For many of the early years in my career I was an independent consultant but in 2004 I joined a large company as an employee. Later that year I first experienced the joy of the corporate performance management system. Sadly, there was very little about the process I enjoyed or found valuable regardless of the ratings or feedback I received.
I couldn’t place my finger on why I felt so underwhelmed by this process. I knew there must be a better way and when the opportunity presented itself, I began tweaking my approach to assessing performance for the people on my teams (captured in a series of blog posts) and I soon realized I wasn’t the only one who felt this way about the approach.
Generally, this is how performance management works in mid-to-large organizations:
1. Employees are asked to complete a self-evaluation of their performance and their achievements for the past year.
2. Manager will assemble feedback and determine an initial rating.
3. Calibration of the ratings will occur with other managers and often a forced ranking of the workforce will be performed.
4. Based on the calibration, a final rating will be determined with some organizations using a bell-curve to always have a certain percentage at the top and a certain percentage at the bottom.
5. Based on the final rating, the manager will determine the merit increase for each of their direct reports.
6. Manager communicates rating and merit increase to the employee.
7. Employee accepts the rating in the system by “signing” their rating form and the comments they received.
8. Repeat 12 months later.
So, why doesn’t this work…
First, this is often a “once-a-year” event for many organizations while some organizations also have a “mid-year” event as well. Leaders will talk about delivering feedback throughout the year but meaningful conversations about performance happens far too rarely.
Second, asking people to self-assess themselves is flawed and potentially damaging. People with low competence tend to rate themselves higher and people with high ability tend to rate themselves lower (known as the Dunning-Kruger effect). This incorrect self-assessment may influence a manager as they determine their initial rating for their people.
Third, many managers do not handle the existing performance management process very well. Many have uncorrected appraisal biases. Many will complete the required forms like cramming for a test and not put real thought behind it. Many will place great emphasis on “areas for improvement” instead of shining a bright spotlight on all the good a person accomplished. People will often walk-away discouraged or confused instead of encouraged and motivated.
Fourth, the “calibrating” or “force-ranking” technique is ripe for corruption. There is typically no transparency to this process yet people know it’s happening and they are being represented by their manager to compare them against their peers. By its very nature, force-ranking will require someone to be rated lower not necessarily because of their performance, but because someone else was rated higher.
Fifth and most importantly, the employee engagement issues currently infusing our workforce are being reinforced with broken systems. If performance is managed mechanically, or as an administrative necessity, people will begin to treat their work in the same manner or learn how to game the system. Leaders say “We want a better culture!” yet are unwilling to change the systems breeding a damaged culture and a lack of trust between themselves and the people in their organization.
So, what can we do…
The current approach to performance management is so entrenched in many organizations that it will take some radical leaders to begin introducing fresh thinking. We must realize performance cannot be managed in the first place, it can only be inspired.
In Part 2, we will start to explore how performance can be inspired and how to move away from the current approach but for now I will leave you with this quote as a sneak peak.
There is nothing else that so kills the ambitions of a person as criticisms from superiors. I never criticize anyone. I believe in giving a person incentive to work. So I am anxious to praise but loath to find fault. If I like anything, I am hearty in my approbation and lavish in my praise.” – Charles Schwab