Four Questions to Ask Yourself if You’re Considering a Move to Rating-less Performance Management

In recent years, the traditional approach to performance management — including practices like ratings and forced rankings popularized in the 1980’s—have come under fire. The reasons for this backlash are understandable. Rating and ranking employees favors competition over collaboration and rigid measurement of individual accountability over growth and development.

According to a recent Gallup State of American Workplace survey, only 21% of employees strongly agree their performance is managed in a way that motivates them to do outstanding work. And managers aren’t feeling satisfied either—Corporate Executive Board (CEB) found that 95% of managers are discontented with their PM systems, and 90% of HR heads believe those systems do not yield accurate information. Given these concerns, it’s understandable that 21% of organizations surveyed by CEB have either already removed ratings or are planning to remove ratings from performance management in the near future.

At Blue Beyond, we have been fortunate to have supported a number of Fortune 500  organizations as they transitioned from a performance management process that included ratings and rankings to a more holistic, growth-mindset approach. In doing so, we’ve found that there are four key questions an organization should ask itself before making the switch to a rating-less performance management system.

Question 1: How is our company culture evolving?

Making a change to a rating-less performance management process simply because it is a trend in the industry needs to be carefully considered given the investment required. As with any change, consider how your performance management process needs to support the organization and culture you wish to create.

An organizational shift to a growth, development, and learning mindset requires a different approach to performance assessment than models which support rigid individual accountability. Similarly, an organization moving to a highly collaborative working model necessitates organizational and team flexibility. With these types of cultural shifts, companies must consider a retooling of current systems and processes to support a more fluid approach to objective setting, feedback, and assessment of achievements.

Question 2: Are we willing to invest the time it takes to thoughtfully change our approach?

There is no quick-fix to implementing a new performance management strategy. Before you jump into a rating-less system, take the time to identify the root problem you’re trying to solve. For example, are you aligning to a shifting organizational culture? Are you suffering from low employee engagement? Is too much time being spent on performance management administration?

Next, you’ll need to reach out to key stakeholders from across the organization to pressure-test your assumptions and understand what each stakeholder is looking for in a performance management system. What are their priorities? What will success look like?

Finally, you’ll need time to strategize and create a plan, find your champions, communicate the change, and train your employees on any new processes.

Don’t underestimate the time it will take to implement a thoughtful, holistic approach to performance management. If you’re going to succeed, you can’t rush the process.

Question 3: Are we willing to take a long-term view of performance and development?

Changing your approach to performance management will not solve your problems overnight. In fact, in many companies, performance outcomes often suffer after making a change to a rating-less system. A  2016 study by CEB  found that organizations who had recently undergone a performance management change showed a decrease in employee satisfaction scores, a drop in employee engagement, and a decrease in the quality of conversations employees said they had with their managers. Additionally, changing your approach to performance management might open a whole new can of worms, requiring you to rethink your entire employee experience – from recruitment and onboarding to development opportunities and links to compensation.

We know from experience that removing ratings alone isn’t enough to change a company’s culture or see immediate performance results. However, by committing to a long-term view of performance and development, being prepared to regularly measure and analyze your results, willingly addressing new issues that may come to light due to the change, and adapting as necessary, you will be more likely to create a performance management system that will best support your employees, and your business, over the long run.

Question 4: Are we committed to educating, equipping, and empowering our managers?

We can’t overstate the crucial role managers play in a successful performance management strategy. A recent Gallup survey highlights that only 20% of employees strongly agree they’ve had a conversation about their goals or their successes with their manager in the last six months. However,  employees who regularly meet with their managers show almost triple the level of engagement than those who don’t.

Encouraging your managers to hold regular meetings and provide meaningful feedback to their employees is not enough, though. According to a CEB global study, less than 5% of managers say they know how to effectively manage employees in the absence of ratings and employees report the quality of conversations they’ve had with their managers decreased by 14% immediately after ratings were removed.

Preparing managers to not only lead, but also model, the change in approach to performance management is critical to your success. It means educating managers about what has changed in the process and why. It means dedicating the time to train and equip your managers to have effective conversations in the absence of ratings, to give frequent and meaningful feedback, and to recognize and reinforce strong performers while identifying and supporting those who need improvement. And it means empowering your managers to make rewards decisions based not only on past performance, but on future potential.

As you consider these questions, and contemplate with your organization and team how you want to proceed, keep in mind that performance management—with or without ratings—is an important aspect of your talent management framework. Just as with any important organizational investment, take the time required to create and shape a system to support employee and organizational success.