Uber’s refusal to abandon outdated performance management methods might cause it to crumbleRead our new Performance Management Trends for 2017 article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.