Throw Out Your Performance Management System!

For the past several years, performance management systems at major US organizations have been under serious attack for not being useful or valid—and for being enormous time wasters with very little value added.  These major US companies have thrown out their performance appraisal rating systems and are looking at new ways to work with employees by focusing on growth and development rather than spending time trying to justify past performance.  Companies who have made this change have found an increase in employee satisfaction and improved performance and customer satisfaction.  It has been reported that when Microsoft removed its performance appraisal system, employee collaboration increased significantly.

Research has shown that performance appraisal systems, especially those that involve ratings and rankings, are subject to a considerable number of rating errors.  In fact, the performance rating of an employee says more about the supervisor’s biases than about the employee’s performance.   As in other organizations, managers in the humanitarian sector spend a lot of time on conducting performance appraisals and they make the same types of “errors” when appraising an employee’s performance.  These errors are unconscious biases that can give an employee an unfair advantage or disadvantage over others.   These errors reflect our very imperfect judgment of others and are very difficult to avoid.

What about the focus on competency-based models so popular in our sector?  Aren’t they more objective?  First, competency-based models are very time consuming to develop and administer effectively.    They are also ineffective because of the changing nature of the work we do.  Giving an annual review of the employee’s past performance based on pre-determined competencies just isn’t relevant.  In the humanitarian sector, we need to develop people quickly.  Jobs grow and change quickly, making competency-based performance models obsolete and time consuming to constantly update and try to make relevant.

Throwing out the traditional performance management system is a radical departure from what we are all used to and what we have been trained to do as managers.  It can be a very hard sell because many managers don’t want to give it up.  Employees, as much as they may hate the current evaluation process, want a performance appraisal so they can know what their boss thinks of their work and how they are doing.   They are crying for feedback!   So why not have a system where the employee and the manager always know how things are going and they work collaboratively to improve performance through frequent open and honest dialogues, instead of focusing on last year’s performance?  We need a system where we engage with our employees in real time, and make course corrections as necessary in real time.

So what’s the alternative?  Stay tuned for my next post on the “One Size Fits One” performance management system for encouraging more engagement and better performance!