Performance ratings: Are they a thing of the past?

July 7, 2016|Kailee Wahler

As the world around us evolves each and every day, is your business adapting and changing to keep up? Do you review your processes to ensure they are valuable, effective and efficient? If you don’t change, you die, right?

Well, that is up for debate when it comes to performance management processes. As many companies are moving away from traditional performance evaluation processes and moving to a continuous feedback approach, others believe their annual evaluation process is extremely valuable and effective. Before making the jump to abandon your traditional performance evaluation process, take a look at the information below about both approaches.

Traditional performance evaluation process

Many organizations have an annual review process in place where employees are assigned a performance rating that depicts how the employee has performed in the past. This rating usually helps shape their potential pay increase, promotion or future opportunities.

Times when traditional evaluation processes can work

  • The process is clearly defined and understood
  • Supervisors are trained on the process and the definitions of each performance rating
  • Timely training sessions are held with leaders before the evaluation process begins
  • Employees are evaluated against structured, measurable and objective metrics
  • Employees have a clear understanding of evaluation metrics
  • Performance ratings are tied to rewards (i.e. pay increases, bonuses, advancement, etc.) and top-performers are retained
  • Employees understand the process and believe it is fair and equitable
  • Leaders hold individual meetings with all of their employees discussing their rating, performance feedback, opportunities, developmental areas and more.

Areas of caution: consider revamping your evaluation process

  • A standard process is not in place nor defined; leaders all take different approaches
  • Ratings are loosely defined, leaving room for individual interpretation and bias; employees are evaluated on mostly subjective metrics leading to leader bias
    • Some research shows that ratings reveal more about leaders’ rating tendencies than they do about actual employee performance
  • Rewards are not differentiated
  • Employees do not value the performance ratings and do not believe the practice is fair nor equitable
    • Employees’ worth is slimmed down to a single performance rating or label. Neuroscience research has shown that employees automatically create a “fight or flight” response which inhibits honest, constructive dialogue
  • Evaluation process is only backward looking and doesn’t focus on the future
  • Leaders spend more time determining a rating than they do discussing performance with employees

Continuous feedback approach

Some companies have decided to say goodbye to traditional performance processes and individual ratings to focus more on timely feedback, development for the future and coaching. In theory, this is a great transformation change for an organization, but it must be done right and your culture must be ready for it to be effective.

Don’t just simply eliminate performance ratings. Ensure that you are looking at your performance management and compensation processes holistically before switching gears to a continuous feedback approach.

  • Does your culture support a continuous feedback approach? Who will own the process and champion the change?
    • There must be buy-in from the top. The leadership of the organization must model the behavior it wants to set expectations for the rest of the organization.
  • How will feedback dialogue occur? How frequently should it occur? How will it be documented? Who owns it?
    • Frequency and documentation is key to continuously evaluate performance and get snap-shots of how each employee is doing throughout the year. These snap-shots help to eliminate year-end recency bias.
  • How will goals and objectives be set each year for the company and individual employees?
  • How will pay increases, promotions, bonuses and other rewards be determined? What will they be linked to?
  • How will you communicate the change in the process to leaders and employees?

If these thoughts are not taken into consideration, a continuous feedback approach may not be effective. You must have a clear strategy and a culture to support this type of approach.

Conclusion

As you can see, there are many things to consider when evaluating your performance management approach. Don’t simply change your process because others are taking the leap. Each organization is unique and there is no “one size fits all” when it comes to performance evaluation. You must do what makes sense for your culture, strategy and vision.

For assistance determining how to approach your performance ratings and other human resources needs, contact Kailee Wahler or any member of Schenck’s Human Resources Consulting team at 800-236-2246.


Kailee Wahler, human resources consultant with Schenck, builds relationships with clients and advises businesses on a wide variety of human resources matters. She provides one-on-one guidance and counsel, along with the ability to analyze and offer solutions to everyday HR challenges.