Facebook: We're Keeping Performance Evaluations

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.

Thoughts? Reactions?

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

Comments

[Karen Kervick]

I agree there are trade-offs and eventually those with no annual review will figure out a way to create a point in time overall assessment, if they don't already.

Besides the compensation area, there is the career planning area that benefits from an overall rating. If you want to even just sort your employees or candidates into different pools for succession planning or other lateral position changes, how do you differentiate them?

You can spend time reading the quarterly feedback notes (I do see benefits to continuous feedback/discussions) once you have narrowed down your search but wouldn't you rather only read the bios of the candidates who would be recommended based on performance?

Ratings could vary from the simple "meets" to a more relevant rating of "recommended" or the lengthier performance overview that takes outcomes and behaviors into account: "high results/high behaviors" vs "low results/low behaviors" along with the other two quadrants of high/low.
Especially in a large organization,it is helpful to identify the employee's performance level in summary.

[E. James (Jim) Brennan]

As both Ann and Karen correctly observes, performance assessment is a vital part of supervision and talent management. When performance is irrelevant to compensation, the organization gets less than it pays for. How such judgments are termed, classified and communicated is more a matter of behavioral psychology than anything else, I fear.

[Ann Bares]

Well said - Karen and Jim. Despite their undeniable faults and issues, it is difficult to completely remove the notion of overall performance assessment from the organization without creating at least some unintended consequences. As our friends at Facebook tell us - there are trade-offs. Best we can do is to understand them clearly and then make informed decisions about what works for our employers.

Thanks for the comments!

[Paul Falcone]

I agree with Facebook's decision. Performance reviews aren't outdated -- they simply need to be customized and updated to match the organization's stage of growth and current challenges. In fact, if a company isn't updating its performance review template at least every other year to reflect its newest challenges and to raise the bar, they're missing the point of the process--both in terms of the letter and the spirit of the program. -- Paul Falcone, co-author, "The Performance Appraisal Tool Kit: Redesigning Your Performance Appraisal Template to Drive Individual and Organizational Change" (AMACOM Books)