time aside for feedback discussions.
Balance performance reviews between the past and future. Rather than solely rehashing what an employee has done in the past quarter, or year, managers should look to the future. Assessing and discussing what's next provides managers with the opportunity to discuss employees' abilities to meet future business needs and how to improve those abilities.
Include peer, not just manager, feedback in evaluating performance. Our research found that two-thirds of knowledge workers report a significant increase in the amount of collaboration required to do their job, and estimate that they interacted with upwards of 10 different people each day to do their job. In this era of increasing collaboration, collecting feedback from peers with a different view of employees' work is necessary for managers to capture a holistic view of performance and to help employees' manage relationships and workload successfully.
Although it may be tempting to follow the hype and eliminate performance reviews, organizations need to realize that there are significant risks to performance and engagement that will result.
Read more from CTDO magazine: Essential talent development content for C-suite leaders.