Personnel Today
  • Home
    • All PT content
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • Brightmine
    • Learn more
    • Products
    • Free trial
    • Request a quote
  • Webinars
  • Advertise
  • OHW+

Personnel Today

Register
Log in
Personnel Today
  • Home
    • All PT content
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • Brightmine
    • Learn more
    • Products
    • Free trial
    • Request a quote
  • Webinars
  • Advertise
  • OHW+

Performance management

Are performance management systems broken?

by Mike Straw 13 Mar 2015
by Mike Straw 13 Mar 2015

The traditional “rank and yank” approach to performance management does not apply to the fast-changing environment in which most employers operate, argues Mike Straw, CEO of organisational change consultancy Achieve Breakthrough. But what can organisations do differently so the process is fairer and more collaborative? 

How companies approach performance management (PM) is changing, and evidence is mounting that conventional methods of strategic human capital management are broken.

A 2013 survey by the Society for Human Resource Management in the US asked HR professionals about the quality of their PM systems; just under a quarter said their company was above average in the way it conducted them.

I believe that this is because conventional PM systems are mostly backward-looking and static; many of them also use “forced distribution curves”, which means that a fixed percentage of the workforce must be ranked as “needs improvement” or “unsatisfactory”.

This combination of ranking based on the past and having to fit people into pre-set performance brackets means that the whole system can seem demotivating and unfair to most people in the organisation.

It is likely that only those in the very top bracket come away feeling satisfied; everyone else is left wishing they had been ranked higher, as well as wondering where their colleagues were ranked.

It also means that there is the possibility that individuals who have been performing reasonably well find themselves in the “needs improvement” box – simply because someone has to be in it. This is hardly a great motivation to perform strongly in the future.

The role of managers

Another problem with these systems is that the responsibility lies very much on the person who is managing performance. The whole process is led by them, the onus is on them to ask all the questions, and the responsibility also lies with them to allocate (and justify) scores for their teams.

Because of the way performance management systems tend to be designed, there is little chance that managers will ever satisfy the majority of the staff, and they spend the rest of the year rebuilding their relationships, only to have them tested when the cycle starts again.

Not only that, but such systems place a major burden on HR departments. They are complex to run – some HR teams need to put aside an entire quarter to manage them. In short, they take up a huge amount of an organisation’s collective time for a questionable return on investment.

Changing times

PM systems belong very much to an old-world mindset of “control-order-predict”. The manager controls their team, gives it orders and predicts outcomes. But these certainties have changed.

The world has become more unpredictable, dynamic and fast-moving, and the fixed mindsets and ways of working that conventional PM systems promote are not adequate to deal with it.

That is why I believe it is time for such approaches to change. Lots of people are talking about it, although only a few pioneering companies have actually done it.

I have worked with and helped some organisations to move their PM systems to a new model, and I know it can work and produce far better results.

The new approach revolves around acknowledging creativity and empowerment.

It consists of the manager and employee working together in a more equal way. Whereas under old systems the work was 90% done by the manager and 10% by the employee, in the new system they are both equally involved.

Dialogue and equality

Instead of a formal appraisal situation once or twice a year, performance management becomes a continual and ongoing dialogue under the new approach.

It is forward-looking and dynamic, focusing on future goals and targets, rather than backward-looking and static.

There is a different deal between manager and employee, a shift from trusting in “the system”, to trusting in the manager – that he/she will develop a truly strength-based view of the employee, be absolutely straight about any capability gaps, and work with the individual to identify where they want to get to and how the manager can help unblock the path to get there.

The radical part is that there are no performance ratings and no cumbersome electronic system. The old bands and distribution curves are simply done away with.

Instead, individuals know where they stand with their manager in terms of how they are performing and are rewarded financially (in terms of bonus, salary increase etc). It is still subject to management review, there is outside scrutiny and transparency (and, of course, budget controls), but there are no simplistic performance ratings held on an HR database.

Of course, there are still challenges. Performance management is an inherently difficult thing. It still requires the manager to have those difficult conversations where necessary.

You will still get some people thinking they are being under-valued and under-rewarded. But, because the system is much more continuously interactive and forward-looking, I have found that such strife and disagreements are noticeably reduced.

Some major companies have moved this way – Microsoft for one has got rid of its enforced ranking system. I hope that more and more will follow suit.

Labelling people with a performance band or number encourages a “fight or flight” mentality: people resist it or decide they want to leave. It breeds resentment and dissatisfaction. It also fosters the notion that performance possibilities are essentially fixed, almost pre-determined – instead of the view that you can learn, develop, grow your performance and become better.

Sign up to our weekly round-up of HR news and guidance

Receive the Personnel Today Direct e-newsletter every Wednesday

OptOut
This field is for validation purposes and should be left unchanged.

Eventually, I believe, the idea of labelling people numerically will be seen as a blip in HR history. Giving people a rating might be a useful tool in a company with a lot of “fat”, where it makes sense to shake people up and create competition, but in many of today’s lean businesses that demand a great deal from their employees, we need a better model.

We need to improve the quality of the conversations we hold with our people. It is time to kill performance ratings.

Mike Straw

Mike Straw is CEO of Achieve Breakthrough, a consultancy that provides organisations with new ways of thinking and acting to deliver better business and people performance.

previous post
Religious discrimination: half of workers believe laws inadequate
next post
How should the BBC deal with Jeremy Clarkson?

2 comments

Penny Davis 14 Mar 2015 - 8:32 am

Excellent article – agree that performance management approaches are flawed and outmoded

Rothrock 17 Mar 2015 - 10:24 am

what do you suggest as an alternative?

Comments are closed.

You may also like

Prioritising performance management: Strategies for success (webinar)

8 May 2025

Eight ways to best support grieving employees

6 May 2025

Half of workers waste two hours a day...

6 May 2025

Having confidence in role makes you a better...

31 Mar 2025

HR Predictions: What’s ahead in 2025? (webinar)

23 Jan 2025

Museum worker wins unfair dismissal case on lack...

22 Jan 2025

Meta to performance manage out 5% of workforce

15 Jan 2025

Who made the best background music, Mozart or...

25 Oct 2024

Presence and productivity: does office time really make...

3 Oct 2024

One in four managers say teams are more...

19 Aug 2024

  • 2025 Employee Communications Report PROMOTED | HR and leadership...Read more
  • The Majority of Employees Have Their Eyes on Their Next Move PROMOTED | A staggering 65%...Read more
  • Prioritising performance management: Strategies for success (webinar) WEBINAR | In today’s fast-paced...Read more
  • Self-Leadership: The Key to Successful Organisations PROMOTED | Eletive is helping businesses...Read more
  • Retaining Female Talent: Four Ways to Reduce Workplace Drop Out PROMOTED | International Women’s Day...Read more

Personnel Today Jobs
 

Search Jobs

PERSONNEL TODAY

About us
Contact us
Browse all HR topics
Email newsletters
Content feeds
Cookies policy
Privacy policy
Terms and conditions

JOBS

Personnel Today Jobs
Post a job
Why advertise with us?

EVENTS & PRODUCTS

The Personnel Today Awards
The RAD Awards
Employee Benefits
Forum for Expatriate Management
OHW+
Whatmedia

ADVERTISING & PR

Advertising opportunities
Features list 2025

  • Facebook
  • Twitter
  • Instagram
  • Linkedin


© 2011 - 2025 DVV Media International Ltd

Personnel Today
  • Home
    • All PT content
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • Brightmine
    • Learn more
    • Products
    • Free trial
    • Request a quote
  • Webinars
  • Advertise
  • OHW+