By Stella Voules & Jo Billing
Editor credit: JOST & Co advisory panel member: Amy Poynton
5 minute read
In Greek mythology, the Sirens were captivating, dangerous creatures; their enchanting singing luring unwary sailors off-course, causing disastrous shipwrecks. Today, unwary business leaders can be similarly seduced into changing established practices by the sweet sounds of promised improvement, increased profit and ease of doing business.
To many employees’ and managers’ delight, in recent years business and human resource (HR) leaders have been enticed to abandon formally structured performance appraisals and ratings – a move often undertaken hastily, with questionable motives and scant regard for the implications.
WHERE DID PERFORMANCE MANAGEMENT ORIGINATE?
Performance management is nothing new. Originally introduced by the US Military during World War I, the 1960s saw McGregor’s Theory X/Theory Y become the rage. Jack Welsh’s forced ratings at GE were popular in the 1990s, followed by today’s IT revolution-led idea of a continuous performance management process which first hit mainstream Australian businesses in 2015.
At the 2016 AHRI conference we watched dismayed as the NeuroLeadership Institute presented feedback for the ‘new way’. As they lauded the many corporates who’d already embraced continuous performance management, those of us who’d spotted its major flaw asked, “But how will HR people pillars such as managing talent and paying bonuses happen without solid data?”
Paradoxically, in today’s intensely data-driven era, those early adopters seem determinedly uninterested in addressing such an inconvenient question.
Instead, the Sirens sing on, luring businesses closer to making the disruptive decision to abandon appraisals without implementing vital innovation first.
WHAT EXACTLY IS THE PROBLEM?
Yes, appraisals can be uncomfortable, but they’re necessary. They’re where opportunities for impactful change to performance management lie.
Annual appraisals become painful when they’re a manager- or HR-driven process – not one owned by employees. And, until we provide an environment where employees genuinely want to contribute, feedback won’t be welcome. Yet in the right environment, they’ll demand it.
We have an obligation to individuals, the business and (often) legislation, to be able to genuinely demonstrate how we manage talent, appraise performance and reward fairly. And continuous performance management on its own isn’t enough.
IS THERE ANY VALUE IN CONTINUOUS PERFORMANCE FEEDBACK?
Granted, the idea has merit. Such feedback is valuable and problems certainly exist with the traditional annual review. Annual reviews may not necessarily improve performance. However, what they do is provide a framework for tracking trends, ensuring fairness and meeting legal requirements. A process which entrusts managers to provide ‘just in time’ feedback relies on managers to do just that: actually provide feedback. And many simply don’t. We know of corporates that have ceased their annual feedback process and whose staff report receiving no feedback at all – ever.
There are some businesses, such as tech giants, that find their corporate governance and working style easily accommodates disruption risk. Regarding bonuses, one said:
‘We stopped paying individual performance bonuses and gave everyone a salary bump. We prefer to pay top market salaries instead of bonuses. However, we continued to pay an organisational bonus, so people can share in the company’s success. And we’ve given out stock options, so employees benefit from the company’s growth/increased value over time.’
Admirable, but unrealistic for complex and often highly-regulated corporates with no natural, ongoing opportunities to embrace continuous feedback, nor sufficient trust in their employee-leader relationships to give or receive it.
WHAT ARE THE IMPLICATIONS?
Holding employees accountable for their yearly objectives is absolutely imperative – but without any feedback how is that remotely possible?
When the annual performance appraisal is abandoned, it soon becomes apparent that a numerator is required to guide internal decisions. Who do you promote? Dismiss? Invest in and develop? The resulting quasi-performance management systems that develop have a name: The Black Box.
The Black Box is where decisions are made by leaders about employees’ promotions, opportunities, pay increases and potential in the employee’s absence, based on informal anecdotal information. Without performance appraisals, decisions are based on continuous performance management alone, evidenced only through promotions and talent opportunities – providing a ‘shadow’ rating.
From the employee’s perspective, the performance review they once dreaded at least provided a forum for important decisions about their careers and remuneration. They had an opportunity to refute outcomes of performance discussions. They knew where they stood.
RESISTING THE SIRENS
Before veering off course, towards those seductive Sirens, consider that some employees wanting insight into their progression have started pushing back, calling for ratings to be returned. Already, some early adopters of The Black Box have returned to traditional performance management systems, having wised up to the following strategic questions:
WHERE TO FROM HERE?
For performance management to evolve, there must be seismic change to the foundations of the HR profession, resulting in innovation to its purpose and processes.
Genuine progress is already coming out of the CHREATE project, a consortium of HR leaders and CHROs looking to advance the future of HR. Over 50 individuals have helped map how HR must evolve to meet the challenges of the next ten years. Being a part of such initiatives will allow us to remain afloat as we navigate through turbulent waters.
In the meantime, it’s important to embrace performance data just as we apply data to every other aspect of our businesses. It’s the best way to protect your business and keep your people actively engaged in their own – and your – success.