One of my least comfortable memories as an HR Director was presenting a new pay and grading system to my senior leadership team. My team had worked for months on it – and in my view, it was a thing of beauty.
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We’ve read the research, we’ve got the feedback from our people, or we’ve reflected on our own experiences. So, we all now know that rating people doesn’t help improve performance or motivation. And yet, we really worry about what will happen if we get rid of them! In this blog we look at the consequences of getting rid ratings – both real and imagined!
How will we know who’s the best/worst performing? How will we differentiate performance?
This is a common worry, that if we can’t give our people a number out of five, we won’t have a clear picture of performance in the organisation.
It’s important to look at the assumptions behind this concern to be able to recognise it’s not valid.
- It assumes that line managers are brilliant at being objective and consistent when it comes to deciding ratings. Any follower of the researcher and writer Marcus Buckingham will tell you that they aren’t. We all suffer from rater bias – not because we’re bad managers – but because we’re human. The ratings we give out are subjective and flawed data and fail to provide a complete picture of someone’s performance over a year. It’s much more complex and nuanced than a single number.
- It also assumes that employees won’t know how they’re performing unless we give them a rating at the end of the year. They will. Getting rid of ratings is not the only step in your reform. It also involves moving to frequent check-ins where we have much more relevant and impactful discussions about contribution and performance than the once-a-year set piece. People will have more of an understanding of how they’re performing, not less.
- Finally, this concern assumes that performance can only be differentiated via a rating. It isn’t. We differentiate performance by giving more opportunities and greater recognition to better performers.
How will we give out bonuses fairly?
This is another common concern. We have this view that if the bonus is determined by a number out of five – then it’s more objective, less arbitrary. It isn’t. If a manager is determining a rating, then the bonus pay out is determined by his or her judgement. This is just as subjective as a line manager having discretion over the amount of money they should get. The majority of companies who have got rid of ratings have given line managers the autonomy to make decisions about pay and bonuses. And this is the right course in my view. We should treat them as grown-ups who are capable of managing the staff budget as well as the other budgets they have. If we are really worried, then we can use calibration sessions to sense check their decisions. These sessions can be much more helpful when discussing additional factors such as market rate and what matters to the individual, than the ratings calibration sessions we’ve held in the past when we fight over who should be a 3 or 2.
How will we know if managers are doing it properly?
Like many of our bureaucratic processes, the cumbersome appraisal system was typically designed to compensate for managers who can’t or won’t manage their people effectively. HR has felt good because at least our people are getting one feedback conversation a year, for example. Ratings sometimes provide some kind of reassurance to HR that managers are having ‘proper’ performance conversations. Sadly, this is not the case. Great performance conversations shouldn’t end in a number out of five or a ‘meets expectations’ statement. When you exclude the top percentage, we’re managing to demotivate the majority of the people who work with us – even if the pre-rating conversation wasn’t bad! The way we get to know whether our managers are helping their people to improve their performance is to ask the people themselves. Instead of looking at our appraisal completion rates or, God forbid, our ratings distribution curves – we can be reassured or worried by asking people via surveys, focus groups or through conversations.
What will we do about poor performers if we don’t have ratings?
And finally, the question that will sometimes come up – although, thankfully, it’s asked less often than it used to be – What will we do about poor performers if we don’t have ratings?
Behind this concern is the (honestly) absurd reasoning that we should apply something that doesn’t work, that often de-motivates our people and frustrates our managers across the whole organisation – simply so we can get to the 2-3% of people who perform badly. Seriously?! If you have a poor performer, then document the hell out of that situation. But let’s not design around the lowest common denominator and make everyone document an annual conversation, that doesn’t drive better performance, just to have the paperwork for the tiny percentage that might get nasty and legal.
There are consequences to giving up ratings, sure. For example, we have to be able to explain and get support for an approach that isn’t as clear cut or clinical as an annual appraisal. We also have to re-focus our efforts away from ensuring compliance with a system and onto coaching for better conversations. But dropping them will help build better performance and higher motivation. Which is kind of why we introduced ratings in the first place isn’t it?!
PS: If you want to help line managers have better conversations with their team, why not check out The Conversations Toolkit. It gives them tips, techniques and conversation starters to help them with the key one-to-one’s they’ll have with their team.
The frequent check-in. It sounds so simple doesn’t it? So why is it so difficult to achieve and how can you make it a reality. In this blog we look at what the HR teams who have managed it are doing right.
The ones who are enjoying the most success tend to adopt four key approaches.
They build from scratch
One of the most common mistakes we see, are HR teams trying to hold onto the old system whilst encouraging the move to frequent check-ins. They retain the annual cycle, the end of year forms, sometimes, even the ratings – and then try and layer frequent check-ins over the top. You can understand why they adopt this approach as it feels less scary if they can point to the incremental nature of the change. But rarely do we see frequent check-ins become the norm whilst they cling to the old structures. If the old structure remains intact, the focus on the check-in gets lost. Managers continue to see performance management as a formal process that they have to do at certain points in the year. Completing their forms and giving out ratings remain the key outputs.
HR teams that have the courage to start from scratch are typically more successful as new behavioural patterns can be formed without the temptation to slip back into the old. For example, the human instinct to put off that potentially tricky conversation till the end of year review can no longer be indulged. The HR team can focus all of their efforts on helping managers and employees have better conversations rather than completing the paperwork.
Have the confidence to completely get rid of the old and build the new from scratch. Abandon the annual objective setting, the end of year review, the ratings, the forms – all of the performance paraphernalia we have built up over decades. Have the courage to adopt a minimalist approach that says the ONLY thing that helps people to improve performance is to have great and frequent conversations.
They help managers to do it differently
Much of our performance management training for managers has centred around the completion of the process rather than how to actually help their employees do something better next week than they are doing today. HR teams who are getting traction with frequent check-ins are supporting managers to have better conversations instead.
This includes helping managers to move from seeing performance management as the means of judging or assessing an employee and instead of providing coaching support. For example, EY’s ‘Leading with Questions’ initiative which helped managers have better coaching conversations through ‘listening with curiosity’ or Cargill’s ‘Everyday Performance Management’ and their focus on the development of coaching skills and two-way conversations.
It doesn’t always have to be a training programme. Sometimes, just providing managers with a few choice phrases or questions to kick things off can be helpful.
They resist the temptation to compensate for poor managers
HR professionals carry a terrible burden that shapes almost everything we do; we believe we are responsible for compensating for poor managers. Almost all of our heavy, bureaucratic processes are driven by the desire to prevent our employees suffering at the hands of managers who have no interest or skill in developing, engaging and leading their people. So, we make them do an annual appraisal to ensure that they have ‘at least one conversation a year’ and give out ratings so that they ‘let their people know how they are doing’, etc. Whilst they may be worthy aims, our mission to save employees from rubbish managers is really holding us back from doing anything new. The HR teams who are managing to get frequent check-ins going typically resist the urge to compensate. They accept that whilst they will make significant gains in performance and motivation from a new approach, there will be consequences that may feel uncomfortable at first. By removing the structural constraints of the traditional PM system, they will be leaving the poor managers to their own devices and that may mean some of them do nothing at all to help their people in terms of performance.
To help us get over any guilty feelings we might have, I’d suggest that we ask ourselves two questions;
- Do we honestly believe that the experience of an annual performance review at the hands of a poor manager would be a positive one?
- Is it fair to inflict a process that is a miserable one for the majority, just so that we can force poor managers to do something they don’t want to do?
Hopefully our answer to both these questions is a resounding ‘NO!’ and we can focus less on mitigating the impact of poor managers and more on helping them improve or move on!
They let employees determine how frequent a check-in should be
One of the dilemmas that I see HR teams wrestling with is the question of ‘how frequent should a frequent check-in be’? Often, they go for the nice neat answer of once a month or weekly. To me this is a classic case of applying old thinking to our new approach; trying to apply a structure from the centre to cover a multitude of different needs. Companies like Vistaprint who have been successful in getting frequent check-ins going have applied them alongside the newer approach of being ‘employee-centred’. So, instead of having a recommended frequency, they encourage managers to find out from their employees how often they might need or want one – or establish a framework where the employee is the person who ‘makes it happen’ rather than the manager.
So, in summary:
- Start again from scratch, resist trying to hold onto some of the old structures
- Focus your approach on the leaders who might be up for doing something different
- Let employees decide when they want one and avoid set frequencies
- Give managers tips and conversation starters to build their confidence
Find out about the latest trends in performance management with our latest animation.
We are seeing a wave of new trends in performance management that take less time, cost less and actually drive up performance – which was kind of why we started this whole thing, right? Oh, and they can be done as easily over Zoom as face to face. This short video talks you through them.
If you want to help your leaders and managers have better conversations to improve performance, then you might want to check out Leader Box – the new app from Disruptive HR that offers leaders and managers really simple tips and conversation starters.
Hear how Essex County Council transformed their approach to performance management. From research to ensure their approach was user-centred, to getting rid of ratings, becoming employee-led and focusing on ‘in-the-moment’ feedback!
Nebel has done some really exciting things during her time at fashion retailer River Island. In this interview Nebel shares how she uses ‘agile hr’ as well as some great innovations in performance management and employee engagement.
Suzanne Roddie, Head of Performance and Talent at Virgin Atlantic and Virgin Holidays talks to Karen about how they have revamped their entire approach to Performance Management.
Learn how they co-created their new approach and how they will be rolling out this new feedback-led culture.
Suzanne also shares with us their new values and how this has led to an interesting piece of work on changing behaviours within the organisation.
The “no more ratings” argument seems to be winning. Which is fantastic. Those organisations who have moved to ratings-free conversations show no signs of wanting to go back and the numbers following these pioneers are swelling.
But there’s a thorny dilemma that many of us are wrestling with. How do I get rid of ratings and yet still pay out an annual bonus? The argument goes …. “Our annual performance management system is completely useless, but at least it gives us a fair and transparent way of handing out the cash” (I’m paraphrasing). And this causes us grief. We believe we must have a number to demonstrate objectivity and so we hang onto our gradings (and all the other trappings of an annual performance cycle) to enable to us to make these payments.
Let’s just pause to reflect on the absurdity of this angst.
- We know that ratings don’t work. They prevent great performance conversations, they suffer from rater bias and they reduce what should be on-going and fluid into an annual event.
- We know from all the companies who have progressed beyond this 1980’s construct that a ratings-free environment leads to much better conversations and reduced frustrations from managers and employees.
- We know that performance ratings are a numerical expression of a subjective judgement from the line manager (occasionally supplemented with some painful calibration or a mythical distribution curve).
- Yet, when we consider removing ratings and replacing with that same line manager’s judgement in the form their view of the bonus award, we worry about appearing arbitrary.
- So, we resist a new approach that would save time, manager and employee frustration, improve the quality of performance conversations, etc – just to retain a pretence at objectivity.
So, let’s assume that you’re going for it, you’re going to remove ratings, but you also want to (or have to) hang onto your bonus scheme or performance related pay – what can you do?
You’ve basically got 3 options – and they’re not mutually exclusive.
1. Continuous Assessment
You can opt for a continuous assessment process, akin to the way schools have moved from a one-off test or exam at the end of the year to periodic grading throughout the year. This seems to work well for those organisations that have frequent and regular performance periods and consistent performance data – sales organisations, for example, or that are project based – such as consultancy firms. By assessing regularly, they avoid the need for a grading at the end of the year and can distribute the bonus based on the average performance across the year or at the end of each of the sales/performance periods. For many companies however, this can be seen as even more onerous than the once a year performance assessment, so not for everyone.
2. Contribution Calibration
You can opt for end of year “Contribution Calibration” where line managers come together to agree who deserves what in terms of their bonus. Instead of a traditional calibration bun-fight where managers wrangle over who gets what grade, they discuss how much each individual has contributed and how much bonus they should receive, relative to each other. There are some real upsides to this approach. You get some good quality conversations about your people and provide challenge to those managers who use the bonus as a means of abdicating their development responsibilities. It’s also a useful way of building in conversations about individuals’ relative worth in terms of the market (helpful for fast growing tech companies where pay levels fluctuate rapidly). The sessions can also factor in discussion around alternative ways in which the individual might want to be rewarded such as promotion or stretch opportunities. It can, however, be seen as unfair and lacking transparency by those in receipt of the outcome if quality conversations haven’t taken place throughout the year. (But, to be fair, that’s the same as what we’ve got now!)
3. Line Manager Discretion
You can simply go for line manager discretion and allow managers total freedom as to what they give to their people, within a capped budget or framework. This is the option that most companies who get rid of ratings seem to favour. If you have had regular feedback between the manager and his/her people throughout the year, and the bonus is simply an extension of those discussions and is therefore expected, this approach can work. If you don’t have those conversations, the bonus can seem to be unfair and arbitrary – and can lead to accusations of favouritism and potentially, discrimination. But again, this is pretty much what you risk today and whilst we retain a system that focuses on one major feedback conversation, it’s really tough to get frequent check-ins going to any great effect.
In truth, there is no fool-proof way of getting rid of ratings and keeping individual performance bonuses. But the worst thing we can do is allow our need to administer the distribution of money to dictate our approach to getting the best from our people. The positive impact of removing ratings has got to be a goal worthy of some experimentation on how to distribute your bonus through different means? The companies who are doing it already are not lamenting the days of “Meets Expectations” so why not give it a try?
A final point – the progressive companies are asking a different question. They’ve already moved on from the 1980’s concept of putting people into performance boxes and are questioning whether their bonus schemes are really working for them. Or whether a combination of paying their people well and recognising effort and excellence through timely rewards that are personalised and thoughtful might not be a more compelling alternative. Maybe that feels like too big a leap right now – but worth keeping in mind?
It’s January 2018 and some of you out there will be entering another year of your major “HR Transformation”. You’ll probably be over-budget and behind schedule
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