Success without Performance Evaluations? Yes!
Nothing is spreading faster today than the elimination of the dreaded performance evaluations. Hot companies like Juniper Networks in California are doing it. Huge conglomerates like GE are doing it. Safe, traditional companies like Deloitte and Accenture are doing it. And Research company Bersin reports that 70% of companies are considering following suit.
The trend is all the more interesting because it was pioneered by start-ups and young, fast-growing digital companies. It is part of a broader discussion of how large corporations can learn about organisational speed from entrepreneurs. And the elimination of performance evaluations is one of the of the first practical examples.
The case for eliminating evalutions is clear. Huffpost reports on November 18, 2015, that “Many employees dread them, while others even report that they create disengagement and negatively impact their creativity. Managers find the process cumbersome and untimely, at a frequency that is unable to impact performance when needed”. Other research points out that our work has grown increasingly complex and a much faster learning curve is required today than what an annual review can deliver. In Lighthouse’s research, they report that 58% of executives do not believe that the process drives engagement or performance. Many suspect that this very time-consuming and costly process actually has a negative ROI.
My blog “Want Accountability? Fix Results!” has as a sub-heading “Why HR processes don’t lead to accountability”. And in another blog – “Good to Great: The Difference is Organisational Health” – I report Jim Collins’ learnings that no company was helped by their HR processes in their transition from Good to Great. The evidence is clear. Something is broken.
But what do we then do? Performance Evaluations were implemented for a reason. A good reason. Along with all the other processes and programs (talent pipeline, succession planning, training programs, incentive programs, etc), the vision was to build a company where all its talent, creativity, experience, intelligence and effort would flow unhindered to the priority projects of the company, which as a result would beat anything competition could do with their tired organisations, full of internal misalignment, political energy drainers, confusing priorities and slow decision making.
The vision is still good. But years after implementation, many companies still find themselves to more like the low-energy company described above. Even with high engagement ratings in employee surveys, daily work still feels more like a struggle than riding a wave towards success.
So companies are ready to try something new. Something which could actually deliver on the promise of the vision above. Removing performance evaluations may be the first step, but what is next?
The way forward is to a large extent described in my blog “The How of Organisational Health”. It’s all about going back to the basics. The basics of people and every daily interaction they have with each other.
It starts with hiring the best people. Not the best people technically. But the people who get your company and your business. Here is how you know if you have found them: The best people do not need to be managed! When we implemented complex bureaucratic control systems, we are really just compensating for not having hired the right people in the first place. Hire the right people, and you don’t have to spend your time managing people. You can focus on building the business and managing the system.
With the right people in place, make it clear to everyone what your company is about. What benefits do we provide to our customers? What is our vision? What are the few capabilities and values where we will exceed 99% of all other companies? Millennials have made it clear that they want to work with a higher purpose. But older generations will equally be motivated by clarity on where you are going and how you are going to get there.
Then replace the control processes and hierarchy by a culture of discipline and entrepreneurship. In “Intolerance: The Ultimate Leadership Value”, I make the point that organisational health (aka culture, values, productive, high performance organisations, competitive edge, etc), is created every day by every employee who writes a mail, talks to a colleague, attends a meeting or makes a decision. And the key to success is to take every opportunity get in line with the company’s stated strategy. And whenever any one observes behavior which is not in line, this should be called out dealt with here and now. Are we working on the right priority? Are we dealing with disagreements productively? Are we making ourselves accountable for our part? Do we tell our colleague when he has not delivered on his part of the team’s tasks? Do we ask for feedback when completing a task? Do we admit mistakes and fix them quickly? Do we face the brutal facts of failure and share them openly? Do we innovate in our daily work? Are we working on our mastery of whatever areas have been chosen by the company has strategic values or capabilities? Do we live up to that standard every day, in every meeting? Do we have a plan how to get there if we are not already there?
In companies which get this part right, annual performance reviews are replaced by daily and immediate feedback. Development plans are no longer annual negotiations but on-going improvements in the mastery of the priority capabilities, reinforced by continuous performance feedback. Performance issues are identified immediately and repeatedly. The employee is likely to decide to move elsewhere before the awkward conversation becomes necessary. Unacceptable behaviour and leadership styles will stick out like a sore thumb in a company where feedback flows freely. And ratings (still required for salaries and promotions) become the result of real performance over time, documented fully by continuous feedback.
Some large companies do this already. As a result, they win in the market place. Even more startups do it. Not necessarily because they are smarter, but because they started with nothing and could go straight to the logical model. All companies will soon face at least one competitor who is doing it. The time is right to start now – and become the first mover in your industry.