The new approach to performance management

Organizations serious about high performance must rethink the way they measure performance in a post-pandemic world

- Anushree Sharma

Here is a classic view of performance review:

• Here is what you did

• Here are your new goals

• Here is your salary hike (or pink slip)

And this is why neither did employees like the performance review process nor did managers like conducting these reviews. This process was enormously draining on morale, energy, and time.

The performance reviews are often viewed as punitive and incapable of reflecting the fast pace of business, and the ratings have been found to have little correlation to company results. But for many years, they were also seen as a necessary evil.

Then a few companies started a movement. Businesses including GE, Deloitte, Accenture, did away with the performance ratings. But then, further research manifested that eliminating ratings led to a drop in performance and engagement. Leadership advisory firm CEB found that the number of Fortune 1000 companies eliminating the annual review increased to 12 percent in 2015 from one percent back in 2011. But CEB subsequently found that getting rid of the review didn’t always reverse its restrictive effects. In fact, it proved to drop employee engagement and performance by 10 percent.

CEB’s analysis also found:

• Manager conversation quality declined by 14 percent

• Managers spent less time on informal reviews conversations

• Top performers’ satisfaction with pay differentiation decreased by eight percent

• Employee engagement dropped by six percent