Published Date: 04/07/2014
By Doug Blizzard
Perhaps you’re like the majority of companies surveyed by Deloitte Consulting in the Human Capital Trends 2014 report1. Seventy percent of companies surveyed indicated they are in the process of, or will be soon initiating, revamping their once-a-year process of assessing employee performance using a rating or ranking scale. In the same report, only 8 percent of companies reported that their performance management process drives high levels of value. Conversely, 58 percent of companies reported their process to be not an effective use of time.
Below are some of the attributes of traditional performance management the Deloitte research and others suggest may need revamping.
The Workforce is Changing
The annual snapshot of performance based on pre-defined timeframe isn’t always effective. Business goals and priorities don’t always fit nicely into an annual performance cycle. Command-and-control organizational design does not work with today’s employees. The best managers today guide, coach, provide feedback and inspire. They don’t simply enforce rules. Performance management systems geared towards ongoing coaching and feedback, not once per year, are most effective.
Measuring Today’s Work is Difficult
Most performance systems require some means to measure work. It’s more difficult to quantify performance today than years ago. Today, more than 70 percent of workers are in service or knowledge-related jobs. In those jobs, performance is driven by skills such as attitude, innovation, change management and customer focus that develop over time versus easily quantifiable output measures. They are hard to capture at one point in time as required by most systems. Performance management that focuses on continually developing these skills vs. measuring at a point in time is more effective. Research shows that organizations that have employees review their goals quarterly or more frequently are four times more likely to be top performers.
Rating and Ranking Scales
Most current systems require managers to assign a rating or ranking to employees. Scales can create all kinds of organizational issues. In some cases they have been found to demoralize employees, create animosity and cause good people to look elsewhere for work. For example, a forced-ranking, bell-curve approach diminishes the value of top performers and pushes many mid-level performers into the bottom. The survey refers to this system, made famous by General Electric, as the “rank and yank” approach. It fails to adequately reward top performers and motivate middle performers to improve. Microsoft recently abandoned the practice noting it resulted in capricious ratings, power struggles among managers, and unhealthy competition among employees. If scales are to be used, levels of performance for each “rating” should be well defined, in clearly understood behavioral terms.
Managerial Skill Deficiency
Many managers do not have the skills needed to do proper assessments, or they simply avoid giving a truthful, representative performance review. Some hesitate to provide feedback throughout the year, and then surprise employees with their ratings, thus creating disengagement. Others shy away from accurately representing lower performers’ ratings. They inflate their ratings and comments to avoid the hard discussion. This is not fair to strong performers and gives a false sense of achievement to low performers and can create liability problems down the road when low performers with great reviews are fired. Managers should have continual discussions with employees. The most successful managers spend 20 percent of their time coaching and guiding employees. One good technique is called the five by five. Imagine a sheet of paper that at the top has the employees 4-6 performance goals for the year (see above) and their development goals. Then below those goals the employee lists out the five activities they plan to work on over the next month towards accomplishing their annual goal. Then when you meet in 30 days, they first report on progress towards their five planned activities last month, and then they set five more activities for the next month. The manager provides feedback and input. This process repeats every month, forever. For this system to work, you must make it clear that the employee owns their performance, not you the manager, which is another tenet of effective performance management.
Want to learn more? Do your managers need more?
- Call: Our Advice & Resolution Team is available to talk to you about how to improve your overall performance management system, or about specific performance issues you face today. You can reach a CAI HR Advisor at 919‑878‑9222 or 336‑668‑7746.
- Learn: Consider sending your managers to a CAI class (or we can deliver it at your site) on one of the following topics:
- Accountability for Improved Work Performance (April 8th in Raleigh)
- Developing Others Through Coaching (May 21 in Greensboro and July 25th in Raleigh)
- Conducting Effective Performance Appraisals (June 18th in Greensboro and August 22nd in Raleigh)
- Managing Problem Performance (June 18th in Greensboro and August 22nd in Raleigh)
- Maximizing Performance: The Power of Feedback (May 20th in Greensboro and July 24th in Raleigh)
- Assist: Don’t have time to devote to improving your system? We can come on site and assist in every aspect of improving your performance management system.
1 A Global survey of more than 2,500 business and HR leaders from 90+ countries, representing a variety of different geographies, roles, organizations, and industries. The top four industries surveyed were financial services, professional services, consumer business, and manufacturing. Forty-one percent of companies had less than 1,000 employees.