Performance management systems need revamp

I am sure most of you by now will have read about how all performance management systems are broken and the most progressive companies are moving away from rating employees — it’s the new bandwagon for people to jump on — I am not convinced.

As far back as 1991 the then Institute of Personnel Management concluded that performance management was about making sure managers manage properly — that they clearly communicate to their staff what is expected of them and give them the means to meet that expectation.

Whilst I read daily about people scrapping their systems I am yet to see what one of these new systems looks like and empirical evidence to show it works better than the ‘old fashioned’ systems they had previously. Though I agree that if a line manager is addressing their employee’s performance only through a ‘formal’ appraisal once a year – we do have a huge problem.

An article recently described a large MNC — who had scrapped their ratings — and had replaced them with simply performing/not performing — (isn’t that a form of ranking on a scale of 2?). When asked about what improvements had been noted, it stated after two years “it’s still too early to see if it worked”. In the business environment we operate in now — we don’t have the luxury of that time to be working out what should be working to drive performance.

Let’s say I remove the ratings I use now and replaced them with performed or not performed. With a performance based reward philosophy — how do I distribute reward fairly between my ok performer and my superstar — who now both rate as ‘performed’? — If they get the same review I disengage my superstar — If I give the superstar more than the person with the same rating they will both ask why. However if one was rated as a “1” and the other a “3”, I can quantify and justify my decision making around reward allocation and potential Talent interventions.

Research has shown that its only around 15 to 20 per cent of your population that really make a difference to the bottom line. With a performed/not performing label – do you really want to lump them with the other 50 per cent of mediocre performers and risk losing them to the competition when they become disengaged by not being recognised?

Ratings work for me because — if your systems are set up correctly — the ratings should be clear and transparent and can be defended if challenged. I work in a complex multi cultural environment and here it can stop accusations of favouritism and tangibly support a decision around talent or reward.

I am still reading a lot of ‘ideas’ about the scrapping of PM systems and ratings — but yet to really see anything that makes me sit up and say ‘wow’. Frequently meeting with your employees, giving real-time feedback and reviewing goals and achievements weekly is just good management and I don’t need an ‘app’ to make that happen. More worryingly the app won’t fix a poor manager or their poor practices.

Managing performance lies with the line manager it is here where the fix starts. Ratings are not broken — it’s the process that feeds into the ratings that needs the work.

What I am advocating is –

The writer is the Group Chief Human Resources Officer of Galadari Brothers . He is a Chartered Fellow of the CIPD and a graduate of the Wharton CHRO programme. His work on organisational transformation has been showcased by the CIPD in their digital learning series and presented at the CIPD London Festival of Work. In 2023 he was listed in the top 50 most Influential HR leaders in the MENA by the Economic Times.