In a series of four articles on Consultancy.uk, Angel Hoover, EMEA Regional Practice Leader Talent Management & Organizational Alignment at Towers Watson, reflects on key trends and developments in the human capital space. In this article Hoover looks into the changing nature of talent management and its impact on performance evaluation cycles.
Over the past eighteen months or so, there has been a lot of conversation about performance management. I find myself thinking back to a decade ago when I was in a corporate role and the conversations were very similar. At that time, we were discussing the advantages and potential limitations of moving to a “ratingless” evaluation system. I specifically recall a meeting with our design team where we debated each facet of the system’s design and its linkages to other talent systems. We talked through how it would benefit the organisation, how the outcomes of a ratingless process would be used to develop talent and finally, how we would or would not be able to continue to reward employees based on performance.
As I read some of the articles published recently in Harvard Business Review and other renowned publications, I see similar themes emerging that provide an interesting parallel to those discussions a decade ago. What is different this time, is the scale and scope of media attention this debate is getting, in part due to the high profile of some of the organisations who have stated that they are moving or have moved to ratingless systems, or even, in their terms, “abolishing” performance management. This esteemed list includes companies like Microsoft, Adobe, Medtronic, Accenture and Deloitte.
Now, before you get excited, reader, I have to say that I have personally spoken with some of these organisations who have stated they are abolishing performance management and that’s not wholly true. There is still a measurement that exists somewhere in their system that enables leaders to categorise who gets the highest rewards at the end of a performance year. In a study that Towers Watson conducted in 2014 of 90 companies globally*, we found that 4% of the participating organisations did not use performance ratings. If we were to duplicate this survey in 2016, I think that number would stay relatively stable. Many organisations simply have not solved the challenge of creating a system without an employee “categorisation” that allows for differentiated reward allocation.
Having said that, this is a move that deserves our attention. As HR leaders and business partners, it is true that even we sometimes dread the administrative aspects of delivering the year-end performance process. So do employees. On top of that, research conducted by Mount, Scullen and Goff in 2000 suggests only 21% of the variance in performance ratings across an employee population was directly related to variance in performance. This is a pretty shocking statistic, given the time and energy that has traditionally been expended on performance management.
So, what do we suggest? There are a number of alternatives that an organisation can take, none of which includes abolishing the ultimate intent of the system. There is no doubt that data and research has confirmed we need a refresh of how we evaluate performance management, but there is still value for all employees in understanding what they need to deliver to benefit business and financial results. In addition to that, I firmly believe that this is a tool that top talent use to prove to leaders watching them, how highly they have achieved during the year.
As organisations debate on the dilemma of what to do about performance management, we must articulate the employee performance evaluation strategy that considers two tenets: increasing impact and enhancing efficiency and effectiveness. Increasing impact is dependent on the business and model, while efficiency/effectiveness is about enhancing the employee experience.
In Hoover’s next blog she will dive into the impact on performance management tools.
* Ticking all the boxes? A study of Performance Management practices in the UK, Towers Watson, 2014.