I can’t tell you how many meetings I’ve had talking with companies about changing their performance management process. Going back to 2015 articles were written by people like Marcus Buckingham and Ashley Goodall (both personal friends), and many others about the need to change year-end ratings, implement regular feedback practices, and reduce the power of the manager in the process.
Many people cite the research from Personnel Psychology in 1998 and Journal of Applied Psychology in 2000 that raters are biased and unreliable, and that almost 50% of the variation in performance ratings is based on the manager, not the employee. In other words, the year-end review is imperfect, and we need better data to make good people decisions.
Well here we are entering 2019, and the debate rages on. Deloitte Consulting LLP’s BersinTM recently published its High-Impact Performance Management study and found that the process is still “universally despised” (with a net promoter score of -60), yet 96% of companies do performance reviews and 86% use performance ratings in some form.
I’ve been studying this topic for almost 20 years now, and while this is a problem that will never fully be solved, let me try to summarize where I believe we are.
1/ Driven By The Economy, the Purpose of Performance Management has Changed.
The most important question I ask leaders is “why are you doing this at all?” What is the outcome you’re trying to achieve? After all, if managers are good at managing, shouldn’t they be “managing performance” all the time?
In 2006, when we first studied this topic, the research found that 80% of companies said the main goal of the performance process was “competitive assessment.” In other words, the process was designed to put people on a 9-box grid (performance vs. potential), decide who would receive the most money, decide who was ready for promotion, and give managers a tool to coach people out of the business.
One of my clients put it this way: “In some sense, the performance management process is designed to force our managers to have tough conversations. In our company everyone is always ‘nice,’ and we need to tighten the screws on accountability. So now they have no choice, they go through the process, we force the distribution of ratings, and we can really see who the high and low performers are.”
Good enough. I can’t disagree with this idea. Some companies do become complacent and it’s often when the numbers are weak that leaders realize a lot of people are misaligned, poorly trained, or just incapable of doing the work we want. And in that kind of situation, a “forced distribution” model acts as an injection of accountability. I always looked at it as a “temporary shock to the system” to get the company back on track.
Microsoft, by the way, used a force ranking model for many years and it fueled the company’s aggressive, highly competitive culture which helped it become the market leader in Windows and Office. People didn’t like it, but the company grew quickly and overpowered dozens of PC-based competitors in its first 20 years.
Today, however, if you ask companies the same question, they answer it quite differently. The highest performing companies surveyed in Bersin’s new study said the goal of performance management is “growth and development” – helping people perform better in their role and grow their career. And this has been the new fad.
Today many companies have renamed the process to “performance development” or “performance coaching” or other positive terms, trying to get away with the “evaluative nature” of this process.
(The Bersin research showed that the lowest performing companies were 50% more likely to say their performance process was focused on “compensation and promotion”, not necessarily growth.)
Why this shift? There are good reasons, and they’re largely because of the economy.
- First, the “rank and yank” model is not very motivating for people, it assumes we operate in a bell curve of performance (which is not true), and it often reduces teamwork and creativity.
- Second, in today’s job market if you can’t retrain, reskill, or remotivate a poor performer, you’re going to have a tough time finding a replacement. So the focus has changed.
2/ Feedback Has Become a Buzzword. It’s important But Not Everything.
The second thing that’s happened, which I have discussed in several articles (read “Feedback is the Killer App” ), is that we now believe performance management is all about feedback. (It always was, by the way.)
Jumping onto this trend, companies now have check-ins, conversations, checkpoints, and all sorts of other ways people can collect data at work. One of the pioneers in this space, BetterWorks, now has hundreds of thousands of “feedback sessions” in its customer base, and they are applying AI and sentiment analysis to figure out what kind of feedback correlates with the highest performing teams.
One of my favorite CHROs, Dean Carter at Patagonia, shared data which proves that employees who check-in more regularly with their managers are statistically higher performers. So, creating an environment where people can and do align with their leaders is very important.
When I talked with Cisco about this topic a year ago, Ashley Goodall mentioned that using a tool for feedback really helps. Since we are all so busy and can’t get face time with our managers (and we often have multiple managers), getting and giving feedback online helps. It’s as simple as asking “here’s what I’m working on, are these the right priorities?” or “can you give me a hand with this particular issue I’m having?” that really make a difference. (The Bersin research found that peer-to-peer feedback had a strong positive outcome as well – so this is not just employee-to-manager.)
Click here to continue reading Josh Bersin’s article.