The Best and Worst Markets For HR Managers....
The Heisenberg Rules: What HR Can Learn from Breaking Bad (#3 - Innovation, Sales and Operations are Equal)

CEB Study Shows Eliminating Performance Reviews Causes Managers to Suck More - Not Less.

I know, I know.  You think performance reviews suck. You're probably right, they probably do.  But is the alternative - not doing them at all - really better? 

I've always thought the biggest lie with the sexy, "we're eliminating performance reviews" clique was the assumption that managers of people in your company could deliver what's required to make sure employees still received feedback on how they're doing without the formal performance review.

My experience is that all of our managers could stand to get better at delivering feedback, and most avoid real feedback sessions with employees like the plague.  After all, feedback is confrontation, I-hate-talking-to-peopleand most of us avoid confrontation if left to our own devices.

The formal performance review forced that feedback at least 1X per year. A recent CEB study found a drop in employee engagement and performance across companies that eliminated performance reviews.  More from Fast Company:

A small but growing cohort of Fortune 500 companies made headlines recently when they broke with tradition and ditched the annual review.

Executives claimed performance reviews were often inefficient. Neuroscience backed them up. One study found that the dread filling employees prior to a review can restrict creativity. Another revealed that performance reviews foster a fixed mind-set in which the employee believes they’ll never be able to improve and achieve professional growth.

So it made sense to toss the annual review process. Leadership advisory firm CEB found that the number of Fortune 1000 companies eliminating the annual review increased to 12% in 2015 from 1% back in 2011.

But CEB subsequently found that getting rid of the review didn’t always reverse its restrictive effects. In fact, it proved to drop employee engagement and performance by 10%.

CEB’s researchers polled nearly 10,000 employees in 18 countries. Workers came from a variety of industries and organizational sizes. The researchers then compared outcomes and perceptions of those employees in organizations that use performance ratings to those in organizations without ratings. They also did a series of interviews with heads of HR to get a handle on trends and challenges for performance management.

Why did that happen? CEB’s analysis also found the following contributing factors in companies that dropped the formal/annual performance review:

  • Manager conversation quality declined by 14%
  • Managers spent less time on informal reviews conversations
  • Top performers’ satisfaction with pay differentiation decreased by 8%
  • Employee engagement dropped by 6%

Which sounds a lot like this - when you eliminate the annual performance review, it decreases the pressure on managers to have their s### together related to being able to defend their stance on an employee's performance level .  

When the pressure goes down, it sounds like manager's coach less, not more.

So if you're going to eliminate the performance review, you'll need to become a LOT more formal with your expectations on things like 1-on-1's. If you don't get more formal with those things once you eliminate performance reviews, the CEB study shows managers coach less, not more.

The numbers don't lie.  If you're thinking of being sexy and eliminating the performance review, you better have an alternative structure in place to force managers to coach - or they won't.

Comments

Jonathan Merrill

I fall into the belief performance reviews are awful. At least, in the 30 years of working professionally at large organizations, performance reviews are executed poorly. HR performance teams are mostly ill-equipped or uninformed, thus try a one-size fits all approach which fails across the board.

How to fix? Use of KRA (Key Results Area) and quarterly reviews. Tie bonus to four consecutive review periods.

Want to encourage managers to talk? Add to manager's KRA and link their quarterly reviews to team performance. I've been doing this for 10+ years across two separate industries with success.

Food for thought.

Matt Landrum

I think "best of both worlds" is to decouple the performance evaluation discussion from the compensation discussion. It doesn't mean that you can use material from the performance evaluation discussion in determining compensation, but you need to separate these two discussions. I see these types of meetings

1. Status meeting. Review/Discussion/Scoring of quarterly objectives.

2. Coaching/performance evaluation where the manager discusses what the employee does well, what they can do better, career goals, ... No money talk here.

3. Delivery/discussion of bonus/raise. This can include discussion of previous performance evals, but you better separate this... maybe by a month.

In my experience, HR needs to be tightly involved, at least in making sure #2 happens at a regular basis. They should be reviewing evals of the top and bottom performers and helping managers as time permits.

Managers not meeting with their employees regularly should be visible at the highest level of the company and all in the management chain should get a ration of ... stuff if this is not happening. Surely employees deserve performance feedback once / quarter, don't they?

Self-evals should be required.

Of course all this is just my opinion, I could be wrong.

Elissa Tucker

Thanks for the great post Kris. I have learned a lot about performance reviews from you over the years. For most organizations, I think the performance review process needs to evolve with the times--rather than be completely eliminated. Here is a list of questions that I created to help organizations think through which side of the great performance review debate they should take: https://www.apqc.org/blog/performance-reviews-how-tell-if-its-time-break-tradition-0

Ensuring managers are communicating regularly and effectively with employees will still be critical--regardless of whether an organization decides to keep, evolve, or get rid of performance reviews. APQC's recent research into People Challenges at Work found that the top two challenges people have with their managers are:
1) Does not share enough information
2) Does not provide enough direction

Batman

his can include discussion of previous performance evals, but you better separate this... maybe by a month.

Blissbookapp

Another great reminder that humans are programmable robots and just do what they're incentivized to do. I'm generalizing, of course... but that doesn't make it not true. =)

Just wanted to drop a line to say we're including this article in our newsletter this week! https://blissbook.com/newsletter

Thanks for writing this.

Tom O'Dea

Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Working...
Your comment could not be posted. Error type:
Your comment has been posted. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.

Working...

Post a comment

Your Information

(Name and email address are required. Email address will not be displayed with the comment.)