Performance Reviews - KeynesYouDigIt/Knowledge GitHub Wiki

Kill Your Performance Ratings Performance Previews

Keep a journal of performance coaching activities

The Performance Management Revolution

"Performance appraisals wouldn't be the least popular practice in business... if something weren't fundamentally wrong with them."
Replace formal, infrequent reviews with informal, more frequent ones.
A "rite of corporate kabuki" that restricts creativity, generates mountains of paperwork, and serves no real purpose
The carrots and sticks hold people accountable for past behavior at the expense of improving current performance and grooming talent for the future
People detest numerical scores- they would rather be told they're average than told they're a 3 out of 5
Ratings have as much or more to do with who the rater is than what's being rated (Iwan Barankay, Wharton)
Force-ranking lowers overall performance (Iwan Barankay, Wharton)
Managers hate doing reviews. 45% did not see any value in them (Willis Towers Watson), and 58% of HR executives consider them an ineffective use of a supervisor's time

History

When human capital was plentiful, firms focused on which people to let go, which to keep, and which to reward. It worked ok, until human capital was in short supply. Performance reviews were invented by the military in WWI, by WWII most companies used them, and by the 60's 90% of companies used them, at which point they were locked in by unions. At this point, performance was considered static- improving anyone's performance wasn't even a consideration until the 70's, when GE split appraisals into reviews and development goals. Inflation turned not getting merit increases into a severe pay cut, and managers started getting huge discretionary bonus pools. In the 80's, Jack Welch introduced stack-ranking to get rid of low-performers (it had been invented in WWII by the military to identify officer candidates). Development resources only went to "A" players at GE. In the 90's, legislation limited the tax deductibility of executive pay, but exempted performance-based pay, so everyone shifted to it. In the late 90's, a McKinsey study indicated that some employees were fundamentally more talented, and should be treated special. As organizations flattened in the 2000s, managers had so many direct reports that managing their performance regularly was considered impractical, especially since they were also expected to do IC work. Then environments became volatile and bonuses started shrinking, and it started looking silly to make goals that were durable enough to last a year, and then ruthlessly evaluate them for such small rewards. Then, agile started to shift the definition of success in an organization.

Reasons to Drop Performance Reviews

People development is key due to tight talent markets and the growth of knowledge work
The need for agility reduces the importance of past performance, and the changing nature of the work makes goal and task performance harder to track
The centrality of teamwork, which is only possible when ranking systems are eliminated, makes it difficult to consider an individual apart from their environment

Challenges

Litigation protection (lots of labor law is based around performance systems that appear objective)
Aligning individual and company goals
Rewarding performance
Identifying poor performers (the traditional system is also bad at this)
Too much feedback

Quotes

The idea of a merit rating is alluring. The sound of the words captivates the imagination: pay for what you get; get what you pay for; motivate people to do their best, for their own good. The effect is exactly the opposite of what the words promise. Everyone propels himself forward, or tries to, for his own good, on his own life preserver. The organization is the loser. The merit rating rewards people that conform to the system. It does not reward attempts to improve the system. Don’t rock the boat. - Deming

The merit rating nourishes short-term performance, annihilates long-term planning, builds fear, demolishes teamwork, [and] nourishes rivalry and politics. It leaves people bitter, crushed, bruised, battered, desolate, despondent, dejected, feeling inferior, some even depressed, unfit for work for weeks after receipt of rating, unable to comprehend why they are inferior. It is unfair, as it ascribes to the people in a group differences that may be caused totally by the system that they work in. - Deming

My boilerplate against performance reviews:

For Q3 reviews, I responded to each of their goals. If it involved reading a book, we talked about their takeaways from the book. If it involved running a workshop, we talked about the challenges of doing it, the impact it had, and how we can reuse those skills elsewhere. If it involved making something, we talked about what they learned how it changed their perspective on development. If the goal didn’t get accomplished, we talked about why and how we could do it differently next time- it was never a surprise, since we talk about them every week or so. Questions I asked for my Q4 planning:

How is everything going?
What do want out of your career right now?
In what way would you like to be different by next month?
What are you most looking forward to in the next month?
What are you dreading the most in the next month?

From that, we developed goals together. They usually knew what they wanted to work on, and I would sometimes add something to stretch it. For example, I had a developer want to make an app with a particular framework- I once added a stipulation that it needed to be done using a certain best-practice release methodology. Sometimes they’re based on what I know they need to do to accomplish their career goals. For one employee who wanted to move into management, I tasked him with starting a book club for the company on a management book that I want him to read.

What I didn’t do at any point is assign number ratings to anyone. In addition to being a subjective measurement masquerading as an objective one, it has the potential to feel dehumanizing. Just as bad, it triggers an amygdala hijack:

“First, labeling people with any form of numerical rating or ranking automatically generates an overwhelming “fight or flight” response that impairs good judgment. This neural response is the same type of “brain hijack” that occurs when there is an imminent physical threat like a confrontation with a wild animal. It primes people for rapid reaction and aggressive movement. But it is ill-suited for the kind of thoughtful, reflective conversation that allows people to learn from a performance review.” - Kill Your Performance Ratings

While it makes it harder to force-rank people for merit-increases, that’s a feature not a bug. Money has consistently been proven to be a hygiene factor rather than a performance factor. In other words, tying people’s money to their performance has never been demonstrated to improve performance- if anything, the opposite is true (see Two-Factor Theory.

Rating people based on how well they live the values is especially cruel, since few/no managers are actively tracking, coaching, or measuring employees on these. Since one of the premises of the performance review is that some critical mass of our managers don’t know how to do valuable reviews and aren’t talking to their people regularly, why would we expect those managers to have been been coaching their people on the values, or at least telling them that they were going to get 1-5 scores on them and their salary might be tied to it? If managers aren’t yet talking to their employees, why are we placing any value in their assessment? If they need guidance on how to become good managers, why would we start with a worst-practice- reducing 3 months of a human’s work to a few subjective ratings? Worse, if an employee isn’t learning and growing courageously, maybe it’s because they’ve been given no coaching or direction from their manager- but it’s the employee who gets a poor review? No behavior happens in a vacuum.

If we want employees to live the values, we should substitute performance reviews for performance previews. If you want your employees to create inclusive human connections, tell them you would like them to take someone new to lunch by the end of the week, and then talk with them Friday about how it went. It keeps performance from being a guess-and-check exercise every 3 months, and turns it into a behavior that managers are expected to consistently engage in. Management is something continuous, not something periodic. Great managers don’t manage people, their performance, or their behaviors every 3 months- they do it every day.

There are no questions, forms, software, rewards, punishments, or advice that replace good management. If we want engagement and performance to go up, we need to take management seriously. Performance-based management is a poor excuse for not being a daily manager.