An Open Letter to Performance Management Processes:
Just go toward the light, already. Your heyday has come and gone. Reviews and rankings were useful when the question was how many widgets did Bob make vs. Stan, and paying Bob for his extra widgets encouraged him to make more.
The 90s were your swan song, and by that I mean the 1890s. For decades we have been trying to squeeze use out of a broken system. We have tried everything: forced distribution, weeding out poor performers the GE way, 9-box grids, 360 reviews, pay for performance. And the results have been astoundingly bad. A recent McKinsey study found that only 16% of executives interviewed believed their companies could tell high performers from low performers.
Wait, wasn’t that the raison d'être for Performance Management in the first place? Not to mention the cost to the organization in time and resources? Performance Management’s own rating is “Epic Fail.”
My colleague, Kristi Erickson and I have been having this conversation for years. And until recently we have always come to the same conclusion: Performance Management doesn't work, everyone hates it, but
we need it to determine merit pay and bonuses.
Cut to the 21st century. Now we have a knowledge-based workforce, where innovation is a survival skill. Exactly how do you measure innovation and pay for more of it? We also have an increasingly diverse workforce with varying motivational preferences, and we know from decades of research that money isn’t a motivator. Performance actually gets worse, the higher rewards that are offered. Boo!
So if the pay piece falls down, what’s left?
That’s why companies like Adobe, Microsoft, Apple, and Zappos are pulling the plug. Instead, they are focusing on meaningful conversations and interactions with employees. Remember those people? They are measuring influence in the organization and are focusing efforts on market-relevant rewards, real-time recognition, continuous feedback, mentoring and development. Real Talent Management Stuff –stuff that will lift HR to Bieber-esque heights of adoration. Yea!
I am continually confronted with the challenge, “we know Performance Management is awful, but what's the alternative?”
My answer: With that kind of negative ROI, what could be worse?
So hurry up with that death rattle, I’ve got a Performance Review to write.
Hi Barbara — While we can all agree that performance management isn’t much fun, saying that it doesn’t work simply isn’t supported by the very conclusive science in this area. If we define performance management as setting a few, very big goals and then coaching employees to keep their performance strong — the science is incontrovertible. Those two activities increase individual performance.
And that’s where I find the problem frequently lies. Many HR leaders have no clear goal for their performance management process. It’s the first question I ask a new client and I’m often met with a blank stare (and these are senior HR leaders in big global companies, so no excuse). Too often the answer includes personal development (wrong) or to feed the compensation system (not wrong, but not the reason for PM). The goal of performance management is to INCREASE PERFORMANCE — that’s it. We can certainly feed the results of performance management into a compensation system, but that’s a choice – not its raison d’être.
So rather than look for just another benchmark (all those things you cite that didn’t work before were as highly praised then as Zappos, Adobe, et al are today), how about this: HR stops worrying about how points there are on the PM scale and starts actually helping to manage performance? This means stripping the PM process down to its basics — a few big goals with a clear metric for each, frequent and easy coaching convos and a year -end discussion. Making the process changes is easy. More challenging is getting HR leaders to have the intestinal fortitude to hold leaders accountable for completing those very straightforward activities.
Yes Marc, I agree we have taken our eye off the conversation ball, and I believe it all comes down to that rather than rankings and ratings. I do think it will become increasingly hard to set goals and expect to manage them objectively when the way work is done and progress is made is open-ended and less narrowly defined.
Ironically (or maybe not so ironically), it’s usually HR who can’t let go of this process.
And we wonder why HR is so maligned?
I agree that perf mgmt needs an overhaul in most organizations. I think the challenge many face is what to do instead, but still have objectives and metrics. I agree with your insights and hope we can turn the page. Great post!
I think it’s really about going back to the basics–communication, feedback, and coaching than trying to find the next thing.
Barbara – Great post. It’s really time for companies to take a hard look at performance management and do some soul searching about what they really need to be doing to develop and grow their people. A cumbersome, expensive annual process is surely NOT the best we can do!!
Surely not! Thank you for all of your brain cycles in this area and continued championing of development over management.
Great post Barbara – and I completely agree that we’ve got to rid ourselves of the outmoded, outdated thinking in order to come up with more innovative, proven ways to develop talent. I think it boils down to making HR a relevant force in the business again, as a mindset shift away from performance management and toward development of talent is critical for even the best companies to survive.
Love the comments and the post. I feel like I have been living a lie. Being in HR and having to “enforce” performance reviews in a system that is not working. Have to show the supporting face when deep down inside I hate it myself and question the effectiveness. Managers have been indoctrinated into being good at filling out forms and getting it all in on time, but not on the substance – the conversations. Like Marc, I agree on stripping down the performance review process to make it much, much simpler and more focused on the conversation. I’m working on that now. I’d love to hear from anyone who has had experience with this!
I’m on board with your thinking Barbara! It seems that my clients struggle with taking that first step to do something different. You’re bringing the new flavor of coo-aid to the party and I love it…the trick is to get others to start trying that new flavor!
“Instead, they are focusing on meaningful conversations and interactions with employees. Remember those people? They are measuring influence in the organization and are focusing efforts on market-relevant rewards, real-time recognition, continuous feedback, mentoring and development.”
That sounds like performance management to me…only…performance management for the new non-widget-making world. It’s the part of performance management that was forgotten when managers decided that they only needed to talk to their workers once or twice a year during “evaluation season” – or worse yet, just hand them the form. And then, it got even worse – they didn’t even have to hand them a form, they could simply fill out the review online and send it to the employee to put their electronic signature on it.
Kudos to those companies who realized that those forms, rankings, etc. are not working and who realize that they really aren’t needed to manage compensation programs, etc. as long as they can count on their managers to stay in touch with their employees and give continuous feedback. And, this is where I’ve seen these newer programs fall down.
So many managers are not properly trained to have crucial conversations. If they provide feedback at all, it’s often not useful, helpful or critical. But, I guess that’s a topic for another post.
Absolutely, Angelique. It’s about returning to the basics of managers who connect with their people regularly and meaningfully.