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Why Uber's Performance Management is Outdated and Ineffective

Guy using uber mobile app in the street in front of a taxi.

Uber’s refusal to aban­don out­dat­ed per­for­mance man­age­ment meth­ods might cause it to crumble

Read our new Performance Management Trends for 2017 article

There is a tidal wave of com­pa­nies who are turn­ing their backs on the year­ly per­for­mance review and out­mod­ed per­for­mance man­age­ment prac­tices, such as forced rank­ings and rat­ings. They are instead favour­ing more for­ward-think­ing approach­es, like con­tin­u­ous per­for­mance man­age­ment. Even the finan­cial sec­tor is slow­ly com­ing around, as J.P. Mor­gan Chase demon­strat­ed when it ditched annu­al reviews for ongo­ing per­for­mance discussions.

In 2016, Ama­zon put an end to their stack rank­ing sys­tem, fol­low­ing hot on the heels of oth­er large com­pa­nies such as Gen­er­al Elec­tric — the com­pa­ny who famous­ly cre­at­ed this per­for­mance rank­ing mod­el in the first place. It is increas­ing­ly clear that rank­ing and forced rat­ings are, at best, futile, as sug­gest­ed by For­tune, and at worst, a ter­ri­ble dystopi­an night­mare akin to The Hunger Games, as point­ed out by Busi­ness Insid­er.

How­ev­er, not all com­pa­nies are quick to make the change. Recent­ly, news hit that Amer­i­can trans­porta­tion net­work com­pa­ny Uber is still using the rank and yank’ mod­el. Despite the fact that this com­pa­ny is incred­i­bly young, orig­i­nal­ly found­ed in 2009, it appears to be behind the times and old-fash­ioned when it comes to per­for­mance man­age­ment sys­tems. But why, specif­i­cal­ly, is Uber’s per­for­mance man­age­ment sys­tem inad­e­quate, and why should it con­sid­er a rad­i­cal rehaul?

For one work­er to suc­ceed, anoth­er employ­ee has to fail

In an ide­al com­pa­ny, team­work would be pri­ori­tised. Employ­ees would be encour­aged to assist one anoth­er in order to improve the com­pa­ny as a whole. This sim­ply isn’t pos­si­ble when com­pa­nies imple­ment a sys­tem such as Uber’s, as employ­ees are in direct com­pe­ti­tion. Each year, the top 10% of employ­ees are reward­ed and the bot­tom 10% face the chop­ping block. Even in a com­pa­ny full of remark­able employ­ees, 10% must fail. Know­ing this, why would an employ­ee help its competition?

As a basis for com­par­i­son, we can look to Microsoft as a case study. A Van­i­ty Fair piece dis­cussing Microsoft­’s Lost Decade’ and its asso­ci­a­tion with stack rank­ing states the inten­si­ty and destruc­tive­ness of the game play­ing grew worse as employ­ees strug­gled to beat out their co-work­ers for pro­mo­tions, bonus­es, or just sur­vival. Microsoft’s man­agers, inten­tion­al­ly or not, pumped up the vol­ume on the vicious­ness. What emerged […] was a tox­ic stew of inter­nal antag­o­nism and warfare.”

Employ­ee morale suf­fers — and work­ers are con­stant­ly anxious

Rank­ing is a recipe for dis­as­ter not only for com­pa­ny cul­ture, but also for employ­ee morale. Employ­ees live in con­stant fear of los­ing their jobs. This tox­ic work­ing envi­ron­ment means work­ers are less like­ly to open up to their man­agers. It will also like­ly increase pre­sen­teeism, an issue that is almost as destruc­tive to a com­pa­ny as absen­teeism. How engaged can employ­ees be when they know, on a cer­tain lev­el, that their com­pa­ny sees them as num­bers that can be pruned away at a moment’s notice?

On top of all this, we need to con­sid­er employ­ee burnout. Giv­en the added pres­sure placed upon employ­ees’ shoul­ders, they are like­ly to work long hours and push them­selves beyond their lim­its. This is not an effec­tive long-term strat­e­gy. It is detri­men­tal to employ­ee health and it does noth­ing to improve employ­ee performance.

Objec­tive mea­sur­ing might not be reli­able — or objective

Pro­po­nents of rat­ing and rank­ing believe it to be a fair sys­tem, as it is based on num­bers. And what could be more objec­tive than num­bers? How­ev­er, we need to con­sid­er the means by which we arrive at these fig­ures. Human beings are mak­ing eval­u­a­tions and deci­sions based on per­for­mance, which means there is every oppor­tu­ni­ty for bias and sub­jec­tiv­i­ty to slip in.

As rank and yank sys­tems gen­er­al­ly involve a sin­gle, year­ly per­for­mance appraisal, an employee’s rat­ing is based sole­ly on one meet­ing. This means that far from being accu­rate, fair and reflec­tive, rat­ings are usu­al­ly ill-informed and depend at least par­tial­ly on the mood of the man­ag­er and the rela­tion­ship he or she has with the employee.

Man­agers would receive a much more reflec­tive and accu­rate indi­ca­tion of employ­ee behav­iour with the incor­po­ra­tion of con­tin­u­ous per­for­mance man­age­ment. It ben­e­fits every­one involved to have reg­u­lar, pres­sure-free per­for­mance conversations.

Improve­ment isn’t tak­en into consideration

One sig­nif­i­cant prob­lem with rank and yank sys­tems is that they don’t take into account employ­ee improve­ment. One employ­ee might have seri­ous­ly advanced their skills and strengths from one year to the next, but fall com­par­a­tive­ly low on the bell curve. Despite all the hard work the employ­ee has put into self-improve­ment, they still risk being penalised. Not only is this dev­as­tat­ing for the employ­ee, but it is short-sight­ed of the com­pa­ny, who will lose a promis­ing and deter­mined employee.

Uber will lose out to oth­er, more for­ward-think­ing companies

Back in the day, many large com­pa­nies made use of rank­ing sys­tems. But suc­cess­ful com­pa­nies know that in order to com­pete and suc­ceed in an ever-evolv­ing busi­ness cli­mate, they need to incor­po­rate mod­ern per­for­mance man­age­ment trends and shed old ones. Giv­en the lack of employ­ee engage­ment and morale that rank­ing pro­motes, it is like­ly that Uber employ­ees will jump ship to one of these com­pa­nies as soon as a promis­ing oppor­tu­ni­ty presents itself. In order to improve reten­tion and improve the company’s rep­u­ta­tion, Uber should con­sid­er phas­ing out this out­dat­ed per­for­mance man­age­ment notion, or they’ll lose their best and bright­est to a com­pa­ny that can offer them a bit of room to breathe.

At Clear Review, we are advo­cates for con­tin­u­ous per­for­mance man­age­ment. We see employ­ees as peo­ple, not num­bers, and we can help boost your com­pa­ny’s per­for­mance. To find out how, book a per­son­al demo.