There are many good reasons for eliminating performance ratings. Here are three: Most people hate them; they’re usually biased – the number only makes them appear objective; and they often are manipulated to serve purposes other than rating performance – think forced ranking or differentiation, which is forced ranking lite.
A number of companies have eliminated ratings, primarily because of how much people dislike them. The hope or belief was that performance-related discussions would increase once the pressure of ratings had been eliminated. It hasn’t worked out that way.
The ratings weren’t just an annoyance. They served a purpose. Apparently, having to provide a rating and explain it, forces managers to think about the performance of their employees in ways managers don’t or won’t do otherwise. According to research, here’s what happened without the ratings
- “Manager conversation quality declines by 14% because managers struggle to explain to employees how they performed in the past and what steps to take to improve future performance.
- Managers have more time, but time spent on informal conversations decreases by 10 hours because managers do not shift that extra time toward ongoing, informal performance conversations.
- Top performers’ satisfaction with pay differentiation decreases by 8% because managers have trouble explaining how pay decisions are made and linked to individual contributions.
- Employee engagement drops by 6% because managers are unable to do the very things that are proven to engage employees, such as set expectations for their employees, hold clear performance and development conversations, and provide appropriate rewards and recognition.”
This research also confirms what experience tells us: many managers don’t want to discuss the performance of their employees with their employees. Ratings may be flawed, but it is naïve to assume that the absence of ratings will inspire managers to have those performance discussions.
If senior management wants managers to eliminate ratings and to have regular have performance discussions with their employees, they can’t just assume everything is going to work out. They have to
- model the behavior they want
- require regular performance discussions
- provide tools to assist the managers
The frequency is up to the manager and employee. But generally, it should be somewhere between every two – eight weeks. It depends on the situation.
Provide a Structured Approach
When people don’t feel comfortable doing something, a structured approach can help ease the way. Here is a structure that can be used for performance management discussions. The steps are:
- Establish clear performance goals or targets or expectations.
- Hold regular performance discussions with each employee that touch on:
- how the employee is performing against goals/targets/expectations?
- what’s going well and how to continue that
- what could go better and how to address that
- development needs that emerge from the performance discussion and how to address those
This approach has two primary goals:
- Learning – what’s working/not working and what to do about it
- Performance improvement – the result of learning.
There are other similar approaches. Project status meetings, for example, have a similar structure, though the focus is the project and not the individual.
These discussions work. According to an article in HBR, when managers and employees have regular discussions like this, explaining compensation decisions without a rating tends to go well. That’s because people know where they stand and know what they need to do to improve.
Again, if that is what senior management wants, senior management must demonstrate it.
One more thing. The discussion should be documented. Whether or not the performance review continues in its current form, some modified form, or is eliminated entirely, documentation still will be needed for employee-related decisions.
Your take away
Even though there are many problems with performance ratings, they provide a basis for performance discussions between manager and employee.
If you eliminate performance ratings and you want performance discussions to replace ratings with a structured approach to performance management and require all managers to implement it on a regular basis.