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A few years ago, I noticed around half a dozen courageous companies beginning experiments to remove ratings from their performance management systems.
Companies such as Juniper and Adobe stopped giving people a one-to-five rating or evaluating employees on a “performance curve,” also known as the “forced ranking” approach.
They were still differentiating performance in various ways, and still using a pay-for-performance approach, just not through a simple rating system. By early 2015, around 30 large companies, representing over 1.5 million employees, were following a similar path. No longer defining performance by a single number, these companies were emphasizing ongoing, quality conversations between managers and their teams.
At the NeuroLeadership Institute, we’ve been studying this trend closely since 2011. Our interest in the topic was piqued when clients started to tell us how our research on motivation and the brain was explaining why standard performance reviews were failing.
You work hard all year. Your projects go well. Your company makes bank. Yet at the end of it all you have a stilted, scripted conversation with your boss, in which you learn you’re a “3” because you “met expectations.”
This, despite all your manager’s happy talk during the year. So goes the perpetually weird ritual known as the “annual review” that rates and ranks workers across a company.
The good news: Companies are starting to get just how ineffective the practice is when it comes to spurring better performance, retaining talent and boosting morale.
Traditional employee performance evaluations, like numbers-based rankings and ratings, simply do not work. In fact, they are de-motivating and fundamentally out of step with the way the human brain learns, develops, and socially interacts.
Join Dr. David Rock, Director of the NeuroLeadership Institute, for a complimentary webinar that examines the latest neuroscience research and case study data around performance ratings. Participants will explore why ratings are so ineffective and discover research-driven ways organizations can manage performance better.
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Evidence is mounting that conventional approaches to strategic human capital management are broken.
This is particularly true for performance management (PM) systems—the appraisal approaches in which employees (working with their managers) set goals for the year; managers interview others who have worked with them and write up an appraisal; employees are rated and ranked numerically; and salary, bonus, and promotion opportunities are awarded accordingly. A 2013 survey by the Society for Human Resource Management asked HR professionals about the quality of their own PM systems; only 23 percent said their company was above average in the way it conducted them. Other studies uncovered even more disdain.
According to the Corporate Executive Board (CEB), a management research group, surveys have found that 95 percent of managers are dissatisfied with their PM systems, and 90 percent of HR heads believe they do not yield accurate information.