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Why Some Organisations Are Having Problems After Ditching Performance Ratings

HR with performance rating checklist.

5 rea­sons why per­for­mance man­age­ment sys­tems can fail with­out per­for­mance ratings

The media has been abuzz recent­ly with news that cer­tain com­pa­nies are suf­fer­ing after ditch­ing their per­for­mance rat­ings. Accord­ing to a Huff­in­g­ton Post arti­cle dis­cussing the recent CEB sur­vey, though employ­ees hate being reviewed and rat­ed, they appear to dis­like not being rat­ed even more. Some com­pa­nies who aban­doned their rat­ings sys­tem have seen a 10% decline in per­for­mance along with an employ­ee engage­ment drop of 6%.

How­ev­er, these find­ings are not par­tic­u­lar­ly sur­pris­ing. Intro­duc­ing and encour­ag­ing new meth­ods of man­ag­ing per­for­mance is not a quick fix. Before their ben­e­fits can be realised, they demand a sig­nif­i­cant invest­ment in both effort and time which many organ­i­sa­tions in the CEB sur­vey did not make. Employ­ees won’t adapt imme­di­ate­ly. As Don­na Mor­ris, exec­u­tive vice pres­i­dent at Adobe has said in rela­tion to drop­ping annu­al appraisals and rat­ings, It’s a jour­ney, and not a des­ti­na­tion”. They even­tu­al­ly achieved remark­able results from this move, with vol­un­tary turnover decreas­ing by 30%. So if you’re not get­ting imme­di­ate results after aban­don­ing rat­ings or appraisals, avoid the temp­ta­tion to revert back to a sys­tem that we know doesn’t work.

Research has shown time and again that rat­ing work­ers is coun­ter­pro­duc­tive, neg­a­tive­ly impact­ing morale and pro­duc­tiv­i­ty alike. When pre­sent­ed with a numer­i­cal rep­re­sen­ta­tive val­ue of all our effort and abil­i­ties, we very often expe­ri­ence a fight or flight response that is unhelp­ful and detri­men­tal to per­for­mance. With this in mind, it makes sense to leave annu­al per­for­mance rat­ings in the past where they belong and stick with an ongo­ing, devel­op­men­tal approach to per­for­mance management.

So if your com­pa­ny hasn’t been see­ing the ben­e­fits it expect­ed since aban­don­ing rat­ings or appraisals, care­ful­ly con­sid­er each point below to see whether you’re mak­ing any of the fol­low­ing five mistakes:

1. You didn’t do enough com­mu­ni­ca­tion or training

As with any form of change man­age­ment, step­ping away from annu­al appraisals and per­for­mance rat­ings needs to be sup­port­ed with reg­u­lar, effec­tive com­mu­ni­ca­tion and train­ing for both man­agers and employ­ees. You need to take the time to explain to staff what’s in it for them and the ben­e­fits they will get from the time they invest in the new approach. With­out this knowl­edge, employ­ees may see it as just anoth­er HR ini­tia­tive’. Man­agers also need to be trained to give them the nec­es­sary skills and con­fi­dence to have good qual­i­ty reg­u­lar per­for­mance discussions.

2. You haven’t intro­duced for­mal guide­lines to man­age and track meetings

When mov­ing to a con­tin­u­ous per­for­mance man­age­ment approach, don’t just leave man­agers to meet with their team mem­bers when­ev­er the mood takes them. That’s what some of the organ­i­sa­tions in the CEB research did and they found that the one-to-one meet­ings sim­ply didn’t hap­pen. There should be for­mal process­es in place which set expec­ta­tions as to the fre­quen­cy of check-in meet­ings and to ensure that they are tak­ing place. The effec­tive­ness of these meet­ings should also be mon­i­tored, with employ­ee feed­back being an impor­tant element.

3. Employ­ees are not get­ting reg­u­lar feedback

If we look at the com­pa­nies men­tioned in the CEB study, we learn that their prob­lems lay in man­agers not giv­ing reg­u­lar feed­back to employ­ees. This is often because man­agers lack the con­fi­dence to give hon­est feed­back, espe­cial­ly con­struc­tive feed­back. You can over­come this by train­ing your staff on how to give and receive feed­back effec­tive­ly. There are a num­ber of great resources avail­able that cov­er how to give good feed­back dur­ing a per­for­mance dis­cus­sion, and our own Clear Review per­for­mance man­age­ment soft­ware has built-in guid­ance and videos for staff on how to give great feedback.

Per­for­mance man­age­ment soft­ware can also help to encour­age reg­u­lar feed­back by mak­ing it very easy for staff to give each oth­er real-time feed­back via their phone or computer.

4. You aren’t encour­ag­ing your employ­ees to take own­er­ship of their own performance

To real­ly make an ongo­ing approach to per­for­mance man­age­ment work, the respon­si­bil­i­ty for set­ting objec­tives and hav­ing reg­u­lar check-ins should not be left up to man­agers. Instead, make employ­ees respon­si­ble for book­ing check-in meet­ings with their man­ag­er and then place the onus on the man­ag­er to hon­our the meet­ings and ensure that they are of high-qual­i­ty. This ulti­mate­ly leads to employ­ees feel­ing more empow­ered and in con­trol of their careers and man­agers feel­ing less put-upon. Organ­i­sa­tions such as Deloitte have adopt­ed this approach with great success.

5. You’re not using the right per­for­mance review software

When mov­ing away from annu­al per­for­mance rat­ings and appraisals, you’ll get the most ben­e­fit from your new process by using HR per­for­mance review soft­ware that is designed specif­i­cal­ly to sup­port a con­tin­u­ous approach to per­for­mance man­age­ment. Using such soft­ware, both man­agers and employ­ees can track and mon­i­tor ongo­ing per­for­mance goals and actions and give in-the-moment feed­back. This soft­ware can also prompt employ­ees to check-in reg­u­lar­ly and give HR full vis­i­bil­i­ty of per­for­mance activ­i­ty so they can inter­vene when employ­ees aren’t hav­ing reg­u­lar check-ins or being giv­en fre­quent feedback.

CEB’s own study con­cludes by advo­cat­ing the ben­e­fits of a con­tin­u­ous approach to per­for­mance man­age­ment, claim­ing that ongo­ing feed­back can improve per­for­mance by 12% — a find­ing that was large­ly when the media report­ed the study. The moral of this sto­ry is that we shouldn’t nec­es­sar­i­ly get hung up on whether or not to rate per­for­mance; we should instead focus on encour­ag­ing fre­quent feed­back from man­agers and peers and get­ting them to engage in reg­u­lar per­for­mance discussions.