The Problem
Over the last three years hardly a month has gone by without some large international organisation announcing that they are removing ratings from their performance management system. The reasons given for this revolve around the view that the process is not effective in improving employee performance. Annual performance reviews are seen as backward rather than forward looking, complex, time consuming and inconsistent. As a result, they are seen by employees as unfair and something to be feared. Managers see them as being ineffective and not helping to improve the performance of their people.
The Solution
Eliminating ratings was expected to take away the fear of annual reviews and, as a result, it was expected that a virtuous cycle would be created: Managers would have more time to spend on informal conversations, the quality of these would improve and as a re result, the employee experience would improve and employees would become more engaged. Research has shown that the reality is quite different.
The Reality
According to research on almost 10,000 employees in 18 countries in 2016 by CEB Global, a global best practice insights and technology company, many organizations received positive feedback from employees after eliminating performance ratings but the initial positive reaction faded and the key performance outcomes that organizations expected to improve actually suffered. Senior HR executives quoted examples such as:
Initial Euphoria. “There was an initial huge boost in morale. Employees felt good that we were removing the part of the performance management process they thought they hated most.”
Reality Sets In: “Our performance and pay systems began to look like a black box. Without the visible symbol of a rating, employees didn’t understand the processes or the philosophies behind them.
The Reason
At Mariner7, we believe that the initial reasoning that drove the elimination of ratings was incorrect. The fear of ratings was a result of the once a year rated review being done in isolation, without ongoing, regular conversations occurring on a continuous basis throughout the year. In the absence of any ongoing discussion it is hardly surprising that being told by your manager that they were now going to rate your performance for the previous twelve months was a scary proposition. After all, remembering everything that had happened over such a long period of time in a balanced way was bound to be difficult and likely to be influenced by more recent events rather than earlier ones. Such an approach is simply not consistent with the way the world works in this digital age where almost nothing happens once a year. Today, almost everything is done on a continuous, ongoing basis.
Eliminating ratings in this environment removes the assurance that there was a process that provided consistency across the organisation. Without the belief that there is a fair and consistent process employees cannot see how performance is recognised and engagement suffers as a result.
The Correct Solution – Three Critical Requirements
Further research by CEB Global, McKinsey and others on the most successful organisations shows that they focus on three key strategies:
- Provide Ongoing, Not Episodic, Performance Feedback
Increasing the frequency of informal, non-rated, online performance conversations throughout the year allows managers to provide timely feedback to employees and manage their expectations. The frequency of these is then controlled by each manager and their direct reports to a level that they are comfortable with and works well for them. Feedback that comes a long time after the action is of little help in improving performance.
Having a rated review at year end that incorporates the performance conversations from through the year is then not a fearful process but rather a more detailed affirmation of the year’s ongoing discussion. The review process is then seen to be a far more considered, balanced and fair process that delivers value across the organisation.
- Make Performance Reviews Forward Looking, Not Backward Looking
Discussing future performance requirements and how, as a team, the manager and others can support the individual in delivering them is a far more relevant approach because its focus is on influencing future outcomes rather than judging past performance. In this context, past performance is only useful in providing insights into what should and should not be done to meet the next round of challenges and deliver the next set of goals.
- Include Peer, Not Just Manager, Feedback in Evaluating Performance
Collecting feedback from peers who understand employees’ work helps managers more effectively assess and discuss employee performance in an environment where employees must increasingly work in teams with peers to be effective.
The focus needs to be on in-the-moment conversations, coaching-on-the-run and ongoing dialogue between the employee, the manager and peers to help them deliver. A collaborative environment allows complementary skills, knowledge and experience to be combined to produce results that cannot be delivered by people working in isolation. It is also a huge contributor to growing the skills and capability of the individuals.
Mariner7 Enables all of These Requirements
For more information go to https://www.mariner7.com/products. To download the research click here. If you would like to chat about your requirements and share experiences call Brian Shaw on +64 21 406 408.
