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Why Some Organistions Are Having Problems After Ditching Performance Ratings

by | Aug 8, 2016 | Blog

Performance Ratings

5 reasons why performance management systems can fail without performance ratings

The media has been abuzz recently with news that certain companies are suffering after ditching their performance ratings. According to a Huffington Post article discussing the recent CEB survey, though employees hate being reviewed and rated, they appear to dislike not being rated even more. Some companies who abandoned their ratings system have seen a 10% decline in performance along with an employee engagement drop of 6%.

However, these findings are not particularly surprising. Introducing and encouraging new methods of managing performance is not a quick fix. Before their benefits can be realised, they demand a significant investment in both effort and time which many organisations in the CEB survey did not make. Employees won’t adapt immediately. As Donna Morris, executive vice president at Adobe has said in relation to dropping annual appraisals and ratings, “It’s a journey, and not a destination“. They eventually achieved remarkable results from this move, with voluntary turnover decreasing by 30%. So if you’re not getting immediate results after abandoning ratings or appraisals, avoid the temptation to revert back to a system that we know doesn’t work.

Research has shown time and again that rating workers is counterproductive, negatively impacting morale and productivity alike. When presented with a numerical representative value of all our effort and abilities, we very often experience a fight or flight response that is unhelpful and detrimental to performance. With this in mind, it makes sense to leave annual performance ratings in the past where they belong and stick with an ongoing, developmental approach to performance management.

So if your company hasn’t been seeing the benefits it expected since abandoning ratings or appraisals, carefully consider each point below to see whether you’re making any of the following five mistakes:

1. You didn’t do enough communication or training

As with any form of change management, stepping away from annual appraisals and performance ratings needs to be supported with regular, effective communication and training for both managers and employees. You need to take the time to explain to staff what’s in it for them and the benefits they will get from the time they invest in the new approach. Without this knowledge, employees may see it as ‘just another HR initiative’. Managers also need to be trained to give them the necessary skills and confidence to have good quality regular performance discussions.

2. You haven’t introduced formal guidelines to manage and track meetings

When moving to a continuous performance management approach, don’t just leave managers to meet with their team members whenever the mood takes them. That’s what some of the organisations in the CEB research did and they found that the one-to-one meetings simply didn’t happen. There should be formal processes in place which set expectations as to the frequency of check-in meetings and to ensure that they are taking place. The effectiveness of these meetings should also be monitored, with employee feedback being an important element.

3. Employees are not getting regular feedback

If we look at the companies mentioned in the CEB study, we learn that their problems lay in managers not giving regular feedback to employees. This is often because managers lack the confidence to give honest feedback, especially constructive feedback. You can overcome this by training your staff on how to give and receive feedback effectively. There are a number of great resources available that cover how to give good feedback during a performance discussion, and our own Clear Review performance management software has built-in guidance and videos for staff on how to give great feedback.

Performance management software can also help to encourage regular feedback by making it very easy for staff to give each other real-time feedback via their phone or computer.

4. You aren’t encouraging your employees to take ownership of their own performance

To really make an ongoing approach to performance management work, the responsibility for setting objectives and having regular check-ins should not be left up to managers. Instead, make employees responsible for booking check-in meetings with their manager and then place the onus on the manager to honour the meetings and ensure that they are of high-quality. This ultimately leads to employees feeling more empowered and in control of their careers and managers feeling less put-upon. Organisations such as Deloitte have adopted this approach with great success.

5. You’re not using the right performance review software

When moving away from annual performance ratings and appraisals, you’ll get the most benefit from your new process by using HR performance review software that is designed specifically to support a continuous approach to performance management. Using such software, both managers and employees can track and monitor ongoing performance goals and actions and give in-the-moment feedback. This software can also prompt employees to check-in regularly and give HR full visibility of performance activity so they can intervene when employees aren’t having regular check-ins or being given frequent feedback.  

CEB’s own study concludes by advocating the benefits of a continuous approach to performance management, claiming that ongoing feedback can improve performance by 12% — a finding that was largely when the media reported the study. The moral of this story is that we shouldn’t necessarily get hung up on whether or not to rate performance; we should instead focus on encouraging frequent feedback from managers and peers and getting them to engage in regular performance discussions.