Reinventing the Wheel of Performance Management

“Is that even possible?”

“Performance management without numbers? Try selling that idea to my 1000+ operating staff on the ground.”

“Actually, I’ve heard it works.”

These were just some of the reactions buzzing around the room when ChapmanCG and the NeuroLeadership Institute (NLI) came together in June this year to co-host an HR leadership discussion on the topic, ‘Kill your performance ratings’ held at the trendy Facebook offices in Singapore.

Revisiting the way companies carry out their employees’ performance reviews has been a discussion topic of choice among HR leaders for quite some time now. More and more organisations are looking to move away from the traditional annual appraisal meeting, which results in a ranking or numerical representation of one’s performance over the previous 12 months. Instead, companies are moving toward more high quality, engaged discussions which are conducted frequently throughout the year. But as always with significant organisation-wide change, particularly when it includes processes as ingrained as performance reviews, there are challenges and a certain degree of ambiguity involved.

What’s driving this change?

Work environments have changed immensely over the past decade. We have more geographically dispersed workforces, increasingly matrixed organisational structures, and we are all dealing with higher volumes of information than ever. In addition, the way work is done has also changed with increasing degrees of interpersonal coordination and reliance needed among employees to help achieve the company’s goals and performance. One of the downsides of the traditional performance management system is that it focusses solely on the individual’s past accomplishments, ignoring his or her impact on the effectiveness of the network. According to recent research conducted by research and advisory firm Corporate Executive Board (CEB), when that happens, ‘enterprise contribution’ or organisation performance declines. Following is their model for ideal enterprise contribution:

This ideal takes into account both individual and network performance, which is key. According to Karin Hawkins, Lead Consultant with NLI, their research also indicates that the traditional performance evaluation system is failing as organisations continue to change and evolve. Some of their findings include:

The recommendation is to shift the focus to individual strengths, review both past and future capabilities and link this with the employee’s contribution to the business’ future results. This reinforces performance enhancing behaviour and helps employees identify areas where they are able to contribute to the enterprise. In light of this information, companies need to start thinking about how and where to do things differently. While getting rid of ratings doesn’t automatically improve performance, it does change the nature of the conversation. More and more companies are crossing this line of courage and getting rid of traditional performance reviews, including well-known names such as Deloitte, Expedia, Fedex, Gap, Medtronic, Microsoft, Sony and hundreds of others.

How do we get there? Equipping your managers

A lot of the success of this system rides with the line mangers who are tasked with conducting it. They can now influence the content of these discussions, as they are without the crutch of a rating system. They need to be provided with the skills to aid a quality conversation, moving toward a coaching approach and away from a judgemental one. How do you equip them?

It may be too much to ask to change the appraisal system to an exercise of joy and delight, but shifting it from a place of overwhelming burden to a sometimes uncomfortable BUT worthwhile exercise is certainly a first step in the right direction.