Mike Straw from Achieve Breakthrough says the old performance ranking systems are broken. 

Appraisal time – does that make your heart sink? If you’re a performance manager, it means fitting individuals in your team into pre-set rating bands or deciding on the remuneration and tackling the disconnect of where people believe they rate and your company’s reality – and dealing with some disgruntled reactions. As an employee, it means slogging through the forms and having those soul-searching conversations when you probably know what score you’re going to be given anyway. Crammed often into a few weeks of the year, it’s a process that leaves almost no one satisfied.

What’s more, these old systems place a large burden on HR departments. They are complex to run – some HR teams need to put aside an entire quarter to manage them. They take up a huge amount of an organisation’s collective time, for questionable ROI. They belong very much to an old world mind-set of control-order-predict. The manager controls his team, gives it orders and predicts outcomes. But old world certainties have changed. Look how unpredictable, dynamic and fast-moving our world has become. The fixed mind-sets and ways of working that conventional PM systems promote just aren’t adequate to deal with the new world that is mushrooming around us.

But it doesn’t have to be that way as there are new alternatives to this system. No longer will only those in the very top bracket come away feeling happy while everyone else is left wishing they had been ranked higher. No longer will 10% of staff be forced into the bottom ‘needs improvement’ box because ‘someone has to be in it’. And a new approach will stop everyone enviously wondering exactly what their colleagues’ ranking was. We have worked with and helped some organisations to move their PM systems to a new model, and we know it can work and produce far better results.

The new approach revolves around changing the old control-order-predict approach to one of acknowledging creativity and empowerment. It consists of the manager and employee working together in a much more equal way. Whereas under old systems the responsibility for the result is 90% the manager and 10% the employee (hence the employee is always destined to be disappointed), in the new system it is 100%-100%. Under the new approach performance management becomes a continual and ongoing dialogue. It is forward-looking and dynamic, focusing on future goals and targets, rather than backward-looking and static. There is a different deal between manager and employee, a shift from trusting in ‘the system’ to trusting in the manager – that they will develop a truly strength-based view of the employee, be absolutely straight about any capability gaps, and work with the individual to identify where they want to get to and how the manager can help unblock the path to get there.

The radical part, from a conventional point of view, is that there are NO PERFORMANCE RATINGS and no cumbersome electronic system. The old bands and distribution curves are simply done away with. Individuals know where they stand with their manager in terms of how they are performing and are rewarded financially (in terms of bonus, salary increase etc) accordingly. It is still subject to management review, there is outside scrutiny and transparency (and, of course, budget controls), but there are no simplistic performance ratings held on an HR database. Some major companies have moved this way – including for example KPMG and Microsoft.  We hope that more and more will follow suit. It is not that it is difficult – it just requires letting go of one trapeze and grabbing the next one – it requires bravery and a desire to make the process an enlivening one not one that saps!!

Eventually, I believe, the idea of labelling people numerically will be seen as a blip in HR history. Giving people a rating might be a useful tool in a company with a lot of ‘fat’, where it makes sense to shake people up and create competition, but in many of today’s lean businesses that demand a great deal from their employees, we need a better model. We need to improve the quality of the conversations we hold with our people. It’s time to kill performance ratings.