According to recent counts, at least 30 of the Fortune 500 have ditched performance ratings. At least company, however, after careful analysis and consideration, has decided to hang on to the practice. In a recent Harvard Business Review article, Facebook head of People Lori Goler and head of HR Business Partners Janelle Gale, along with Wharton professor and consultant Adam Grant (author of Give and Take), explain why.
Here are some key points from their article.
Transparency and Fairness. The Facebook team asserts, as I have, that in reality performance ratings exist even when companies get rid of the formal process. They are just done subjectively behind the scenes rather than in an open - and admittedly challenging - manner. "Without evaluations, people are left in the dark about who is gauging their performance and how."
The Macro as Well as the Micro. Real-time feedback systems are an excellent way to help employees see and learn from their day-to-day successes and failures, but they don't help them (or the organization) gauge their performance overall. These micro assessments come without a macro assessment can leave employees at a loss to appreciate their performance in a larger context. "At Facebook we have experimented with various approaches to translating micro assessments into a macro performance rating."
Untethered Development Conversations. While employee development is often cited as a reason to move away from performance evaluations, the authors note that feedback and conversations about professional growth, untethered by ratings, can backfire. "Without ratings, they can spend weeks pruning a few trees while the forest is on fire. If a manager receives multiple pieces of feedback about being late to meetings but misses the larger issue of prioritization, she might become the timeliest person to deliver mediocre results."
Success Without Ratings Requires Significant Investment. The authors note research, including a global survey by CEB, finding that despite the issues with performance evaluations, not having them can be worse. The CEB survey results show that a Manager Conversation Quality score (which includes a range of criteria including performance on specific assignments, contributions to organization success, work priorities, developmental action steps, etc.) decreases 14% in organizations without performance ratings compared to organizations with them. "Although a handful of managers are more effective without ratings, most organizations will find it too difficult to get their managers to the level needed to make this change worth the investment.
In conclusion, the authors make it clear they aren't claiming that performance evaluations are uniformly beneficial, simply that they involve trade-offs and - in light of these trade-offs - they have decided to keep theirs.
Ann Bares is the Editor of Compensation Café, Author of Compensation Force and Managing Partner of Altura Consulting Group LLC, where she provides compensation consulting services to a wide range of client organizations. She earned her M.B.A. at Northwestern University’s Kellogg School and enjoys reading in her spare time. Follow her on Twitter at @annbares.
Creative Commons image "feedback checklist" by AJC1