Based upon feedback from thousands of performance management training participants, we know what employees and their managers don’t like when it comes to performance management. We know they don’t like the overly formal and not very effective annual performance evaluation. But the ratings systems that have replaced that old stand-by are getting mixed reviews. What actually works to improve an employee’s future performance?
Some companies have gone so far as to eliminate rating systems altogether. The reaction has been similar to what happened when some schools discontinued grading their students. Some pupils thrived with the no-grade system. Even though it felt “really weird,” they felt they could focus more on learning the actual material rather than cramming for the perfect test score. But some, especially the best students, missed having a gauge of just where they fit in their class. They missed the feedback and they wanted those “A’s”. Not surprisingly, employees reacted similarly.
Many organizations that scrapped the rating systems completely claim that the conversations around performance were much richer because they were focused on outcomes rather than the rating labels. Employees at these companies felt less threatened, had fewer distractions and were not consumed by internal competition. On the other hand, in some organizations where ratings were dropped entirely, many felt that performance discussions were less valuable. Many perceived that the performance conversations were less focused, managers spent less time on performance overall, and employees were confused about where they stood. Additionally, the link between performance ratings and pay raises became blurred.
So where does that leave us? After two decades in the field of performance management training, we advise that you adopt a performance system that helps to align your corporate culture and talent with your business strategy. Some cultures thrive on competition and employees actually want quantitative feedback on performance. They want to know where they stand vis-à-vis others on their team. Other cultures value a more free-wheeling approach to evaluating performance where the learning process is more valued than the measure.
If you think your organizational culture would support, and actually benefit from, a less rigid performance management rating system, test out more flexible grading with a pilot group. Give it a year or two, survey the group and their managers for their reactions and then decide if the experiment should be expanded throughout the company.
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