All You Need to Know About Performance Management Without Ratings

A lot of changes are occurring in performance management. A 2015 Bersin by Deloitte survey of more than 7,000 business and HR leaders from around the world found that more than two-thirds of companies surveyed said they were redesigning their performance management practices. And one aspect many of those organizations said they were rethinking was traditional performance ratings.

The notion that the best way to provide employees feedback is by ranking their performance on a scale of 1 to 5 is outdated. After all, what does it really mean to tell someone that he or she rates a "4" for teamwork, but a "2" for time management?

As with most changes, however, something cannot just be removed without an effective backup plan to put in its place. A 2016 report from CEB Global surveyed more than 9,000 managers and employees about what had happened after their companies stopped using performance ratings.

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The results? Less than 5 percent of managers said they knew how to effectively manage employees without ratings. Additionally, the quality of the conversations managers said they had with the individuals on their team had decreased by 14 percent.

So, while a ranking system might not be the best, it’s better than nothing at all. The key to advancing performance management past ratings is to lay the foundations for a new, more effective way of providing employees with feedback.

Here are five ways to succeed without ratings:

1. Clearly define expectations.

No performance management system can work unless everyone knows the expectations. Both managers and employees need to have a clear idea of what exceptional performance looks like for the employee’s position. This requires having an in-depth discussion with individuals about their responsibilities and how to achieve specific goals.

This might seem to be going a bit overboard, especially for employees who have been with the company for a while, but a bit of clarification never hurts. In fact, a 2015 Gallup survey looked at the engagement levels of 27 million employees. Of the employees surveyed who strongly felt their managers were good about helping them set work priorities, 66 percent were engaged.

The message here, then, is, begin an ongoing conversation with employees about expectations. Provide concrete examples of what acceptable, exceptional and poor performance looks like. Also, encourage employees to ask any question they may have so everyone gets on the same page about performance criteria.

2. Include ongoing, in-the-moment feedback.

One of the biggest issues with traditional performance ratings is that they reduce employees’ performances to a number and delay any kind of recognition they receive for a job well done. Employees have to wait for months to be rewarded. Even worse, they just receive a piece of paper that says they’ve received a 5 out of 5 rating.

Providing more frequent feedback allows managers to acknowledge employees better -- and that matters to workers. A 2016 Society for Human Resource Management report surveyed 600 U.S. employees and found that 48 percent of respondents believed their management’s recognition of employee job performance was very important to job satisfaction, while only 26 percent were actually very satisfied with the recognition they received.

It can be difficult for managers to go from a formal feedback system to one that is more in the moment. Help them make the transition by encouraging them to start small. Simple comments like saying “good job” or “thank you” are good first steps to get managers in the habit of providing ongoing feedback. Starting there also gives employees the recognition and guidance they deserve on a more regular basis.

3. Bring peers into the conversation.

Co-workers have a lot of influence over one another. In a 2015 survey from Virgin Pulse, more 1,000 employees were asked about their relationship with their colleagues. Sixty-six percent said their co-workers improved their productivity and focus at work. That’s probably because employees work so closely together and are better in tuned to one other’s needs than managers.

And that makes their feedback very valuable. They see what those around them are doing, and from a different perspective. By incorporating their feedback, managers will have a fuller picture of what’s going on with their team. It will allow them to give everyone better guidance and support.

No to mention that receiving meaningful praise from co-workers is another source of recognition to boost engagement. Hearing that management and their peers appreciate their hard work will show employees the impact they really have on the company.

4. Focus on the future.

Most think the point of a performance review is to look at what an employee did (note the past tense), and correct any old mistakes. But that’s a backwards way to approach management. There is no way to undo what has been done in the past, so it makes more sense to focus performance management on the future and on further developing employees.

Yet few organizations seem to be taking this approach. A 2015 LinkedIn report looked at the reasons more than 10,500 people had changed jobs the previous year. Forty-five percent of respondents said they left their old company because of a lack of career opportunities.

In order to keep employees happy, managers and leaders need to help them along their career paths so talent can take the next steps in their professional growth. One way to do that is to offer more training that is interactive.

For example, ChangeMyPath is a training platform that allows companies to create learning materials and then uses gamification to make even the most boring topics fun. All of a sudden, learning a new software or skill isn’t about reading presentation slides but making it through an interactive maze. Employees will get excited about their development and know their employer is supporting them along the way.

5. Follow-up

Having a conversation about employees’ performance isn’t enough. What’s said and discussed during a performance review needs to then be converted into goals that both managers and employees can monitor. This keeps everyone on track and helps employees stay engaged with their work. The aforementioned Gallup survey found that 69 percent of employees who said their manager help them set performance goals were engaged.

Work with individual team members to determine the most logical next steps. Create realistic goals that can be achieved through incremental steps. Also, discuss how progress and success will be measured in the coming months.

And then comes the most important part: Follow up.

When managers neglect to check back in with their employees, they are unaware of obstacles that have popped up or when employees lose focus. Simply by asking employees how things are going, formally or informally, allows everyone to know things are moving smoothly. If they’re not, problems can be addressed in a timely manner.