No Ratings. No Regrets. What really happens when you give up performance ratings

00:03 – Lucy Adams (Host)
Welcome to HR Disrupted with me, Lucy Adams. Each episode will explore innovative approaches for leaders and HR professionals and challenge the status quo with inspiring but practical people strategies. So if you’re looking for fresh ideas, tips and our take on the latest HR trends, subscribe wherever you get your podcasts. Hi and welcome. And today we’re diving into the big and very often emotional topic of performance ratings and why you won’t miss them when they’re gone. And I’m delighted to be joined by my partner and co-founder of Disruptive HR, Karen Moran. Hi, Karen.

00:49 – Karen Moran (Host)
Hi, great to be here.

00:51 – Lucy Adams (Host)
My favourite topic it is I always say that, yeah, we do actually, but no, I think this is definitely up there, isn’t it Getting?

00:59
rid of ratings, changing our approach to performance management. You know, and I think we’ve all got our performance ratings horror stories, don’t we? You know, I remember I can’t remember which company it was, I think it might have been Serco and I had worked so hard for the whole year you know, and I just knew I was in for that top rating. I just I had it in the bag, I just delivered, I knocked it out the park and then, when it came to it, I was marked, I think, the one below the top rating, because there was one small objective that I hadn’t delivered, and this objective was actually no it was irrelevant.

01:41
It was, it had basically been agreed on 12 months prior and was now completely irrelevant and worthless. But because it’s on the form, it went into sort of. You know, not a deep depression, but I felt really low coming out of there. You know the conversation had been great, but the ratings kind of really annoyed me. What’s yours then, have you?

02:17 – Karen Moran (Host)
got a horror story mine has to be when I worked at Evershed and I know that they have moved on from since my days of being there, probably because I left but I remember we had this, this kind of this year, where we were trying to kind of raise the bar. We were talked about, you know, raise the bar, and I think we were everybody was giving out ones and twos which were the best kind of you know best scores, and we said we’ve got to stop, we’ve got to start making sure that we are really showing the people that are the best and we’ve got to kind of start managing people’s expectations that they’re not as brilliant as they think they are. And so we introduced this. You know, a three is meets expectations, and I can remember literally being with managers say, and they were saying I can’t give someone meets expectations. That sounds terrible. I’m like no, it’s good.

03:16 – Lucy Adams (Host)
It’s really good. Meets expectations is fantastic.

03:21 – Karen Moran (Host)
It says you’re doing everything required of the job. Fantastic, it says you’re doing everything required of the job. And they weren’t convinced. But they had no choice. We kind of pushed them down this, this kind of distribution curve, if you like.

03:32
So they had to be the majority of their team threes to raise the bar, and so I’d been spending all this time telling managers to do this and it’s okay. And then I had my own appraisal and I was given a three and I literally remember this sort of feeling of like three, I’m not a three. So I think we forget to put ourselves in the shoes of our people, don’t we? About how it actually, how demotivating it is. So we probably went from being high performing that year to, you know, mediocre.

04:08 – Lucy Adams (Host)
But yeah, that’s my horror story, talking of those uh awful forced or guided distribution things that we do. So for those of you who perhaps aren’t familiar with this, this is where we we in HR say that every team has got to follow a normal performance curve and a normal distribution curve, and so managers are only allowed a certain numbers of you know, small number of ones slightly bigger group of twos, much bigger group of threes, etc. And of course you get managers going. You know, if it was up to me, I’d give you a one, but HR won, won’t let me. But there was a client of ours, do you remember? They were in the defence industry and they had this set up where, if you got the lowest performance rating two years in a row, then you went on to an immediate performance improvement plan. And again, if there happens to be any non-HR people who are listening to this, a performance improvement plan. And again, if there happens to be any non-hr people who are listening to this, a performance improvement plan is not nice it sounds nice, but it’s not.

05:11
It’s basically your first step out the door. Um, but uh, they had this forced distribution so they had to give these lowest performance ratings out, and the team one team at at this company decided that to kind of game the system and protect their colleagues, they would just share it round. So you know it would be. Oh, bill, it’s your turn to take the five out of, you know take one for the team.

05:38
And you know, jack, it will be you next year. So it just becomes why are we doing this? You know and I think fortunately, many of us have kind of finally woken up to the fact that handing out a rating at the end of the annual performance review is a kind of surefire way of demotivating at least 80% of your workforce. People don’t like them, managers don’t like them, and yet when we try to get rid of them, we’re often met with a number of concerns about what will happen if we don’t have them. So that’s what we’re going to do today, isn’t it? We’re going to kind of unpack some of the common misconceptions about the value of ratings and hopefully demonstrate that you know, getting rid of them is not as risky as you might think.

06:33
So we’re going to look at four typical uh concerns and issues. So the first one we’re going to look at is um, how will we differentiate performance if we haven’t got a rating? How will they know how they’re doing if they haven’t got a rating? The second one, a real biggie how will bonuses be handed out fairly if we haven’t got a number which is driving it? If it’s a judgment call rather than a number, how can we be sure that managers are doing it properly, are they? How can we be sure that they’re managing performance properly is the third one we’re going to look at. And then the fourth and final one is what are we going to do if we haven’t got an appraisal system with a rating about our poor performers? Because we use the appraisal scheme to help us deal with poor performance.

07:30
So those are the four, you know. How will we differentiate performance? How will people know if they’re doing well or not doing so well? And not just how will they know, but also how will the company know, if we haven’t got ratings, who’s performing and who isn’t? How will bonuses be handed out fairly? How can we be sure that managers are doing performance management properly and how are we going to address the issue of poor performance if we haven’t got a performance ratings? Before we dive into those questions, why do you think we generally worry about removing ratings?

08:11 – Karen Moran (Host)
Yeah, that’s a good question. I think we’ve got to look at what underpins performance management and our kind of processes, our systems. Why did we create them in the first place? I think all we really wanted was for managers to have conversations with their team so they could understand what was expected of them, give them some feedback on how they’re doing, coach them to improve, you know, think about their career and all of those nice things. But probably we didn’t trust them to do it so, or they didn’t. I don’t think there’s any probably about it.

08:47 – Lucy Adams (Host)
It’s like entirely built on a lack of trust, lack of trust.

08:52 – Karen Moran (Host)
I can’t believe they didn’t see through us. And so we’ve created these heavy processes, these annual processes, so we thought at least we can make sure they’re having a conversation at least once a year. And then we give them this criteria, then we give them ratings, so that we can check that they’re differentiating performance, not just telling everyone that everything’s great. And of course that’s going to make paying out bonuses a problem if if they don’t have something, and in some cases I think we we have these kind of distribution curves. So my example um at Evershed’s, so we can be really clear about how many high performers we’ve got, middle performers and poor performers, which, of course, is not actually working for us anyway, is it?

09:41 – Lucy Adams (Host)
no, it’s not. So I think, you know, if we just kind of hold, uh, that thought throughout is performance management systems were largely created, if not entirely created, because we didn’t trust managers to manage performance effectively and so we believed, by putting in these structures, that we could make them do stuff. We can make them have that conversation, we can make them give feedback, we can make them assess their performance and so on. And and I think that’s just a kind of helpful thing thing to keep in our minds because quite often when we start to feel that resistance to giving up ratings, it usually comes down to the managers we don’t trust. So we’ll keep that in the back of our mind and we’re going to dive into this first concern that people often have about giving up ratings, and this is you know, how will we know who are the best and worst performing? How will we differentiate performance? How will they know that you know how they’re doing and you know 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 organization.

10:53
And I think it’s important to look at the assumptions behind this concern to be able to recognize that it’s not a valid concern. You know it assumes that managers are brilliant at being objective and consistent when it comes to deciding ratings. You know, I mean any follower of the researcher and writer um, and superstar really now isn’t he in the us, marcus buckingham, will just tell you that. You know, ratings are not valid data. 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 just a single number.

11:46 – Karen Moran (Host)
Yeah, it definitely is. I think it’s on this old school idea that people won’t know how they’re doing unless we give them a score. But of course they do know how they’re doing, and so ditching ratings isn’t the full story. It’s about replacing those with those regular check ins that are way more useful than an annual exercise with a rating at the end, exercise with the rating at the end. So those kind of short, frequent chats how things are going, how’s your contribution, how’s your performance, what’s next instead of that kind of horrible once a year ritual where we kind of put them in a room. It’s just just doesn’t make sense, does it? So I know Microsoft, just one organization of many that have scrapped the annual review and they’ve bought in what they call connects and I quite like that language because you, yeah, and language is so important here, isn’t?

12:37 – Lucy Adams (Host)
it really is who is going to go skipping into a performance review or an appraisal? It sounds so judgy, and you know whereas a connect, it feels like a conversation, doesn’t it?

12:49 – Karen Moran (Host)
it’s really good. So these are informal, ongoing conversations, no ratings, just honest chats. And they’ve introduced these um performance journals, so they have these kind of journals where employees can make their own notes about what they’re, what they’ve achieved or what they want to achieve their goals and I think and they can share it with their manager or keep it to themselves. And I love that because it’s sort of much more about you. This is for you as an individual, not about us judging you.

13:21 – Lucy Adams (Host)
Yeah, and also linked to this concern that we’ve been talking about is the assumption that performance can only be differentiated by a rating, but of course it isn’t. You know, we differentiate performers, hyper-higher performers by giving them more opportunities or greater recognition, and you know and I think what we do need to understand, though, is that if we haven’t got that once a year ratings discussion and overview of who’s got what, what can we replace it with? And I think the answer is you just have regular talent talks amongst your senior managers, and Spotify do this really well. You know. They hold regular talent snapshot sessions, and these are peer-led conversations where groups of managers talk about their teams, who’s ready for something new, who’s excelling, who needs support. There’s no ratings, it’s just real rich conversations, and I think that’s how you differentiate.

14:22
Performance is, as you say. You’re having these one-to-one connects or check-ins with your manager, and you’re having regular you know regular having regular discussions and getting feedback, but you’re also then supported by managers coming together to talk about performance in their teams, talk about who’s ready for a move, so that you can then promote the ones who are better, you can give them more opportunities, and so on, but it’s being done regularly, rather than this kind of bizarre once a year ritual as you described you can give my example now, lucy, about when you were my manager so, um, karen worked for me as in my team and she was brilliant.

15:13
Is this why you wanted me to tell you? I know that, isn’t that?

15:15 – Karen Moran (Host)
true.

15:18 – Lucy Adams (Host)
I know, I know she’s the most modest, shy person when it comes to talking about herself, but she was brilliant and I, you know, thought that I’d been giving her regular, great feedback throughout the year. You know I love that I could do a bit more there, but that’s fantastic. You’ve really, you know, massive contribution. Thank you so much. And and then we’d get to the end of uh year at the end of the year, and I would, it would be Karen’s review time and we’d go into a room and you’d be terrified, you’d be in a real state, you’d be really agitated and I used to say, but what’s the matter? Why, why, why do you think something different is going to happen to what we’ve been doing for the whole year? And and I think it’s just an artificial way of having a conversation with someone, isn’t it? It’s that very parent-child dynamic. You know where you go into a room to do it.

16:11 – Karen Moran (Host)
You’re going to everybody in the office knows that you’re having it trying to see.

16:17 – Lucy Adams (Host)
You know she’s smiling. How long did that one? It’s crazy, it’s just a very artificial way, whereas actually the feedback that we’ve been having was on the way to a meeting, by your desk, um, you know, uh, by the water cooler. It’s that kind of little um feedback. So, you know, um. And then this point that I made about spotify, having leaders coming together talking regularly about their teams no nine box grids, no paperwork, but just talking about you know who’s doing really well, who could be ready for promotion, but throughout the year, so they get better at it.

16:59
So let’s have a look at the second concern that we get when people are thinking about giving up ratings, and it’s probably the one that we hear the most frequently, and that is if we don’t have ratings, how will we give out bonuses fairly? And obviously, if you don’t have bonuses, this is not an issue for you, but many, many companies still do and it’s an individual bonus linked to your performance. And if you haven’t got a number so you’re a three or a two or a one, or you could be a statement if you haven’t got a statement rating, how will that be fair? How will that be fair? And we have this view that if a bonus is determined by a number out of five, that it’s more, it’s less arbitrary. But it isn’t right. So if a manager is determining a rating, then the bonus payout is determined by his or her judgment. This is just as subjective as a line manager having discretion over the amount of money that that individual should get.

18:13 – Karen Moran (Host)
Yeah, yeah, it’s just. It’s just incredible, isn’t it? When you really think about it. We’re just.

18:18
It’s so silly, and I know that when we’ve looked at the sort of the research what other organisations are doing, most of them who’ve got rid of ratings have just been really clear about giving autonomy to managers to make those pay and bonus decisions, and particularly, I think you know, around pay, because if it’s pay around their contribution, they’re going to have a much better idea about what that should be, aren’t they?

18:43
Because they’re having regular check-ins with them, they know what they’re doing, and I think we’ve got to just start treating our managers as grownups, you know, that are capable of managing all of our clients and they’re managing big budgets and they’re also should be responsible for managing their own people budgets, their salary budgets, obviously with our advice and guidance, to make sure we’re not kind of, you know, out of whack in terms of market rate etc. But Adobe is a good example. So they’ve again replaced the annual appraisal with these, and they’ve been doing this for years now with their kind of check in conversations, but given managers the responsibility for paying bonuses and then still having calibration sessions, still having calibration sessions and that’s important, isn’t it?

19:35 – Lucy Adams (Host)
Because, again, when we talk to HR professionals about giving managers responsibility for the pay budget and the bonus budget, they do worry about possible discriminatory practices coming in and bias being shown and so on, and, of course, the reality is that they’re probably getting the.

19:52 – Karen Moran (Host)
they’re probably getting a discriminatory based uh rating anyway, but but that aside, so I think that calibration piece is helpful yeah, I think it’s just because, again, as we know, if managers are all we’re all biased, then you kind of someone you need that check-in, don’t you to kind of go, oh well, maybe I’ve been a bit too, you know, too too soft with that person or maybe I shouldn’t be giving them that and all I can see that you’re giving that team member that, so that feels fair. I just think it’s those good conversations again, isn’t it between peers of managers, and that’s, I think, again, where our value comes as HR is facilitating those kinds of calibration sessions, not about a process, but just about having good conversations about it.

20:41 – Lucy Adams (Host)
Yeah, and also bringing in our insights about you know market rate for certain roles, and so you’re able to actually make the conversation a much better one, rather than are they a two or a three. It’s actually about you know the value and the contribution that this individual is making. Um, okay, well, we’re going to have a little pause here just to tell you about our disruptive hr club. Uh, we have members all over the world, h HR professionals like you who want to do things a bit differently. With membership of the Disruptive HR Club, you get weekly live training sessions. You’ve got our on-demand training programs and tons of useful toolkits to help you make the changes in your organization. So if you’re interested in checking it out, head over to our website, organization. So, if you’re interested in checking it out, head over to our website, disruptivehrcom, and you can find out all the details there. Okay, let’s move on to our third concern, which is, if we’re not collecting in ratings, how are we going to know that managers are doing it properly?

21:48 – Karen Moran (Host)
Oh dear, the classic HR safety net. So yeah, I mean, I think we have to be honest, a lot of our processes exist because, as we talked about at the beginning, we often don’t trust most of our, some of our managers, most of our managers, to do it themselves. So we build these processes, these tick boxes, um, but because we know that just because a form was completed doesn’t mean a great conversation happened Again. I think my time at the BBC where I’d kind of pat myself on the back for having, you know, complete 98% completion of appraisal forms probably wasn’t that high, but you know, I’d be really chuffed with myself. Actually, I wasn’t thinking about the person on the other side. What did they? Have a great conversation just because the form was filled in. Were they feeling motivated or demotivated? Um, and I think. But in HR, I think we’ve just felt good because we know at least they’re getting one conversation a year, which I know that you believe, lucy, is probably worse than nothing at all.

22:53 – Lucy Adams (Host)
I do, I do. I think you know, if you’ve got managers that are not practicing this on a regular basis and doing it little and often, then you’ve got this kind of once a year feedback, as we’ve already talked about the kind of artificiality of those conversations. You know, once a year. But also, as human beings, we can only change one behaviour at a time, and yet we have all this feedback that’s kind of saved up for us. Or worse, your manager can only actually remember what you’ve done in the last six weeks. So that’s what they talk about, you know. So it’s yeah, I think it’s it’s for.

23:30 – Karen Moran (Host)
For me it can almost be worse than nothing, yeah and I think, if we forget about the top percent, that might be the ones we’re managing to demotivate the majority of our people, even if they haven’t. You know, even if the pre-rating conversation wasn’t bad, um, it’s still demotivating, isn’t’t it? To not be the number one?

23:50 – Lucy Adams (Host)
I know we said we wouldn’t talk about guided distribution all the time. But there was a manager that I’ve been working with and he was talking about how he was very pleased with the way he’d handled this appraisal conversation. He said, yeah, the individual was absolutely brilliant, but I knew I had to give them a two because I’d run out of my ones. So I kind of toned down my feedback to make it, to make it less positive, so that when I gave him the two he wasn’t going to be surprised thinking, oh my god, this is, this is mad. This is mad, it’s crazy.

24:28 – Karen Moran (Host)
Um, yeah, I think I think the way that we can know whether our managers are doing it or having these regular conversations, we have to ask them. Yeah, you know, I don’t know why we think having a form is kind of like helpful for us. We need to ask our people. Are, you know, is your manager um, do you, are you clear about what you need to do? Are they coaching you to be better? Um, and you know, I think um have not having ratings distribution curves. It’s just we just this just should not exist. And I think you know we can do that through surveys, through focus groups, through conversations, um, asking our people is the best measurement.

25:12 – Lucy Adams (Host)
Well, because it’s valid data, isn’t it? Yeah, it’s their experience and it therefore it’s valid data. Um, and you know, a great example of that is salesforce. So they use regular pulse surveys to ask employees directly how supported they feel, how their manager is helping them improve their performance, and then they publish the data internally. You know and we talk about this a lot, karen, don’t you know about?

25:41
It’s amazing to us how leaders, managers, are very comfortable with having their operational performance, financial performance, in the public, shared widely, and yet, when it comes to people performance and their role as a people leader, that data tends to get buried or it’s just you only get your own results. We don’t see across the board where the great managers are and where perhaps we could do better. So I think you’re right. I think we will know when, uh, we will know that managers will do it properly, because we’re going to ask our people. Um, we’re not going to assume that, because we’ve got 95 completion rates of appraisal forms, that that equates to great performance conversations.

26:29
So final question that sometimes comes up, but I think, thankfully, it’s asked less often than it used to be, and this is well. What will we do about poor performers if we don’t have ratings. Now, just to kind of take a step back. If we agree that a performance management system demotivates and doesn’t actually improve performance, then what we’re saying is but we need to hang on to it, to make sure that we’ve got the two or three percent of people who might be behaving badly, because we need to keep it for them. I mean, that just doesn’t make sense, does it?

27:13 – Karen Moran (Host)
no, it doesn’t. I think you know. Obviously, if there is a poor performer, then we would say, of course, then you should keep notes, you should have a record record. You know. You need to know that you’ve got something. If something goes wrong kind of further down the line, you’ve got some record of it. But let’s not design the whole approach around the lowest common denominator. Make everyone record it, just so that we can get to the tiny percentage that might get, might turn bad in the future and end up, end us up in a tribunal.

27:47 – Lucy Adams (Host)
And of course we know, don’t we, that it doesn’t actually help in those legal situations. Anyway, I mean, I, you know, I remember times where managers would phone me and say, right, I’ve had enough of this person. You know, they are such a poor performer, they’re a nightmare and I want them out of my team immediately. And I’d go scurrying over there and, all right, let’s right, okay, let’s see how we can do this then and, uh, talk to me about the issues. Oh, that is really bad. Yeah, it’s been going on for a while.

28:15
And right, can I have a look at the um, any documentation you’ve got to support this, and you’d pick up the appraisal form and it would say meets expectations, thanks, thanks for another year. You know, come on, I mean, you and I both worked at Eversheds, the law firm, and I remember us talking to the head of employment law there and he was saying that in I think it was 20 years of being an employment lawyer, years of being an employment lawyer that an appraisal system had never helped him win a legal case for unfair dismissal. Um, because, actually, the information, and neither should it. We shouldn’t be waiting all year to make a note at their appraisal that they’re a poor performer, you know, it just doesn’t make any sense.

29:08 – Karen Moran (Host)
Um, we should be dealing with it throughout the year at the time where it becomes obvious that this person is not performing yeah, and I think that’s what’s great about us kind of moving towards these more regular check-ins, because you’re you’re doing it in the moment, you’re kind of catching it before it goes bad, you know, maybe even resolving it before it gets to that, before it turns nasty. And so I think we can give our managers kind of more simple, clear tools, not performance improvement plan processes, because, again, we know that, even though we like to say in HR it’s not a, you know, it’s not a formal process, but it’s a process it feels like it feels formal to the individual that it’s happening to. And I think it’s Athena. I’ve seen that they’re doing this kind of colour-coded feedback which is for poor performers, but really for HR to help managers understand what they need to do, what kind of conversation they might need to have with their person who’s the poor performer.

30:15
So they have this yellow. It means you know it’s, you know maybe they’ve done something wrong or something’s gone bad, but it’s not critical and it’s actually probably a good learning experience. All good orange. Um, this is kind of a bit of a problem and it’s probably going to affect your opportunities to be promoted or get a pay review and then red is like this is serious and if we don’t see change, then you know you’re going to get fired and I think that, again, those sorts of tools help managers kind of be ready for right. What kind of message am I going to have to give this person? Is it a yellow, is it an orange or is it a red?

30:55 – Lucy Adams (Host)
I kind of quite like that sort of it’s sort of a simple tool for managers yeah, I really like it as well because, as you and I have, both experienced managers think that they’re being clear about the severity of the situation. But, you know, when we’ve gone in to do the mop-up and you’ve got a very happy individual sitting there thinking they’re about to get promoted or they’re going to invest in their training, and you think I’m not sure what you’ve heard, but it definitely wasn’t what the manager thought that they were saying to you. And so actually using some of these simple visual and verbal cues, I think can be very, very powerful, yeah, okay. Well, let’s start to wrap things up.

31:35
You know there are consequences to giving up ratings, absolutely. You know. For example, we’ve got to be able to explain and get support for an approach that isn’t as clear cut or clinical as an annual appraisal. You know we also in HR we have to refocus our efforts away from ensuring compliance with the system and refocus our efforts onto coaching managers to have better conversations. But dropping ratings will help build better performance and higher motivations, because the conversations will be better as a result, and that higher performance is kind of why we introduced ratings in the first place, isn’t?

32:21 – Karen Moran (Host)
it.

32:23 – Lucy Adams (Host)
So we really hope you’ve enjoyed this podcast. Don’t forget to subscribe, uh, so you don’t miss an episode, and if you’ve liked it, do let us know. Bye for now, bye.