…Okay, so much has been written in the news about companies doing away with performance ratings. GE is probably the most famous company to make this change. But companies such as Microsoft, Dell, Adobe, Deloitte and Accenture have also (somewhat less famously) recently re-designed their performance management process, eschewing the formal annual review + rating in favor of more ongoing feedback and check-ins.
The articles I linked to above all have different views on the efficacy of replacing annual, formal review programs with more infrequent and informal fare… and to be sure companies have had varying degrees of success (and failure) with said implementations – often measured internally through employee feedback surveys and other experience data. Some of it has even been published online. But I don’t think that before yesterday I’d seen any large scale survey research that aggregated company experience data to quantify the value proposition companies are realizing (or not) from this performance management shift in the form of talent differentiation and productivity outcomes.
Fortunately, I stumbled upon a great white paper from the folks at USC CEO here that did just this. Surveying 244 different organizations, USC CEO looked at three trending performance management process changes – namely the introduction of ongoing performance feedback, ratingless reviews of performance, and crowd-sourced feedback – and their effect on the way that employees were rewarded and the impact on their development.
…You’ll need to purchase the full working paper if you want to deep dive into the findings, but I want to share a (really compelling) exhibit on the impact that the shift in performance management practices has had on the way employees are developing and being rewarded. From the study:
^*80* percent of respondents are saying that shifting their performance management process to a more informal/less cyclical format has improved development outcomes for employees, which is exactly what a good performance management process is supposed to do. 2/3rds of companies also report that top employees are being more appropriately rewarded, with real differentiation between poor, average and good performance that (based on the data) is reinforcing the behaviors merit/reward pay should be reinforcing. Again, developing good performers into great performers is what this is supposed to be all about. And that’s what 4 in 5 are getting out of this change.
And now for my favorite data point:
^Again, 80% of the companies responding are – on some level – trusting and empowering their managers to make merit/reward decisions without meddling. And it’s working. Only 21% of employees say they are less clear about how they’re performing, with 62% saying that they feel pay decisions are more transparent (see exhibit #1 above). Much has been made about the subjectivity of a ratingless system… but most employees seem to prefer them and feel that they more accurately capture their value.
Having transitioned away from the rating scale and annual performance discussions in favor of no ratings + ongoing feedback with my own teams years ago, this data jives with my own experience and wasn’t much of a surprise. Still, it’s good to see some survey data coming out supporting what most people managers already know: If you have frequent, candid conversations with your people about what is expected and reward them appropriately, most of the time they will improve their performance (and be more engaged).
…Anyway, that’s all I’ve got for today. Check out more research at USC CEO from Ed Lawler here, and as always let me know what I got wrong (or right – positive feedback is appreciated!) in the comments section below.
P.S. Has anyone tried crowd-sourcing feedback yet? Approximately 80% of the companies surveyed here had moved to ratingless reviews, while (I suspect) a much smaller number have started crowd-sourcing feedback as part of the performance management process. It is a novel idea, but I think you really have to have the right culture for this to work. What that culture looks like? I don’t know. Please share your own experiences etc.