Eliminate Performance Ratings (#6 Reset Performance Management)

Companies excel at calculating ratings. They judge, force rank, provide infrequent and limited feedback, and assess outdated, obsolete, and irrelevant goals. And then they wonder why appraisals are so despised! Forget performance ratings and annual appraisals. Instead, create a culture of mutual respect where candid dialogues, continuous feedback, knowledge sharing, and learning are integral to the workflow.

This article is part of the series “How Lean | Agile Enterprises Push the Reset Button on Performance Management”

#6: Eliminate performance ratings and annual appraisals in favor of open dialogue and continuous feedback and sharing

Employee appraisals are considered a management tool to evaluate results, give valuable feedback, and identify opportunities for learning and growth. And performance ratings are a way to guide the discussion and differentiate performance.

Sounds like a great thing. So why do more and more companies join the ranks of those who eliminate employee ratings? The decision to go in a new direction usually starts with the realization that despite the time, money, and energy spent (investment), the outcome (return) is unsatisfactory.

Over the years, appraisals have taken over the whole Performance Management process and derailed the focus from vision, goal alignment, and performance. With the attention on calculating recognition, the system has become so fixated on the rating aspect that it leaves little room for anything else. In fact, employee appraisals have become synonymous with performance ratings.

And we all know, the higher the rating, the better the cash incentive. So, we fill out mounds of paperwork to get the numbers just right (even if that means tweaking certain categories to the get the desired outcome) while selling it as objective assessment.

At the same time, we fool our employees and ourselves into believing that there is a guaranteed and immediate link between ratings and promotions. However, these decisions are not purely driven by individual contributions and achievements. The economic situation, succession planning, and corporate climate have just as much to do with it. Individual managers usually have limited control over these factors but are the ones making promises to that end.

It is no wonder that, in most organizations, employee appraisals are no longer about assessing performance in order to learn and adapt but rather to calculate salaries and estimate career steps, leaving behind the appraisal part. The bulk of the discussion is on getting the rating to ensure the “correct” reward.

By doing so, we spend valuable time explaining away a number and negotiating a deal in performance with highly valuable employees. We have lost sight of what is important – to give purpose and meaning, provide a platform for growth and greatness, and unlock intrinsic motivation.

The situation gets even more dire when companies apply staked or forced rankings, which are supposed to help differentiate performance and ensure a favorable spread along the high to low achiever scale. But, more often than not, they simply leave employees demotivated and undervalued.

In other words, we judge people, we force rank them, and we provide limited feedback. On top of that, we rate them on goals that are most likely outdated, obsolete, and irrelevant. And then we wonder why everyone has ambivalent feelings about appraisals.

Some of the problem lies within the definition of appraisals. Appraisals are defined as “the act of estimating or judging the nature or value of something or someone,” which in itself is not a very stimulating and engaging way to approach and deal with cherished employees. Such discussions are definitely no fun, regardless of whether you are on the giving or the receiving end. These discussions often push people into a defensive position, viewing the appraisal as unfair and blaming their superior for being unjust and biased. And they are right.

Of course, ratings are flawed and impartial – they are highly subjective, they differ in quality, and recent events account for more than accomplishments that were achieved earlier in the year. Over the years, organizations have tried to master this by imposing more sophisticated rating models. But regardless whether it is a 5, 7, or 9-point scale or one done by several people in a 360-degree approach, it remains a ranking conducted by human beings.

However, subjectivity in itself is not the issue. There is nothing wrong with having different opinions. Quite the opposite, it is one of the key ingredients for innovation and growth. And who says two people can’t have an honest and valuable discussion on achievements and development potential and leave the meeting energized and eager to move forward instead of demotivated and weary?

This does not mean that we shy away from hard discussions. Agile teams prove that daily. They are accustomed to being held accountable for their actions and results. They showcase, get evaluated, and learn and adapt – not only on an individual level but as a team and organization. They are not afraid to move forward and make changes to the system. Rather, the discussion is focused on the right outcomes, relentless improvements, and continuous learning.

Agile enterprises eliminate traditional performance ratings and employee appraisals. Alternatively, they opt to create a stimulating performance culture based on mutual respect and trust, in which open, honest, and candid dialogues, continuous feedback and self-reflection, as well as transparency, knowledge sharing, continuous learning, and relentless improvement are integral parts of the workflow.

Are you ready for a new take on performance ratings and appraisals?