|Performance Reviews: Don't Remove the Ratings|
Impact on Employees
In an effort to better their performance management systems, some companies have removed numeric or qualitative performance ratings. However, while there is often an initial positive reaction after eliminating performance ratings, key performance outcomes like quality of manager feedback and employee engagement ultimately suffer.
This has a greater impact on high-performing employees than average or low performers. High performers are less satisfied with the amount of time managers spend on performance management and manager conversations in environments without ratings. On the other hand, lower performing employees are happy when ratings are removed and they are not confronted with a score.
Without a rating to point to, managers struggle to explain how pay decisions are made and link to individual contributions. Employees notice this – in organizations where there are no ratings, the number of employees who believe their organization connects performance to pay decisions dropped eight percent. Unsurprisingly, in these workplaces high performers are less likely to feel that they are rewarded appropriately for their contributions.
"Performance ratings are crucial for organizations that desire a high-performing and engaged workforce," said
Without ratings, managers struggle when trying to explain to employees how they performed in the past and what steps to take to improve future performance. In fact, employees working at organizations that have eliminated ratings from the review process score their performance conversations with managers 14 percent lower than at organizations that use ratings. Managers at organizations that have abolished ratings also spend fewer hours on informal performance management conversations – 24 hours per direct report per year, versus 36 hours at organizations with ratings.
"When performance ratings are removed two things happen for managers – they spend less time on performance management and they have difficulty providing concrete evidence of how the employee is performing and progressing," added Kropp.
The Path Forward
Companies should focus on improving their performance management in three ways:
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Mary Baker, email@example.com, +1 (571) 303-6481