There are many reasons why leading companies are reinventing the way they rank performance. When we get right down to it, however, one reason trumps them all – ratings trigger impulses in us that are anything but productive. In fact, they lead to “high levels of frustration, less willingness to take risks, and employees working against each other.” More in the video below:
To summarize:
First, labeling people with any form of numerical rating or ranking automatically generates an overwhelming “fight or flight” response that impairs good judgment. This neural response is the same type of “brain hijack” that occurs when there is an imminent physical threat like a confrontation with a wild animal. It primes people for rapid reaction and aggressive movement. But it is ill-suited for the kind of thoughtful, reflective conversation that allows people to learn from a performance review.
The second problem with PM is that it fosters an incorrect but prevalent view of human growth and learning. As Carol Dweck, the Lewis and Virginia Eaton Professor of Psychology at Stanford University, has discovered, most people hold one of two implicit theories about human growth and learning. The “fixed mind-set,” as she calls it, holds that intelligence and talent are basically established at birth and remain static throughout life. People are born smart or not, and there’s not much anyone can do about it. The “growth mind-set,” by contrast, holds that people learn, grow, and improve all their lives. This is accurate; most people do learn throughout their years. But they could learn far more effectively, and bring more of a high-performance attitude to everything they did, if they weren’t held back by the mental paralysis associated with the fixed mind-set.
What is the alternative?
Companies that are taking the lead in transforming the traditional performance rating system are implementing a growth-based approach. Accenture is one of those companies and its CEO, Pierre Nanterme, has shared his ideas about employee development. When asked if Accenture would still give out ratings or just feedback, he says:
At the end of the day, you need to give some evaluation. You need to give a compensation increase. But all this terminology of rankings—forcing rankings along some distribution curve or whatever—we’re done with that. We’ve totally done too much effort for a limited outcome.
We’re going to evaluate you in your role, not vis a vis someone else who might work in Washington, who might work in Bangalore. It’s irrelevant. It should be about you. How are you performing now, and do we believe you are prepared to move to another role? We are getting rid of all this comparison with other people.
When companies focus on individual development, they foster more innovative communities, simply because they choose cooperation over competition. This reflects a change away from command and control and toward connection and inspiration (Raghu Krishnamoorthy, long time GE exec).
Millennials – 1/3 of the American Workforce
The millennial generation, which has now taken over the American workforce, calls for a new set of engagement policies. In other words, as digital natives, millennials expect a more intuitive, personalized, data-driven approach and reject the traditional top-down process. Mr. Nanterme explains why:
And for the millennium generation, it’s not the way they want to be recognized, the way they want to be measured. If you put this new generation in the box of the performance management we’ve used the last 30 years, you lose them. We’re done with the famous annual performance review, where once a year I’m going to share with you what I think about you. That doesn’t make any sense.
Performance is an ongoing activity. It’s every day, after any client interaction or business interaction or corporate interaction. It’s much more fluid. People want to know on an ongoing basis, am I doing right? Am I moving in the right direction? Do you think I’m progressing? Nobody’s going to wait for an annual cycle to get that feedback. Now it’s all about instant performance management.
Could your HR office embrace a more qualitative approach to performance management and meet the expectations of millennials?