1. There are no "does not meet" or below-average ratings: If your managers aren’t delivering some bad news, they don’t feel compelled to be candid about performance. Change the expectation.
2. Employee pay increases are clustered around the budgeted average merit increase percent: Everyone getting 3 percent means rewards are being withheld from high performers to avoid tough conversations with low performers.
3. High performers are leaving your organization for better opportunities: If they can’t get feedback differentiating their performance from others and/or more than 3 percent increases from you, they’ll go somewhere else. That’s not good.
4. Your performance management system has no individual goal setting: Socialist countries don’t bother attempting to define individual contributions. Don’t encourage employees to be mediocre.
5. You have no employee relations issues that are related to frank and honest feedback about low performance: If you don’t have at least a few employee relations issues related to low review scores, you have a culture reinforcing that being average is OK. Is that going to help you make your revenue number?