The Downside of Eliminating Employee Performance Ratings

The Downside of Eliminating Employee Performance Ratings
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Beware of Eliminating Employee Performance Ratings
Leaders, human resources and employees have been debating the pros and cons of eliminating employee performance ratings for years.  The debate centers on questions of approach, cost and effectiveness.  For most, the goal of employee performance ratings is to help improve performance.

What the Experts Say
Let us start by saying that there is a lot of conflicting and unsubstantiated research.  Just as with the question over whether a student’s performance improves when letter or number grades are abolished, the question about the effectiveness of employee ratings is debatable.  In fact, most experts seem to disagree.

Many well-known companies like Accenture, Adobe, Deloitte, the Gap, GE and Microsoft have all revamped their performance review processes to remove forced rankings, to reduce unconscious bias, to save managers time and to create an environment more conducive for real time feedback and coaching.  Their experiences have helped to identify what works and what does not work.

The Downside of Eliminating Employee Performance Ratings
Most of the negatives associated with eliminating employee performance ratings seem to stem from an ineffective implementation of the performance measurement process, not from measuring employee performance itself.  In fact, Gartner recently found that the elimination of employee performance ratings caused a:

  • 10% decrease in employee performance
  • 95% of managers to report they were having more difficulty effectively managing employees
  • 14% decline in the quality of performance conversations
  • Decrease in employee satisfaction of 8% by top performers
  • 6% drop in employee engagement

Three Things All High Performance Environments Have in Common
Our organizational alignment research found that the highest performing cultures have three things in common when it comes to the performance review process:

1. Clear Performance Direction
High performance cultures provide crystal clear direction as to where people should focus. Everyone knows the actions that must be taken, the expected outcomes of those actions, and how success will be measured.

2. Transparent Performance Status
High performance cultures use clear, credible and fair methods to consistently let teams and individuals know where they stand compared to performance standards in terms of Doing (generating desired results) and Being (achieving them in the right way).

3. Aligned and Meaningful Motivation to Perform
High performance cultures create motivation by providing positive feedback for desired behaviors, negative feedback for undesired behaviors and compelling reasons for people to stay and improve.

The Bottom Line
While eliminating employee performance ratings may seem like a good idea to improve an ineffective performance management process, you still need to ensure that goals are relevant and crystal clear, that people know where they stand vis-à-vis performance standards, and that motivational mechanisms for achievement and improvement are meaningful.  In our opinion, effective performance management has less to do with the details like ratings or grades and more to do with being thoughtful about setting clear performance expectations and giving people meaningful and timely feedback.

To learn more about creating a high performance culture, download The Top 5 High Performance Culture Warning Signs

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