Can you manage employee performance without ratings?
I recently saw a question on social media from a senior and experienced HR Practitioner asking who has moved away from of "mid-year" and/or "annual" performance reviews. He also asked what indicators people are using instead of ratings and who was still using performance improvement plans (PIPs).
I’m sure my colleague realises that performance management costs about 8% of the salary budget. For example if my colleague’s salary budget is $200M, then he is spending about $16M every year trying to manage performance.
That’s a lot of money when systems based on ratings, reviews and PIPs don’t actually deliver results. In fact most managers I know argue it delivers zero value!
In my experience the secret to managing employee performance without reviews, ratings or PIPs is “simplicity” because to achieve simplicity you must:-
Pervade every part of the process
Pay attention to every detail
Build a strong sense of values
Make it seem like less stuff is required while actually doing more stuff
Make something complex easy for the user
So my response to the social media question was simple.
I explained how about 20 years ago I moved away from reviews, ratings and PIPs.
I now insist that if an employee is doing a good job then just discuss how to help them do even better. By using a simple system, detailed management data for training needs or remuneration purposes is still captured and delivered without impeding the employee/manager conversation. And when someone is not performing, I use a separate policy setting that solves the management problem caused by the poor performing employee’s behaviour.
If you are going to spend 8% of your salary budget on performance management, please replace reviews, ratings or PIPs with simplicity and make sure you get great value for money.