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Copping Out on Performance Management

The story below about performance management rating scales, originally written in 2007, still holds true today. In the time that’s passed since this article was first published, more research has been conducted and books written about the need to simply the performance review process. The original article was about how complicated rating systems allow managers to avoid tough conversations with employees. Recent research shows that the more complexity there is in a performance management system, the less it is used by all parties involved.

In addition to these research findings, technology has increasingly made the rating scale structure less relevant, as talent management systems increasing come with “slider” features and other user-interface design elements that allow the manager to drag the rating for any item to a relative position on a scale, making the fixed-point rating scale less relevant than it once was for many. However, the consideration of the rating scale remains a key issue for employees and for companies without access to the aforementioned upgraded technology.

As far as whether the three-point scale works, experience using it has taught me one thing: Your performance system is only as good as the training you give your managers related to feedback. Weak managers avoid tough conversations, regardless of the rating scale used. Train your managers to give great feedback related to performance in support of the three-point rating scale, and it works great. Avoid that training and fail to force managers to contrast good vs. great performance to the employees they’re reviewing, and the scale used doesn’t matter.

Does your performance management system have a “bail out” rating that allows managers to avoid confrontation? Don’t answer this question too quickly—it probably does.

Ever notice how Paula Abdul can’t be negative about any contestant on American Idol? Human nature follows this example when it comes to performance reviews. After all, who among us wants to confront and tell the contestant (oops, make that the employee) on the other side of the table that they are average—or worse yet, below average? Unfortunately, managers give reviews solo. There’s no hard-core bad guy (like Simon Cowell on American Idol) at the table with them as they cover a review with an employee.

A great opportunity to become more strategic and affect business results exists in the area of performance management. I speak from experience, since we are in the process of implementing a new performance management system at my company.

In addition to the setting of individual objectives for each position in our company, we are evolving from the standard five-point scale (1=Does Not Meet, 2=Sometimes Meets, 3=Meets, 4=Sometimes Exceeds, 5=Always Exceeds) to a three-point scale (0=Does Not Meet, 1=Meets, 2=Exceeds). Our reason for simplifying the scale was basic. We wanted more direct and honest dialog between managers and employees about what type of behavior/performance was required to be an “Exceeds” employee in our company. After all, the true “Exceeds” employees in any organization are the ones driving the most innovation, value and profit.

Why did we feel the need to strip down the rating scale to force this dialog? Our focus was to eliminate the “bail out” rating of “4” (Sometimes Exceeds), which serves as a crutch, allowing managers to avoid deep performance conversations with employees. Here’s how the “bail out” works:

Your average performer comes due for a review, so the manager breaks out the performance management form using the 5-point scale. In moving through the format, the manager gives mostly “3s” (Meets), but sprinkles enough “4s” (Sometimes Exceeds) in the process to make the overall review average out to be a 3.3 or a 3.4. With that in mind, the overall score falls somewhere between a “Meets” and a “Sometimes Exceeds” in the employee’s mind.

The result is that the average employee is satisfied with the overall numerical rating and generally won’t challenge the specific ratings provided on an item-by-item basis. Not only is the employee content with the overall score, but she usually goes away thinking that she “Sometimes Exceeds” the expectations for her role with the company (which is not correct; by all practical measurements, she’s an average performer). This scenario also means the manager never had to engage in tough conversations with the employee to differentiate between current performance and performance that truly “Exceeds” for the position in question. Most managers will do anything to avoid this type of conversation, since telling someone he merely “Meets” their objectives doesn’t feel good. Don’t we all think we are superstars on some level?

The business impact of this scenario is that the necessary conversations to drive performance and improved business results never happen. And that is where questionable practices like forced ranking come into play. Forced ranking is the big nasty that often emerges in organizations where managers don’t have real and candid performance conversations with all employees.

The logic of forced ranking is simple: If the manager won’t have tough performance conversations to drive improved performance, the organization will just force change through a mathematical approach mandating a certain percentage of “Does Not Meet” ratings, with those rated in the lowest category often terminated as a result. While the “up or out” system has worked well at places like General Electric, others trying to follow GE’s example (Ford comes to mind, as well as others) have found themselves locked up in litigation as a result.

Of course, there is a better way. Rather than attempt to drive improved business results through practices like forced ranking, simplify your performance management system. Move to the simple three-point scale I’ve outlined, then train managers on identifying differentiators on performance that truly drive business results. The primary challenge with the three-point scale is not only to create individual goals and objectives, but also to set the bar for “Meets” versus “Exceeds” performance. Make the usual measurements like quality, quantity, accuracy, timeliness and achieving deadlines the starting point for a “Meets” rating, then communicate early and often to employees that items like innovation, creativity, collaboration and leadership must be added to that mix to achieve an “Exceeds” on any objective.

A commenter on my blog captured it best. When choosing a Web designer for her business, she’s always disappointed when the designer being evaluated doesn’t have a fresh idea on what to do with her site, opting instead to ask her what she had in mind. The point? In any position, simply cranking out the task and executing well is “Meets” performance, while the innovators bring their own ideas to the table and “Exceed” expectations. Establish the performance differentiators for your organization and watch innovators you didn’t know existed rise to the surface.

Innovators always command a higher price on the market and bring increased revenue to their companies. Make sure your performance management system differentiates the rewards for those truly exceeding expectations.

Kris Dunn is a frequent Workforce Management contributor. He is chief human resources officer at Kinetix and writes the blog The HR Capitalist. He is also the head blogger at Fistful of Talent. To comment, email editors@workforce.com.