Studying W. Edwards Deming’s approach to management with him in 1993 was an eye-opening experience in many ways. One of the most controversial topics was his Point #12:
“Remove barriers that rob people of pride of workmanship, and eliminate the annual rating or merit system.”
Mentioning the idea back in the workplace caused an uproar. People perceived the idea as totally opposite of the organizational principles of maintaining high standards and weeding out weak performers. Ratings had become so inflated that a score of 3.8 on a 4.0 scale was career-ending.
The Performance Management Revolution
Over two decades later, we are witnessing what pundits and analysts call a performance management revolution. First touted as the abolishment of the performance review, what is occurring is a shift from annual reviews and goal-setting to frequent development discussions and flexible goals.
According to Harvard Business Review, one-third of U.S. companies have abandoned performance reviews. We are not surprised. They are universally hated by both managers and employees.
Lessons of Experience
We have been actors in the performance management (PM) process for decades – as subjects, reviewers, approvers, and designers. We have also been enablers, both in HR and in the talent management software business.
Many of us can remember the feeling of being held to vague standards, subject to the whims and biases of managers who were afraid to tell the truth. We can remember the tedious hours and days we spent writing evaluations, or worse, having employees write their own.
In 2002, charged with the responsibility of developing an in-house competency-based performance management system, we based the design on the best practices of the day.
- A comprehensive set of competencies developed and validated by subject matter experts, managers, job classification experts, and behavioral scientists.
- Cascaded goal system based on organizational objectives.
- Non-numerical rating system (converted to numbers for analysis).
- Specific behavioral indicators in an attempt to reduce bias in ratings.
- Employee self-evaluation.
- Second-level reviews and calibrations to reduce bias and create a perception of deep analysis.
- A mechanism for employees to challenge reviews.
The results were predictable. The application was as hated as the paper process it replaced. Management sold it as pay for performance, so when budget cuts eliminated performance bonuses, everyone but a few diehards stopped doing evaluations.
As talent management software consultants in the first decade of this century, we had a front-row seat as organizations struggled with ways to make performance management palatable. Some are now abandoning annual reviews altogether.
Are We Ready for Change?
Most organizations and talent management professionals have arrived at the conclusion that traditional performance management practices do not improve performance. In fact, they often hinder it.
Yet some of the organizational drivers that kept the process in place still exist, and will be hard to overcome:
- Merit compensation practices that rely on a definitive number to calculate pay increases. We build them into the integrated software platforms still being deployed today.
- The deep-seated need for metrics to justify decisions.
- Reluctance to rely on more sophisticated analytics to predict behavior.
- The value we place on competition as a selector.
How Technology Will Change the Process
Many companies are moving toward frequent check-ins and development conversations, with flexible goal management untethered to the calendar. The truth is businesses operate better that way. Marketplace changes, regulations, end economic conditions don’t care what day it is.
What makes it possible is technology. Fifteen years ago, when we suggested frequent check-ins and flexible goals to clients, they resisted the idea as too cumbersome. They were already spending too much time on performance and goal management.
We now have passive ways to collect data about development meetings. Talent management software is now centered on the user experience, and current users do not tolerate cumbersome processes. Employees and managers can change goals in seconds on their mobile devices.
We are only limited by how well we manage the data, analyze it, and handle the privacy concerns of our employees. One thing we are sure of: it will be a bumpy ride.
Will die-hard practices or technology win? Our bet is on technology and enlightened leadership.
1. Deming, W. Edwards. Out of the Crisis. MIT Press. 2000.
Pixentia is a full-service technology company dedicated to helping clients solve business problems, improve the capability of their people, and achieve better results.