People, not numbers

The death of performance reviews may be closer than you think.

The fast-changing dynamics of managing people have some major companies ditching annual performance reviews. Market forces and technology changes make yearly reviews to correct employee behavior and skill an anachronism and a change toward employee development a better fit for more and more companies.

No one looks forward to annual evaluations. It’s stressful for both the manager and the employee.

But to HR professionals, it may be a little scary since it’s familiar.

For the HR manager, changing from a “tried and true” formula may be unsettling. As an HR manager, you quantify and analyze. It’s your life’s blood. Numbers are your standard.

 But, what if there’s a better way?

A recent Adobe study revealed that a performance review, good or bad, has no effect on how employees actually do their job.

As a result, Adobe stopped giving one-to-five ratings and placing employees on a performance curve, known as forced ranking. Additionally, the company stopped its pay for performance system.

Other studies bear out these results. Threats and rewards activate intense reactions in the brain, which is why people don’t like assessment on a point scale.

Instead of the “correction” model, some businesses are moving to real-time 360 reviews.

A 360 review is unfiltered feedback from everyone an employee works and interacts with on a regular basis.

Success rests on training and buy-in from the top.

Companies like Goldman Sachs uses the technique, which includes standards, questions and ratings like communication, goal assessment, reliability, consistency, effectiveness and overall performance of each employee.

In small companies, you may want all employees to evaluate one another. Large companies may be confined to departments or teams. These rating won’t be daily, but employees may choose when to evaluate another team member.

Trends will emerge.

Several apps, including Inpraise, Qualtrics 300 and Explorance, make a 360 review easier for the manager.

But trained evaluators need to review initial feedback and anonymize the responses. Some managers fear retaliation from one employee for non-work-related personal issues, but a few negative comments will be negated by more accurate feedback from numerous others.

Company leaders must be open to evaluation, too. Praise participants for their engagement in the process, then make it a mandatory process to ensure that timidity doesn’t overshadow real feedback.

But, if there’s a problem with an employee or a worker has done something noteworthy, they need to know that right away; don’t wait for a 360.

One key to this type of review is to avoid tying ratings to pay (increase or decrease) or promotion.

Another – hire leadership coaches to teach managers how to give informal feedback to employees and how to receive feedback gracefully.

Meetings may be weekly or monthly, but annual and bi-annual meetings aren’t timely and should be nixed.

Juniper, Warby Parker, Adobe and Goldman Sachs are just a sampling of companies going to a less formal process.

In 2015 dozens of large companies stopped defining performance by a single evaluative number. Instead, they emphasized ongoing, high-quality discussions between teams and managers.

Due to the changing nature of work, numerical performance management systems don’t take into account how work is done today.

No one sets 12-month goals anymore. Cycles have shortened to one month or one week to evaluate and change course as necessary.

Sever point-based evaluations hinder close collaboration. High rating getters get promotions and raises, but with a forced curve, if every team member is contributing on a high level, someone will still be on the bottom of the curve, so team members end up competing with each other, which stifles collaborative efforts.

When Microsoft removed its ratings, employee collaboration increased dramatically.

Removing ratings means managers speak to employees more about career development more often, which makes Millennials happy, which in turn keeps talented workers from leaving.

Two million hours a year are spent in annual and bi-annual performance reviews, Deloitte says, but most of that time was spent talking about ratings, not about actual work or career development.

With informal reviews, employees and managers aren’t talking about past performance, but about growth and development.

Employees are happier, which translates into higher productivity and less turnover.  

When management stops treating its employees like numbers and instead, like valuable parts of the organization, it’s a win-win.

Results from these companies will show if this new approach will last.

 

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Sources:

https://hbr.org/2015/09/why-more-and-more-companies-are-ditching-performance-ratings – Harvard Business Review

https://www.inc.com/thomas-koulopoulos/performance-reviews-are-dead-heres-what-you-should-do-instead.html – Inc

https://www.fastcompany.com/40405106/ready-to-scrap-your-annual-performance-reviews-try-these-alternatives – Fast Company

 

Tamera Shaw is a freelance writer for Insured Solutions based in Louisville, Kentucky. She writes fiction and enjoys amateur photography. She happily shares her life with husband Ron, daughter Cate and sage cat, Sophie, who grudgingly shares her home with the newest member of our family – Nieko, our new kitten.