You might believe it if you read the latest research data by Deloitte Consulting in the Human Capital Trends 2014 report. Seventy percent of companies surveyed indicated they are in the process of, or will be soon initiate, revamping their once-a-year process of assessing employee performance using a rating or ranking scale. In the same report, only 8% of companies reported that their performance management process drives high levels of value. Conversely, 58% of companies reported their process to be not an effective use of time.
Could it be these employers think their systems are broken?
With all the advancements in technology and system design, it is still startling that this process continues to create a significant amount of dissatisfaction for both employees and managers.
Below are some of the attributes of traditional performance management the Deloitte research and others suggest are broken.
The Workforce is Changing – the Old Rules Don’t Work
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. Research shows that organizations that have employees review their goals quarterly or more frequently are four times more likely to be top performers.
Measuring Today’s Work is Difficult
Most performance systems require measuring work. It’s more difficult to quantify performance today than years ago. The GE model under Jack Welch viewed employees as workers whose output could be easily quantified and measured. Today, more than 70% 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. 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.
Rating and Ranking Scales
Most current systems require managers to assign a rating or ranking to employees. Scales create all kinds of organizational issues. They have been found to demoralize employees, create animosity and spur 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. It fails to adequately reward top performers and motivate middle performers to improve. Organizational requirements for using the system also create issues. If a “5” rating must be saved only for those who “walk on water,” you’ve effectively changed your scale to a 4-point scale and likely de-motivated your high performers. Alternatively, if everyone gets a “5” there is no room for coaching, since you cannot improve on perfection. If scales are to be used, levels of performance for each “rating” should be well defined, in 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, 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. Managers should have continual discussions with employees. The most successful managers spend 20% of their time coaching and guiding employees. Capturing one “note” a week on each employee is a good guideline. Train your managers to deliver the “bad” messages by focusing on the facts of the performance, not the person.