Magazine article Talent Development

Out with the Old, in with ... One by One, Companies Are Ditching Their Performance Management Approaches, but What's a Better Method?

Magazine article Talent Development

Out with the Old, in with ... One by One, Companies Are Ditching Their Performance Management Approaches, but What's a Better Method?

Article excerpt

No one needs to make the case for reinventing performance management. If it weren't such an important development, you could call it a fad. GE has announced that it is scrapping its old approach to annual reviews and raises. Goldman Sachs is discarding its nine-point performance evaluations for more timely and constructive real-time input. Morgan Stanley is moving away from a numerical ratings system. Microsoft, Adobe, Netflix, Motorola, Disney, Medtronic-the list of companies abandoning traditional performance reviews goes on and on.

But there is less clarity to this trend than there seems to be. While some organizations are eliminating ratings altogether, others are simply introducing different kinds or cadences of ratings. And it's by no means clear that ditching ratings is a cure-all for what we all agree is a problem. In fact, CEB research purports to show that companies that get rid of ratings altogether display a 10 percent drop in employee performance despite initial enthusiasm for new systems.

It seems we are all clear that we want to leave the past of performance management behind. But we're less clear on what the future looks like. How do we get clear?

When we talk about performance management, we are talking about two distinct problems, which we need to attack separately. First, performance assessment: How do we reliably reveal performance? Here the challenge is to find a way to see the true, unforced range in performance of each employee so that we can then invest differentially in our people. This is a measurement challenge.

Second, there's the problem of performance acceleration: How do we create more or better performance? This deals with issues such as how to pinpoint people's strengths, how to focus and coach them, and how to engage them. It's a development challenge.

One stone, zero birds

Although "two birds, one stone" seems like a model of efficiency, in practice it is incredibly inefficient to tackle assessment and acceleration together.

Take the example of feedback. We think feedback is useful for accelerating performance. But even if it is necessary, what happens when that feedback seeps into the assessment realm? "Hey, everybody needs feedback. Let's get even more of it. We're going to aggregate that feedback from your bosses, and even your peers, over the course of the year, so that we can figure out what your performance was like and how to differentially invest in you." Now we've taken feedback from the acceleration bucket and poured it into the assessment bucket.

The problem? When they know that their feedback is about assessment and not just acceleration, people skew their feedback.

It's just as bad in the other direction. Take competencies. They were initially intended as a way to assess performance-at many companies, they represent strict evaluation criteria for whether an employee is prepared to level up; in the U.S. federal government, competencies are even written into law as the criteria for promotion into Senior Executive Service.

As we all know, competencies never stay in their assigned little assessment compartment; they creep over into the acceleration part of the equation. We use them to define performance for our people, and link them to our learning and training content.

Unfortunately, whatever you think of competency models as a way to assess performance, there is no evidence at all that the way to accelerate performance is to identify a list of competencies and then tell people to go out and acquire the ones they don't have. Any team leader will tell you this is a hugely inefficient way to accelerate performance because you're ignoring the starting point of performance: the person.

These are just two examples, and there are countless others, of how systems that try to solve for both assessment and acceleration at once wind up doing both badly. So what's the right way to reinvent performance management? …

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