Whenever a company makes a decision about whom to hire and whom to reject, whom to promote to the next level and whom to ignore, who will get a 100% bonus and who will get zero, who receives a 5% salary raise and who gets only 1%, i.e. whenever a company differentiates between individuals across the various levers of talent management, then it is – at least implicitly - applying a form of both ratings and rankings. Claiming to abandon performance ratings while promoting a performance culture means to deny factual realities, and is a contradiction in and of itself. It should be considered an obvious and standard people-management practice for companies and their people managers, to explain to employees how they have made these decisions, and which criteria they have used. Hence, recently trending ideas for management teams to continue executing the performance management cycle, but not share the results with their employees, should not be considered “evolutionary progress” in modern people management, I suppose.
Scientific evidence
Various sciences like psychology, biology or statistics have proven that for every consistent and representatively sized group of human beings, i.e. a peer group, there is a mid-point for the performance and capability level of this group, provided that their members are rated against a set of performance criteria that are relevant for the remit of this group. The majority of participants in this peer group will normally perform at this mid-point level, while there will be a few that exceed as well as a few that underperform this benchmark. Even within the highest performing peer group, e.g. the winning team in soccer Champions League, there are those players above, and there are those below the average performance in this team. Hence, there is no such thing as a right-shifted bell-curve when a company is claiming to have the “best people”. Well-intended concepts like “Everyone is a Talent” in this case get misleadingly confused with “Everyone is a Top Performer”.
The existence of norm distributions might be a hard-to-accept reality for managers who shy away from delivering unpleasant performance feedbacks or who are incapable of developing below-average employees up the curve. It might also not be liked by employees who find themselves at the lower end of the performance spectrum of their peer group and who are lacking either the ambition or the capabilities to improve their situation. But, the existence of this bell-curve phenomenon is a scientific fact that simply should not be ignored under authentic, tell-it-like-it-is people management and leadership value regimes. This does not necessarily speak for the application of enforced distribution of performance ratings as such, since this comes with other risks and has to fit the culture of an organization. But, the performance management process should acknowledge the fact that those Gaussian distributions of performance levels exist. Companies must be prepared for negative implications when ignoring these findings and allowing the average performance objective achievements across the workforce to exceed 100%, as this is by default leading to the funding of bonus pools or unplanned personnel cost and respective margin impacts.
The manager empowerment myth – a big step backward
The latest “silver bullet” to the alleged crisis in performance management is the delegation of all related decisions to the individual people manager, who receives a pre-funded bonus and salary increase budget, or promotion quota.
What is celebrated as manager empowerment for continuous performance feedback is not changing the nature of the decisions to be made, but can actually make the process even worse. The manager still needs to identify his/her best people in order to select those who get one of those limited promotion tickets or those who get the highest bonus under a pay-for-performance culture. At least in his/her mind, the manager still needs to define a ranking based upon his/her performance evaluation (= ratings) to make those decisions.
What makes this situation worse than in the past is that the process is now happening without calibrating these decisions across the management team while aiming to save the massive efforts that are associated with the calibration process. But, all sorts of “nose-factor decision” risks then apply. Each manager uses a different set of criteria, and determining who gets rewarded ends up depending on the judgment of each particular boss. Remember the age old adage – people join companies, but leave managers. I believe that eliminating calibration - which has been a key ingredient to successful performance management for many years - is a massive step back into the stone-age of feedback and rewards, when employees were solely dependent on the goodwill of their boss in a rather non-transparent process.
This “idiosyncratic rater effect” applies also to the new performance measurement system of Deloitte, regardless of the fact that their approach is changing from past performance of the employee to future manager actions about the employee. The propagated savings of two million hours a year for central rating creation processes have only been reallocated to innumerable weekly conversations between managers and their team members, constant employee self-assessments and still ongoing management review meetings of those “performance snapshots”. They just don’t get counted anymore.
Ratings, ratings everywhere
Fostered and supported by the advent of social platform technologies in the last decade or so, rather dormant or at least non-revealed characteristics of human beings have come massively to the forefront. I am talking, of course, about the remarkable desire to comment on everything and everyone, at all times. With an unparalleled global consistency, this behavior has become a force of change in 3rd millennium societies: how people live together, communicate with each other, rely on each other, compete with each other, and ultimately how they make social and professional decisions.
This new “feedback culture” is most prominently emblematized by Facebook’s thumbs-ups and thumbs-downs – better known as “likes” and “dis-likes.” Other well-known forms of this behavior can be seen in sharing comments and news by (re-)tweets, posting photos on Instagram, or forming social opinions via WhatsApp. In all cases, in almost real-time, there is statistically representative feedback on whatever statement, behavior, look, relationship, event or incident being shared. Such votes and comments, which in various forums are even allowed to be provided anonymously, are uncovering a newly unknown dimension of insults, defamation and verbal brutality, i.e. cyberbullying. They have become a defining characteristic of today’s societies, and can often have materially positive or negative consequences on the voted subject or object.
On the other hand, people seem to be desperately searching for this feedback by voluntarily exposing themselves to public scrutiny and bashing by awkward juries comprised mostly of pseudo-experts or B-celebrities, or even by the general public (e.g. through TV audience voting). What just a few years ago would have been treated as a most personal secret, nowadays provides just another opportunity to go public on the stock exchange of social feedback. The almost desperate desire for very questionable recognition or volatile fame has become a key driver in how people design their social entities today.
Reversely, we are collecting (or “googling”) others’ votes or feedback prior to making purchase decisions, or even life choices (employer selection, travel destination decisions, medical treatments, etc.).
But, looking back in history shows that this kind of thumb voting is not new at all in the evolution of humankind. Think back to the coliseums of ancient Rome. Giving the fatal consequences of being voted thumbs-down, it raises a striking question as to what kind of platform Facebook wanted to be(come) when it decided to go for the thumbs pictogram?!?
Are we asking for it ourselves?
So, we provide ratings day-in and day-out, and make ourselves voluntarily subject to the votes and ratings of others, who in most cases are strangers, regardless of being known as “friends.”
But it is not just personal. In economic environments we are living in a world of constant performance ratings: in particular, publicly traded companies are subject to all kinds of partially questionable listings, ratings, rankings, or “analyst” evaluations in a world of ever increasing, fierce competition that is characterizing today’s markets.
How ironic that within those market participants, a trend in the opposite direction is taking hold: employee performance ratings are regarded as outdated and obsolete instruments of employee motivation and engagement. Shall corporate performance management become the last competition-free, ring-fenced, cozy and philanthropic resort in an otherwise brutally competitive world?
The demands and economic realities of business and the postulate of a performance culture, supported by the results of multi-discipline scientific research about normal distribution of performance levels, dictate that selections (= rankings based upon ratings) have to be made across the various areas of talent management.
Above and beyond the business context, it is deeply anchored in the human DNA and the red-line in human history up to actual events that we compete with one another. The human being does not want to be equal at all, but – visibly and transparently – better, richer, more powerful, more beautiful looking, etc. All forms of egalitarianism are preposterous to nature.
In the context of all of the above, this whole rating and ranking elimination discussion feels a bit counter-intuitive, to say the least.
What about the Accenture move?
What was celebrated as a “big move” in performance management in a recent Washington Post interview with Accenture’s CEO Pierre Nanterme should actually be considered a practical necessity. In a 330,000 person, multi-divisional organization, it is neither meaningful with regards to content nor operationally feasible or affordable to evaluate one employee in a relative peer group ranking against the rest of the entire population. There is certainly no point in comparing a management consultant from the consulting division with a data entry clerk from the outsourcing division. Instead, you define relevant and consistent peer groups and do the calibration within (but not across) those groups against peer group-specific performance criteria. Or you switch to a more role-based and short-term feedback process completely, as is now intended by Accenture and others. This regular feedback, we should note, is not new at all at Accenture, they are just re-invigorating it. Receiving feedback from a direct project supervisor against a set of globally consistent performance criteria after every project assignment was normal practice for every consultant until the second half of the ‘90s, but then disappeared when the business grew and became more diverse.
Many of Accenture’s managers and employees learned about the envisioned change from the newspaper. HR departments around the globe are now facing massive challenges as the announced shifts are in conflict with local labor contracts or works council agreements when it comes to bonus payments and variable pay schemes. All principles of good change management have clearly been sacrificed for the sake of a great marketing bluff that should attract potential consulting customers who want to learn from a “front-runner.” Perhaps they should rather run-away from such approach.
Change is inevitable
All that said, there is an unquestioned need for evolving and adapting current performance management practices to reflect the characteristics of today’s talent and economic markets, and to meet the expectations of the five-generation workforce. The key factor in this required change is more regular interaction between people leaders and employees about demonstrated performance, perceived strengths and areas for further development, as well as short-term direction, future objectives and employee expectations. All this should not require massive inventions, as it has always been relevant in good people management, as it is now to the New Millenials. It was simply forgotten, so managers got excused from it by overly-bureaucratic, rather administrative processes and tools. Companies allowed the people leadership dimension to be deemphasized too much in the ever-growing portfolio of manager tasks and schedules.
As a result, the performance management process needs to once again be simplified and made more flexible in order to become more attractive to both managers and employees, and to be applicable to the broad spectrum of both continuous long-term and ad-hoc short-term employee assignments. But, making it a priority for managers (again), probably remains the real challenge.
People Manager – make it or break it
Above and beyond the performance management strategies and leadership philosophies of an organization, its processes or the supporting IT solutions, it is all about enabling leaders to do their people job, and then holding them strictly accountable for good people leadership behavior. When you take a deeper look at all the recent criticism by practitioners, academics and employees about today’s performance management systems, you see that the underlying root cause of most failure is not the process nor the system, but the human factor in process execution. People managers who do not take the time or are not able to provide fair and meaningful feedback on demonstrated performance or fail to offer clear guidance on future career development. The lack of this capability is completely independent from any formal factors, like frequency of the feedback process, relative peer-to-peer vs. absolute job-related rating schemes, or forced distributions. Companies must avoid being misled by weak people managers trying to hide their lack of leadership capabilities behind allegedly limiting processes and systems. Effective people leaders actually need neither of those.
As companies move away from structured processes, frameworks and controls, even more will strong people managers become the key prerequisite and the sine qua non for preventing organizations from very unfavorable outcomes and unintended results. Only strong leaders are capable of stepping up and assuming this additional responsibility under these less forceful regimes. They are offering managers much more empowerment, but also provide them much less guidance or restrictions, and hence give managers a stronger impact - unfortunately in both ways.
It is strong people managers that make people stay and grow, and it is poor people managers that make people fail and go, regardless of the formal performance management system. This is where the current discussion needs to shine a lens, and where company investment priorities should go, as opposed to rather publicity focused launches of performance rating eliminations. Mindful performance management is simply human.
Consequences for HR IS solutions
In the foreseeable future, we will see a broad range of formal performance management philosophies and approaches take hold. Depending on company culture, leadership philosophies and organization-specific requirements, they will range from very structured, system-enforced approaches on the one hand to the total elimination of centrally guided and administered, but manager-centric concepts on the other.
Whichever way the trend develops, all approaches will have two things in common:
1. They will need to allow organizations to finally make factual, traceable and verifiable decisions that impact the career development and the total compensation of individual employees, based upon a rich set of regularly captured and multi-sourced data-points.
2. The perceived quality of those processes will be highly dependent on the leadership quality of the direct people manager executing the process with the employees, and representing the performance management culture and leadership values of an organization.
HR IS solutions therefore need to provide the flexibility to support organizations in their individual design of the performance management process, including the usage or non-usage of performance ratings. They also need to provide a platform to managers and access to data that enables them to hold meaningful performance conversations whenever needed, support talent management decisions of all types, drive individualized career development, and document those decisions and actions.
It is exactly these two major design criteria along which we have built and will further evolve our SuccessFactors HCM suite.
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