Home' HR Monthly : July 2015 Contents 12
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MARK SHAW CAHRI
Performance management systems with fixed ratings are still a
popular way of managing employee performance and compensation
despite their terrible reputation. Compare a system with five
numbers to the messiness of managers having to talk to their
employees and the numbers will always win, hands down.
While there are many downsides to these rating systems, these
downsides are abstract and mostly invisible.
Let’s shed some light on these downsides. First, let’s start with
the maths. With a one to five rating system, over 40 per cent of
your employees have to be rated a ‘B’ or a ‘C ’, including top talent
who’ve always gotten an ‘A’ throughout life. These people’s reactions
range from mildly annoyed to furious. During ratings season,
these conversations with dedicated employees are hard. Dealing
with the emotional fallout can cost your H R team a quarter of
productivity. Mistrust increases across the board. Many top people
leave, exhausted by inauthentic conversations with people they are
trying to develop. If this isn’t bad enough, fi xed ratings increase
competition among employees, reducing collaboration and therefore
Is all this really worth a system that feels simple to manage? In the
US, 43 large companies have done away with ratings altogether, and
they find life on the other side a whole lot better. They are building
tools for managers to have quality conversations with employees
about how to improve performance. This might be a little more
complex than a set of numbers, but so are human beings.
When I am asked if I think traditional performance reviews add
value to an organisation, my answer is an emphatic “no.” They are
generally overly complicated, bureaucratic and subjective. Most
managers tell me they are significant time wasters that add no value.
However, we should keep the baby, not the bath water. With some
adjustments, performance reviews can provide valuable feedback to
individuals and captu re important corporate data for training plans
and remuneration decisions.
Everyone knows that, generally, 80 per cent of employees do a
pretty good job and don’t cause problems, so we shouldn’t put them
into a normal distribution curve (bell curve). Why not just insist that
performance reviews focus on discussing how to make a positive
difference in your job? I find people have great ideas.
Rating and rankings can’t convey the full meaning of a person’s
performance. ‘My sales performance is traditionally reported as
2/5 (because I only sold 10 units in the period).’ It’s so much more
meaningful to say, ‘I was 20 per cent less than budget’, as I can now
discuss ways to improve. This logic can apply to all performance
measures and issues.
Finally, people hate filling out forms. Replace them with a quick
and easy process, and people will readily see the benefits.
Systems designed using these contemporary principles lead to
measurable improvement in productivity and reduced costs. So ask
employees and managers if the current system works, and if they say
‘no’, redesign it. Performance reviews can add value, but it’s up to us.
FOR OR AGAINST?
TWO BUSINESS PROFESSIONALS TACKLE A TOPICAL DEBATE EACH MONTH.
Q CAN PERFORMANCE REVIEWS
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18/06/2015 2:24 pm
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