Getting Rid of Performance Reviews Isn’t the Answer

As established organizations fight to maintain market share, or developing organizations fight to take their fair share, both have a common competitive advantage – their people. The days of having great technology as the brand of an organization are rapidly disappearing. Today’s successful companies focus on their people, making sure they are engaged on the right activities, laser focused on delivering top customer support, and are out-innovating the competition.

Performance management under fire

Every week there is an article about some organization announcing they are removing performance ratings or performance management overall. The reality is that the traditional performance management (PM) programs that exist in many of these established organizations are not driving business performance. Equally troubling is that there is a strong trend to throw out the performance management process altogether.

The reality is that neither strategy will succeed. A few recent studies of companies that have removed performance ratings are showing that the desired outcomes of increased engagement and more frequent “conversations” between employees and manager are not happening. In fact the opposite is occurring — engagement scores are going down as employees don’t understand the connection between pay and performance and the actual number of conversations between managers and their people are decreasing.

What is required is a fresh and simple view on performance management, a view that encourages frequent and meaningful conversations with a purpose, and which can be memorialized for future recall. Changing discrete portions such as ratings or annual meetings does not address the root cause, which is often twofold:

First, the typical performance conversation focuses on the most recent activity, not the full performance review. Managers often don’t have much to go on other than emails or conversations over the prior 30 to 60 days.
Second is the reality that most managers do not know how, and do not want to hold difficult conversations with their employees around missed expectations or poor performance.

Continuous performance management

One solution being proposed is Continuous Performance Management (CPM). Traditional PM allows for one conversation at 12 month intervals which is usually painful, undesirable, and mostly a rote response to pressure from human resources. CPM in contrast is all about in-the-moment conversations, curbside coaching, and ongoing dialogue between the employee and the manager. Holding frequent and less polarizing annual conversations has two very important outcomes. Having the conversations and then memorializing them in the talent management solution averts the halo or horn effect of annual reviews. The second is that more frequent conversations on smaller impact topics builds skills in both giving and receiving potentially negative feedback.

Sherry Turkle, in her D!gitalist Magazine article, We Need to Talk, proposes that in this era of digitization of the workplace, face-to-face conversations become more and more essential to the success of the organization.

Turkle is a psychologist at MIT and she and her team have researched the impact that face-to-face conversations have on the bottom line success of the business. Her findings are that organizations that encourage and promote face-to-face conversations outperform those that don’t. In today’s virtual world, with geographically dispersed teams, technology can foster as near to a face-to-face encounter as possible using virtual streaming solutions.

In our desire to simplify how business is done through digitization perhaps we need to slow down when it comes to human interaction and walk down the hall, pick up the phone, or use Skype or FaceTime to get the full experience. As with art, a picture – or a face – is worth a thousand words.

Of course not all conversations can be in person. In a global organization such as SAP SuccessFactors managers may rarely, if ever, have the opportunity to have an in-person conversation. Fortunately there are a number of communications and social media tools to create a near real experience.

Bottom line business success

Performance management done well contributes to the success of an organization. Similar to the need to refresh and innovate the products and services offered to an organization’s customer base, HR must also refresh the programs we are responsible for designing. Josh Bersin in his latest Global Human Capital Trends 2016 report calls out the “new organization.” He describes it as one “built around highly empowered teams, driven by a new model of management, and led by a breed of younger more globally diverse teams.” This new organization requires a radically different approach to performance management.

The opportunity to design and develop a new approach to an important topic is one of the ways HR can contribute to the bottom line success of the business. This new approach also requires rethinking how to design and deliver traditional HR programs. The most successful organizations incorporate design thinking into the development of a radically different approach, as Bersin calls for. Getting users of the PM program involved in the design helps ensure that the solution is viable, feasible, and desirable. Without end user input the solution runs the risk of being just another HR developed program that within months is relegated to the “Why I hate HR” file. Don’t let that happen in your organization.