Source | LinkedIn : By David Rock
The shift away from formal numerical performance ratings is at an interesting tipping point. According to a recent CEB study, approximately 6% of the Fortune 1000 have removed ratings, 15% of companies are in the process of deciding whether to do so, and 28% of companies would consider it. On the other hand, 51% of companies say they do not plan on removing ratings.
At this junction, with around 200 large companies either considering or betting on the path away from performance ratings, it’s important to have good data about the process. Here’s what else this new CEB study showed: removing ratings can be a positive experience, but only if you do a few key things. If you just remove ratings and expect employees to be more engaged, without taking a few key steps, you are more likely to find the experience a negative one. Yes, you read that right: Don’t remove performance ratings, unless you plan to take the process seriously, as you may not get the results you want.
What are the three things? In summary, companies need to ensure there is an increase in the frequency of performance conversations that happen throughout the year, that these conversations shift from past-focused to future-focused, and that they support the culture shift with robust change management.*
At first glance, CEB’s headline that ‘most firms had a negative experience’ appears to contradict other recent research. At the NeuroLeadership Institute, we have been tracking the trends around removing performance ratings since 2012. A study we completed in 2015 found 36 large companies with positive results from the transition on engagement, quality and quantity of performance conversations, and employee perceptions.
The discrepancy here is that NLI interviewed firms who were willing to be a case study and therefore had a positive experience. Whereas CEB’s study went directly to employees rather than HR, and in this way they found both positive and negative experiences. Also, NLI studied mostly larger organizations, who by nature have a more mature HR function, more likely to think strategically about a change, whereas CEB studied companies of many different sizes.
CEB’s study found a ‘majority’ of firms who had removed ratings had negative experiences. Yet these were also firms who didn’t do three important things. And if you only selected firms who did do these three things, the majority had a positive experience. A big question here is whether you can do these three things without removing ratings. At the NLI we are not so sure, given that the act of rating people creates such strong emotional reactions. It is hard to be future-focused in conversations when you feel defensive. Also, our research showed a strong pattern of the quantity and quality of conversations going up significantly on the removal of ratings, when done well. We think ratings, by their nature, inhibit ongoing conversations: the task is mentally ‘parked’ until a designed time of year. CEB continues to wonder if it is possible to get the benefits of more frequent, forward looking conversations, without removing ratings. At the NLI, we think a better thing to solve for is, how can we make it much easier for all companies to execute the three things necessary to make rating-less performance work?