Does your performance management system deliver?

Does your business use annual performance management reviews?

I’m assuming that, because you’re reading on, you answered yes to that question.  I’ve been the subject of and have delivered many performance reviews, and have always struggled to understand the value of these annual rituals.

Why do we do this?

Is the purpose of the annual review to help individuals identify how to perform better in the future?  Is it designed to set their annual bonus and pay award?  It may well be both of these, in which case, can you really expect your team to be honest and open in their own assessment of their performance?  If they know they had a challenging year, from which they’ve already learned by their mistakes, are they going to remind you about this, or will they tell you about all of the good things that happened?  I know what I’d do!

I’m an employee, a manger and a human being!

As an employee, I’ve always sought and acted on feedback from others around me, so why do I need to be reminded of the mistakes that I made 11 months ago, or the successful completion of a project last week?  The answer is usually that my salary is related to my sustained performance, and that the company bonus scheme pays out a princely sum, based on my performance last year.  Will my manager play up the positives or remember the negatives?  I’m nervous now!

As a manager, I try to coach my team throughout the year, leading them through the difficult times and celebrating their successes with them.  I have to assess their performance over the year on a 3 or 5 point rating scale, and remind them of their highs and lows over the year.  This is something that I struggle to with, as a manger; performance across a 12-month period has a natural variation, yet I’m expected to summarise this variation with a single rating.  I feel sorry for my team members who had learned from their mistakes, yet will receive a lower rating than they feel they deserve, despite having shown improved performance since that error of judgement earlier in the year.

As a human being, I suffer from bias.  I am programmed to remember bad things; I remember bad or dangerous events for self-preservation.  As a human being, I like some people more than I like others; I can’t help it!  The impact of this as me as a manager is that I going to fail to give an objective view of my team members’ performance.  I can’t help it, it’s just the way I was made.

What’s the result of all this?

My experience of such systems is that we rarely feel that my performance was assessed objectively.  Personally, I’ve had reviews that rated my performance below what I thought it was and, perhaps more surprisingly, above my expectation.  It was the latter experience that made me wonder whether there was any real value in performance reviews.  Does the fact that my annual bonus is related to my personal performance over the last year make me deliver higher performance? No, of course not!  What it does to me, and many others around me, is to demotivate us when it is not as good as we had hoped!  I’ll discuss this problem another time!

The good news!

There is a solution, however.  Throw away the annual performance review and coach your teams throughout the year.  If you must pay a bonus to your staff, link it to business performance.  I have been part of an organisation that paid its staff a fixed annual bonus based on the company’s performance. Every member of staff got the same bonus; that seemed to be much fairer than more complex system, based partly on individual performance.

I’m sure that you may think that there are serious risks with taking such a bold step, but ask yourself, what would you gain by not having an annual performance management cycle?