[su_dropcap style=”flat”]I[/su_dropcap]T’S TIME FOR your annual review. Aaarrrggghhhh! My sentiments, exactly.
Before I started my company, I worked for several organizations that used annual, ratings-based performance reviews. To tell you the truth, I never liked them. It didn’t matter whether I was praised, given a raise, promoted, or given the list of what I needed to do to improve. Even worse, was being rated on a scale of 1-5 or 1- 10. The process was uncomfortable at best – for my bosses and for me. When I managed employees and had to do those reviews, I liked them even less.
Good news! After almost two centuries, change is in the air. According to an article in the November 2015 Harvard Business Review, a significant number of major global corporations have retired their once a year, ratings-based systems.
Instead, they’re creating a much more supportive approach to performance management that includes mentoring, coaching, and skill building. It centers on frequent, quality conversations between managers and their teams. These are conversations about corporate, team and personal goals, improved capability and capacity, overall progress, accountability, immediate and actionable feedback, compensation, and the future. And it’s working.
In a comprehensive study of 33 U.S.- based companies that have made the shift away from traditional ratings-based reviews, David Rock and Beth Jones of the NeuroLeadership Institute discovered these results.
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As the frequency of manager-employee conversations increases, performance and engagement improves.
All of the companies increased the recommended number of manager interactions with their teams, most going from the old once a year, to a minimum of four times a year.
This one change powerfully demonstrated that on-going mentoring and coaching conversations increased engagement, productivity and staff retention. They saw that performance and engagement were strongest when employees experienced being supported by a manager’s guidance and coaching and when they had more ownership of the process. Researchers also found that the new focus on quality conversations was well received by both employees and managers.
Companies significantly reduced the administrative burden of their managers.
Twenty-two of the 33 organizations studied, formally reduced managers’ documentation requirements with fewer and simpler forms. Another 11 companies eliminated documentation requirements altogether.
According to another Harvard Business Review article, companies dedicate between 30 and 40 hours per employee review. This level of investment is just too high for a process that so clearly fails to improve performance and often, drives good people away.
Companies still use pay-for-performance or pay differentiation.
The new process allows managers to get to know their people better through higher-quality conversations about performance, then, differentiate compensation based on their own judgment. One multinational retailer reported that this new strategy resulted in a dramatic drop in the number of complaints about compensation review season.
Well-designed change management was essential to a successful transition.
A few organizations regretted rolling out their new performance management platforms too quickly. Taking the time to execute a strong change-management strategy was essential to success.
Educating line executives about the business case for the change was a critical step. They took ownership of the initiative and were more inclined to advocate for both the importance and urgency of the change. Teaching them how coach and mentor effectively make the process even more efficient.[/message][su_spacer]
Imagine the possibilities for your company. No more fear-inducing, backward-looking performance reviews. Instead, managers would coach and mentor employees. These periodic conversations would empower managers and their teams. Together they would align their goals and values with those of the organization and the team. Managers would provide support and encouragement for professional development and growth. They would be able to focus on the future and produce extraordinary results. That’s a system that allows everyone to win.