And Why Eliminating Them Might Be Even Worse
A few years ago, a number of large, highly respected employers, including Cargill, Microsoft, and The Gap made headlines when they decided to do away with their annual employee performance reviews and ratings. Since then, a growing number of organizations have followed suit.
At first, the idea of abandoning annual performance ratings seemed like a mistake. After all, this has been a standard operating procedure throughout the United States since the 1950’s. For large companies especially, it’s a proven method of evaluating, documenting and rewarding employee contributions – and using a “common organizational language” -- for identifying strengths and weaknesses across a vast workforce.
So, why are so many companies abandoning the practice?
And demoralizing, and a little dehumanizing. These are words often used by employees when they describe their experiences with – and their feelings about – ratings. These descriptions make sense. The idea of looking at someone’s efforts and results for an entire year and then boiling it all down to a single numerical grade that will follow them around forever is, for many people, insulting.
It erodes team collaboration and fosters mistrust.
How? Don’t forget the dirty little not-so-secret rule that most employers enforce at review time: bell-curve quotas or “forced rankings.” (And keep in mind that ratings do determine salary raises.) If you follow a fairly typical 1-5 rating scale and you have ten direct reports, do you want each of them to hope that their departmental peers are not too talented, hard working, successful or all-around-awesome employees? Well, that’s probably what they can’t help hoping. After all, only one or two of them of them is getting a “5.” Another 2-3 people are getting 4’s… you get the picture.
It’s used instead of delivering consistent, productive coaching.
Highly formalized annual performance appraisals make mighty handy hiding places for managers who can’t – or simply don’t want to – provide ongoing feedback and coaching to their employees. The result: employees can go an entire year, uncertain of how they’re doing, where they stand, or what looms ahead at review time. That’s just not how today’s workers want to feel at work. Today’s talent pools are comprised of a growing number of millennials. For a generation of workers known for their need to communicate, collaborate and be in-the-know, annual reviews are particularly toxic to the entire employee experience.
So, when you stop to consider the many ways that annual performance ratings actually undermine the employee experience, it seems like we should have been surprised that it took so many years to stop using them.
But what happened when those companies kicked their ratings systems to the curb?
Here’s another surprise: it hasn’t been all sunshine and roses. According to a study by CEB, employee performance actually dropped – by roughly 10% – after ratings were eliminated.
Turns out that, as overly bureaucratic, infrequent, and dread inducing as the old ratings process could be, at least it was something. Every employee needs and deserves feedback on their performance. Annual ratings do that. Often, when the ratings structure was removed, no other structure replaced it. Instead, organizations “encouraged” their managers to do more regular coaching. They “expected” their managers to provide frequent, actionable feedback. They “committed” to a more collaborative process for manager and employee to jointly assess performance.
But statements of encouragement, expectation, and commitment don’t deliver much at the end of the day – or the end of the year. Some managers are natural born leaders, capable of stepping right up and coaching performance in an honest but motivating way. But far too many organizations are discovering that far too many of their supervisors lack these critical skills. For their employees, the loss of the annual performance rating simply made things worse. Now it seems that the next quick fix for that problem is to swing right back to the old ratings approach. I disagree with that approach.
Before we all give up on a ratings-free performance review system, I favor the following 3 Things:
Provide coaching training for all managers.
And by training, I do mean give these people actual training. Give them the tools and skills they need to effectively, consistently communicate with their employees about the specific quality of their efforts, the measure of their results, their personal career goals, and, most important: what they appreciate about that person’s contributions. Above all else, provide ample opportunities for your managers to practice using these new skills and tools – and coach them so they keep improving. Will this be difficult? Yes. Will you need to bring in some help to get this done? Probably. Might it lead to changes in the ways you hire and promote managers going forward? I hope so.
Invest mightily in building an environment of true collaboration.
It may sound lofty but this is not just another platitude. It’s an achievable goal that demands serious intention on your part. Set goals that cannot be reached without collaboration and celebrate everyone when they’re achieved. Welcome input and never put down sincerely offered suggestions. When everyone on your team feels welcome to express their ideas, questions, goals, and concerns, they’re more ready to engage in honest conversations about their performance and listen non-defensively to feedback about growth areas. How do you get there? Start with yourself. Listen to the goals, needs and concerns of the people on your team. Make promises that you can keep. And keep them. When everyone sees you do that, they’ll trust you – and your feedback – even more.
Stop limiting “positive feedback” to past achievements.
Are past accomplishments important? Of course. But part of the ugliness associated with the old ratings systems is the disconnect between what an employee needs from a review conversation – and what a rating conversation actually provides. Employees have personal goals. They have career aspirations.
They also have a very real need to feel recognized and valued by their employer. When the conversation goes into painstaking detail about past results, gets vague about present capabilities, and remains hazy about future opportunities, an employee walks away feeling summed up, not pumped up.
Try this 20-30-50 ratio for your performance conversations: focus 20% of the conversation on the past, 30% on what they’re working on right now, and a whopping 50% focus on their goals and the organizational goals and what they’d like to do in the future. When you put the energy on the present and future, you can still reference previous results meaningfully, without getting stuck in the past.
A workplace based on honest, open communication between managers, employees and peers fosters trust. And it’s on that foundation of trust that meaningful performance conversations really happen and employee experience flourishes. It takes some serious effort. But it’s worth it.