A tug of war is underway between practitioners who rely upon big data and those who look to restore balance in the employment deal. Over the past few years, the debate about the value of performance management has intensified, to the point where some have questioned whether it has any place in the future of talent management.
Acting with determination, a few big name companies have eliminated their systems altogether, believing that the time and energy placed into cumbersome performance management systems does little to drive performance or employee engagement. This list spans very different industries, including Accenture, General Electric, SAP, Deloitte, and Gap, all of which have switched away from traditional performance management processes and systems in favor of some other methodology.
And they may have a point. Survey upon survey has shown a general dislike of the typical performance management process, with managers and employees rating their experience as both ineffective and something they would prefer not to do. They complain about the form-filling, awkwardness of the conversation, and lack of commitment to development.
Other companies have responded to this feedback by not throwing the baby out with the bathwater, but attempting to flex their current process, notably by going ratingless. According to a recent pulse survey by Willis Towers Watson, approximately 14% of companies have eliminated performance ratings, while an additional 24% are considering to go ratingless.
Yet, not everyone has embraced such change enthusiastically. Compensation experts are quick to note that by going ratingless, core metrics for evaluating rewards and merit increases will disappear, potentially killing the meritocracy that they worked so hard to establish. With the absence of performance ratings, new ways of differentiating performance are required and potentially might create additional work for managers.
As another example, a recent Wall Street Journal article featured Kimberly-Clark and their reliance on performance data to focus energy and attention on only their best talent, with notable results on the company’s overall performance. Their talent strategy is entirely dependent on having data that differentiates employees.
Beyond ratings, practitioners are experimenting with changing the scope of performance discussions, to include both what someone has accomplished and how they got there. Employee motivation has also entered the fray, while team goals, crowd sourced feedback, and more casual contact points are trending upwards.
From a psychological perspective, the majority of the changes in performance management can be seen as restoring balance in the employment deal. Traditional performance management processes are transactional by nature, with dictated touch points, formalized ratings that capture a year’s worth of activity, and tit-for-tat types of repercussions.
Increased touch points with the manager, talking about recent and noteworthy events, while taking account of the whole person (his or her behavior, motivation, and capability) drives a relationship-centric employment deal and with it, employee engagement. There was little surprise when Willis Towers Watson found a distinct relationship between the time invested by managers and perceived effectiveness of the performance management process.
The field is at an impasse. Including features like ratings and future potential into a performance management process provides useful data for organizations to manage their talent, yet at the expense of a more relational employment deal. It is a question of whether companies can have their cake and eat it too.
The typical performance management process attempts to serve many masters. Performance data is used by compensation experts to inform reward decisions, while talent managers use the data to create nine boxes for succession planning. All the while, development practitioners tap into the IDPs and explore organizational trends that need to be addressed.
Maybe there is no perfect remedy to the situation and instead practitioners must decide which is the primary purpose for their performance management process. Going ratingless may make sense for a development oriented philosophy, but could be entirely wrong if the underlying purpose is centered on reward decisions.
A single best practice approach to performance management is no longer a given, but a judgement call practitioners make on how best to manage their specific talent issues.
To learn more about performance management and its effect on the employment deal, pick up a copy of my book, Misplaced Talent: A Guide to Better People Decisions.
