Nearly every mid to large size company in the world now has some kind of performance management system, a process that in theory should help people set to achieve goals and ultimately drive performance.
Yet only 14% of organizations are actually happy with their performance management system as it stands, according to industry research firm CEB. Despite that, so far only 3% of companies are doing anything radical around how they manage performance. The rest are tinkering on the surface, altering the number of goals being set, shifting from a 3 to a 5-point rating scale, OR changing the rating criteria.
While I respect that significant change in a large organization is tough, tinkering isn’t doing much. Research shows that there is no measurable impact on performance linked to the number of ratings people have, or from altering the wording for these ratings. It seems that we need a significant rethink of the whole concept of how we manage performance.
Driving this need are seismic changes in demographics as well as how work is structured today. Annual goals might have worked 20 years ago, but between new technologies and a rapidly changing economy it is hard for goals to be relevant for more than a quarter. Even quarterly feedback does little for younger generations craving to learn something useful every week from their boss. And consider the fact that most of the time performance is only discussed with one manager – even when that employee is involved in a half dozen emergent teams unrelated to his manager’s work. The nature of work has become more relational and creative than ever, with a greater need for collaboration — which some performance systems accidentally inhibit.
The first step in any difficult change program is to acknowledge that your company has a problem. To help recognize that problem, maybe it’s time you gave your performance management its own performance review. There are many ways to do this, including identifying the real business goals of having a performance system, and seeing if these goals are being achieved through employee surveys. You could also collect data about the actual behavioral impact that annual employee conversations have on teams.
I will share more on these kinds of approaches in future posts, for now I wanted to share an even simpler idea: A 5-point rating scale for performance management itself.
Here’s how I would craft the ratings — read through and think about where your company’s system falls :
Tier one: “Needs to go”
While your performance management system showed promise during recruitment, it’s turned out to be a dud. It hasn’t achieved any of company goals. Heck, it probably never knew it had goals. Worse still, no one wants to work with it anymore. It’s time to move this system on to new pastures and let it find a place more suited to its talents.
Tier two: “Needs improvement”
Your system has personality issues. Despite achieving a few goals and having good technical skills, it often rubs people up the wrong way. People complain about its lack of authenticity, inflexibility, and glaring blind spots. In short, the system is under-performing and needs to have a breakthrough soon if it is going to stick around.
Tier three: “Good but inconsistent”
Your performance management system is like the wind in summer. Things fly along, then there are long stretches of nothingness, people becalmed in a sea of unmotivated action, waiting for something better — feedback of any sort, a career discussion, any puff of positive wind in their sails. You wish your system raised performance more consistently throughout the year, yet you can’t quite bring yourself to let it go, because, sometimes, it works.
Tier four: “Strong performer”
Your performance management system does a solid job most of the time. It gives employees the feedback they need to feel appreciated once in a while and helps them generally understand how they can develop. While not a stellar system, you’re happy with what you have and can’t see yourself firing this system any time soon. You’d love it to be a top performer, but hey, at least it’s consistent.
Tier five: “Top performer”
Your performance management system consistently motivates top talent, stretches mid-level performers, and helps your low performers self-select out. When times are tough and bonuses are tight, your performance management system helps folks stay engaged for better times. Everyone who works with your performance management system loves it, and wishes they could be it when they grow up.
So, how does your performance management system rank ? If it is low, how long has it been at that level, with no consequences ? Should you let your system languish another few years on a low tier, hoping it will improve ? Oh, and if you decide to rank your own firm, be sure to keep things confidential. No one likes feedback going public. Even performance management systems have feelings.