Does Your Performance Management Plan Need an Overhaul? (Hint: Yes)
Here's the worst-kept secret in business: performance reviews don't improve performance. Not only are they out of touch with the needs of employees, they can demoralize them, lower engagement, and decrease performance. - all while costing your organization significant (read: absurd) amounts of time and resources. How can you re-engineer your performance management plan and enable your people to achieve better results?
What's Wrong with the Performance Review? It's "Total Baloney"
In Get Rid of the Performance Review! UCLA business professor Samuel Culbert pulls no punches:
It's time to finally put the performance review out of its misery. This corporate sham is one of the most insidious, most damaging, and yet most ubiquitous of corporate activities. Everybody does it, and almost everyone who's evaluated hates it.
Why so harsh? It could be the dismal performance of performance reviews over the years. Consider this:
- 87% of employees and managers feel that performance reviews are neither helpful nor effective.
- At least 30% of employee evaluations result in decreased performance.
- When people receive information that conflicts with their self-image, they change the information - not their behavior. So what? So critical feedback, however well intentioned, activates people's defense mechanisms and impedes change. This applies even when you use an "Oreo" approach (sandwiching negative comments between positives).
- Performance ratings that include rankings lead to destructive competition and erode learning cultures. Further, they can cause people who receive poor evaluations to do even worse.
- They waste untold time and resources. Deloitte, for instance, found they spent 2 million hours a year filling out forms, holding meetings, and discussing reviews.
- Research shows that 62% of the variance in employee ratings is accounted for by raters' perception. Their actual performance accounts for only 21%. Meaning the same person could rate as "subpar" according to one manager and excellent according to another
- And as Culbert says, they've become "total baloney."
Finding a Better Way
It'd be a mistake to do away with performance management plans altogether, though. Employers still need to evaluate employees, praise results, and course-correct for areas of weakness. And, as much as employees loathe the annual review, they do crave feedback.
US employees rate stress as the top workplace issue, and one of the biggest sources of stress is "unclear or conflicting job expectations." Lack of authentic, and timely, feedback only feeds this stress. It's further exacerbated by the unknown; when they don't get feedback, they lose confidence in their ability, feel less secure, and ultimately begin to disengage with the organization.
But here's where Culbert is wrong: not everyone does performance reviews. Companies like Gap, Adobe, and Microsoft have forgone rating systems. Others, like Deloitte, are reengineering them.
Reinventing Performance Management Plans
In "Reinventing Performance Management," Marcus Buckingham and Ashley Goodall write that their "current process for evaluating the work of our people is increasingly out of step with our objectives." They realized they needed something "nimbler, real-time, and more individualized - something squarely focused on fueling performance in the future rather than assessing it in the past."
Deloitte studied high-performing teams vs. low-performing teams within their organization: they found that the single biggest factor in success was having the "chance to use my strengths every day." So, they wanted to design a system that, rather than assessing the past, would allow them to reach into the future by helping their people use their strengths more.
Their resulting strengths-oriented system consists of three components:
Seeing performance clearly. They had to overcome two hurdles here: first, rater bias, mentioned above, and second, the significant amount of time that the process consumed. To do this, Deloitte asked team leaders a new type of question. Instead of asking about skills, as is typical, they gave leaders four future-based questions through which to evaluate employees.
- Given what I know of this person's performance, and if it were my money, I would award this person the highest possible increase and bonus. (On a 5-point scale from Strongly Agree to Strongly Disagree)
- Given what I know of this person's performance, I would always want him or her on my team. (Strongly Agree to Strongly Disagree)
- This person is at risk for low performance. (Yes or No)
- This person is ready for promotion today. (Yes or No)
Buckingham and Goodall write, "In effect, we are asking our team leaders what they would do with each team member rather than what they think of that individual." This step has allowed Deloitte to shift its $2 million investment from gathering the facts to deciding how to respond to them.
Fueling performance. As Buckingham and Goodall write, "[A]lthough it may be great to be able to measure and reward the performance you have, wouldn't it be better still to be able to improve it?" How does Deloitte do this? The same way your organization can.
At the heart of their new performance management plan is ongoing check-ins. Studies show that employees who have regular meetings with their managers are almost three times as likely to be engaged. It is best when check-ins are:
- "Radically frequent." Managers should make time to meet with their team at least once a week. As Deloitte points out, this isn't in addition to their work; it is their work.
- Initiated by the employee. They have discovered that this is the best way to ensure frequent meetings. Remember, employees do want feedback; they want to learn and grow.
- Continuous. Instead of waiting for a yearly review, leaders should provide constant feedback. This is particularly important for millennial employees, but all will benefit. Real-time conversations deliver much more value than those that are "batched."
This approach, which can be tailored to your organization, remedies many of the arguments against conventional performance management plans. It can even turn "total baloney" into something far more palatable - and healthy.