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Thursday, December 12, 2013
Why Top Companies are Killling the Traditional Performance Review
Hear that whooshing sound? That’s the collective sigh of relief from Microsoft employees who won’t be subjected anymore to the company’s despised stack rankings.
Under that system, employees were essentially forced to compete against one another to receive excellent performance rankings. The rankings were supposed to cull the weakest from the herd, but instead it led to employees feeling helpless and somehow encouraged to backstab colleagues to get a better ranking.
It’s estimated that at least 30% of Fortune 500 companies use such rankings that rate employees along a curve. For example, an employer might state that a manager can only put 10% of employees in a top category, while 2% must be in the bottom group.
But Microsoft was often criticized for using the “yank and rank” process made popular at General Electric in the 1980s. Motorola CEO Greg Brown has referred to its ranking system that it eventually tossed as “demoralizing” and creating a “culture of infighting.”
But Samuel A. Culbert has argued for years against that even annual performance reviews are horrible, calling them “one of the most insidious, most damaging and yet most ubiquitous of corporate practices.”
“Everybody does it, and almost everyone who’s evaluated hates it. It’s a pretentious, bogus practice that produces absolutely nothing that any thinking executive should call a corporate plus,” Culbert says.
Culbert, a professor at the UCLA Anderson School of Management, argues that companies should instead use what he calls “performance previews.”
Under that scenario, an employee outlines what kind of supervision helps him or her operate most effectively and what kinds of past management practices cause a problem in getting work done. The manager then shares with the worker what is needed for the manager to be most effective.
Ongoing discussions about how to best combine their talents would then help them communicate better and deliver better results together, he argues, and puts an end to performance reviews that he says are nothing more than “intimidation.”
Employers are clearly re-thinking performance management, but what will evolve is under debate. Will all companies eventually abandon rankings? Will the annual performance review be scrapped as well? While experts debate the merits of how best to manage their employees to achieve results, here are what some other employers are trying:
Motorola. The company scrapped its employee rating system because CEO Brown worried about how employees might feel being called a “valued performer” rather than “excellent” or “outstanding,” he told Crain’s Chicago Business. Managers and employees now have ongoing communications about performance in addition to the annual reviews that ensure employees met their goals. Pay discussions are (read more here)