Is It Time to Put the Performance Review on a PIP?

April 7, 2015

Recently, the Society of Human Resources posted the following article which continues the movement towards alternative performance management processes that more realistically reflect the nature of how work is performed and communications around performance are more likely to have meaning — both for employee and manager. The article’s author, Dori Meinert, provides compelling evidence as to why traditional performance review processes can be more of a nuisance than a value-add to an organization. We often work with clients, aligning the right performance management solution to a company’s business culture, and find ourselves moving further away from the traditional five level rating process. Ms. Meinert’s perspective is one we see and share. Her article follows below:

The changing landscape of performance feedback…

Four years ago, Adobe Systems used the type of traditional performance review system that a vast majority of companies still use. Its 11,000 employees were ranked on a scale of 1 to 4 in what one Adobe manager describes as a “soul-crushing exercise.”

Right after review time each year, the HR team saw a disturbing spike in voluntary turnover as disheartened employees—many of them good workers—left the company.

“We hired the very best, and then we brought them into an organization and on an annual basis said, ‘You were exceptional when you came in, but now, relative to your peers, you’re only average.’ That doesn’t feel good,” says Donna Morris, Adobe’s senior vice president of global people and places.

So in 2012, with the support of the company’s leaders, Morris abolished the system. She replaced it with more-frequent, informal conversations between managers and employees—minus the annual ratings.

“We want to make sure everyone has a chance to make an impact. Our process wasn’t enabling us to do that because it was pitting person against person, and we are very team-oriented,” she says.

At the time, Adobe’s move was considered experimental, even risky. However, the number of employers that are either ditching the numerical ranking of employees or tossing out the entire performance review process has grown from 4 percent in 2012 to 12 percent in 2014, according to a Corporate Executive Board (CEB) survey of Fortune 1,000 companies.

“It’s gone from an interesting quirky thing that some companies do to a viable strategy that a good chunk of companies are pursuing,” says Brian Kropp, executive director of CEB’s HR practice.

The shift from the traditional angst-ridden numerical ranking system to a qualitative approach is occurring as companies recognize that the old way doesn’t work anymore. Work has become more collaborative, more knowledge-based and, as a result, more difficult to measure. At the same time, technological advances have made employees crave more real-time feedback.

“So many of the processes and functions in HR are practices that were adopted in a different era,” Morris says. “I think we need to re-evaluate some of our core practices and processes.”

Tossing out the traditional performance review system and numerical rankings might not be right for every organization, she acknowledges. But she says HR professionals should be asking themselves these questions: What impact does the performance review process have on the employees HR is trying to motivate, engage and retain? What impact does the process have on the company’s performance?

 

By the Numbers

In the 1980s, former General Electric CEO Jack Welch popularized the “rank-and-yank” practice of rating employees and weeding out the bottom 10 percent. While that may have worked for a while, critics say it eventually forced managers to get rid of talented people. GE phased out the practice in the mid-2000s, according to the Wall Street Journal. But many companies still use a less draconian form of stacked ranking in their performance appraisals.

“They purport to be objective. They’re not objective. The metrics they use have different meaning to different people,” says Samuel A. Culbert, author of Get Rid of the Performance Review! (Business Plus, 2010) and a professor of management and organizations at UCLA’s Anderson School of Management.

Moreover, rankings may prevent people from talking candidly to their bosses. Culbert notes that many corporate scandals might have been prevented if employees hadn’t been afraid to speak up: “You’ve got people who are getting 5s on their performance reviews who won’t go in and tell their bosses what’s actually going on because they don’t want to screw things up for themselves.”

Studies have shown that employees’ scores often aren’t accurate reflections of their performance. Only one-third of the employees who get the highest score in their performance review are considered organizations’ top contributors.

Furthermore, about 66 percent of employees say the performance review process interferes with their productivity, and 65 percent say it isn’t even relevant to their jobs, according to a CEB survey of 13,000 employees worldwide.

It’s not just employees who are unhappy. About 95 percent of managers say they aren’t satisfied with their organizations’ performance management processes either, and 90 percent of HR professionals don’t believe their companies’ performance reviews provide accurate information, CEB researchers found.

If there’s so much dissatisfaction, why aren’t more companies ditching the traditional appraisal process?

Dick Grote, founder of Grote Consulting Group in Frisco, Texas, says there’s a good reason: The documentation that traditional appraisals produce is a business necessity.

The data collected in the performance appraisal process allows the organization to make important decisions in a whole host of business areas, Grote says.

“It provides a mechanism for giving people feedback. It provides a mechanism for deciding who is ready for promotion. It provides a mechanism for supporting when a termination has to occur,” he says.

Plus, Grote notes, every employee deep down wants to know “What do you expect of me? How am I doing at meeting your expectations?”

“As organizational leaders, we have an ethical obligation to answer those two questions fully and frankly for every single person on the team,” he says.

The question, of course, is whether there’s a better way for employers to meet that obligation.

 

Checking In

Morris believes there is. Four years after Adobe’s simplified process was introduced, she says employees are getting the feedback they seek in informal discussions with managers held at least every other month.

In the appropriately named “Check-in” process, managers are encouraged to discuss how well employees are performing against objectives and what resources employees need to succeed. Instead of dwelling on past mistakes, managers focus on what to change in the future.

Gone are the lengthy bureaucratic forms. Managers aren’t even required to submit forms to HR to prove that the discussions have taken place.

“We’ve gotten out of the policing business altogether,” Morris says of HR’s role. “We’re more focused now on capability-building and consulting.”

Still, HR runs a pulse survey at least annually to make sure employees have had regular check-ins and feel supported. In 2014, 80 percent of employees said their managers were open to feedback, up from 76 percent in 2012.