Write3-1 Discussion: Performance Reviews: Improve the Process to Make It Meaningful
Time to Scrap Performance Appraisals?Published on May 4, 2013Josh BersinStatus is reachableJosh Bersin Global Industry Analyst, I study all aspects of HR, business leadership, corporate L&D, recruiting, and HR technology. ✨133 articles FollowSomething big is going on in business today. More and more companies have decided to radically change their performance appraisal process.Last week at our research conference we spoke with Adobe, Juniper, Kelly Services, and a variety of other companies who have decided to do away with traditional performance ratings and completely change the annual appraisal process.Our research shows that this is a strong and positive trend.Why the process must change.Why do companies have annual reviews in the first place? Primarily they are an artifact from traditional top-down companies where we had to “weed out” the bottom performers every year. By forcing managers to rate people once per year we can have annual talent reviews and decide who gets more money, who to promote, and who to let go.Coupled with the performance rating is the “potential” rating, which tries to capture an individual’s potential to move up two levels in the organization (the traditional definition).This approach is based on a philosophy that “we cant totally trust managers” so we’re going to force them to fit people into these rating scales. And in many companies (around 20%) there are forced distributions.The well publicized problems with this process abound. These include:Employees need and want regular feedback (daily, weekly), so a once-a-year review is not only too late but it’s often a surprise.Managers cannot typically “judge” an entire year of work from an individual, so the annual review is awkward and uncomfortable for both manager and employee.The manager-employee link is not 1:1 like it used to be – we usually have many peers and managers we work with during the year, so one person cannot adequately rate you without lots of peer input.While some employees are a poor fit and likely are poor performers, these issues should be addressed immediately, not once per year.People are inspired and motivated by positive, constructive feedback – and the “appraisal” process almost always works against this.The most important part of an appraisal is the “development planning” conversation – what can one do to improve performance and engagement – and this is often left to a small box on the review form.Of course companies are very nervous about eliminating this process because:We need a fair and validated way to distribute compensation increases (don’t we?)We need a record of low performance when we let someone goWe need to capture performance data in an employee’s profile for future promotion and other talent reviews, development plans, and career migrationWe need a way to make sure managers are doing their jobs well.Well I’ve probably discussed these issues with 100+ companies over the last five years and our research shows more and more that we can live without this dreaded annual review.What companies have found is a few keys to success:Develop a “feedback-rich” culture and set of tools (often online, sometimes formal, often informal) that encourages all employees to give each other feedback. Tools from companies like Achievers, Globoforce, and most HR software vendors now enable and make this easy.Separate the discussions about performance from discussions about potential and future career plans. Yes we need to evaluate people when raise time comes, but that can be a totally different conversation from.Assume that employees already know something about their own performance, and force them to self-assess. People tend to have a pretty good idea of their own strengths and weaknesses – give them an open and positive opportunity to share it with you. That starts the dialogue about expectations and the match between their self-assessment and that of the organization.Enable managers to assess performance more regularly. Software teams now use Agile tools which evaluate code on a weekly basis. You as a manager should be giving your people feedback regularly on their work. If you learn to do this on a regular basis it will get easier and employees will learn to appreciate it.Focus managers on hiring the best, so they build a team with 100% high performers. This is never possible of course, but rather than assuming that 20% of your employees will perform poorly, spend more time on assessment, culture, and fit to make sure very few low performers make it into the organization in the first place.Assume that everyone wants to succeed, so if they aren’t performing well it’s not necessarily their fault – the organization should take responsibility for helping them find a better fit if possible.Set and evaluate goals frequently. Companies that set performance goals quarterly generate 31% greater returns from their performance process than those who do it annually, and those who do it monthly get even better results. This means employees get feedback on a continuous basis (most sales organizations work this way). Read our research for more details.Beware of pay for performance plans. While many companies (particularly investment banking, sales) have large pay for performance plans, much research shows that these can create perverse behavior. People focus on their own goals at the expense of the organization. In sales related roles this process works well – when you move to customer service, engineering, and other “builder” roles they can create problems.Give your leaders a strong cultural framework and set of values to work from. Companies like Juniper and Deckers (Uggs shoes) focus very heavily on corporate values, forcing managers to hire and manage to these values. This makes selection easier and enables us to evaluate and coach people against higher level frameworks.Invest in leadership development. Being a manager is a tough job. Managers at all levels struggle with selection, hiring, training, coaching, and evaluation. Give them time and tools to learn, a framework for feedback, and a continuous development process so they learn how to become better.Reward talent “production” not talent “hoarding.” Remember that if you pay your managers to “produce output,” they will focus heavily on talent performance and evaluation. This may be a good thing, but ultimately companies thrive by building skills – so in addition to encouraging managers to produce good work, incent them to produce good talent as well. Many of our clients now have “talent production” metrics they use to evaluate leadership, forcing the appraisal process to move toward coaching and development.I’ve had the opportunity to study HR and performance management for almost 15 years now, and this topic has been controversial for a long time. In today’s globalized,talent constrained workplace it’s clear to me that the traditional appraisal has to change.Businesses thrive on agility, speed, passion, and alignment. The process of driving and measuring performance has to do the same.2: One page for each3-2 Final Project One Milestone Two: Profile of a Successful CompanyAssignmentTask: Submit to complete this assignmentSubmit a profile of your chosen successful company. This milestone will serve as a rough draft and must cover the six critical elements, which are described in Part II of the Final Project One Guidelines and Rubric document. You are expected to provide a minimum of two to three sentences for each of the six critical elements: mission and vision, strategic management plan, organizational culture, decision making, principle of ethics, and human resources.For additional details, please refer to the Final Project One Milestone Two Rubric document and the Final Project One Guidelines and Rubric document.