traditional performance management
Asian business person ready to run toward the city

What’s Going Wrong?

By M. Tamra Chandler

Many of our biggest companies are doing it: Adobe, Gap, Netflix and GE. Microsoft has played with it. Yahoo is being challenged in court for not doing it. And the world of Human Resources is buzzing about it. What’s “it?” I’m talking about reworking traditional performance management and its attendant performance reviews, an increasingly hot topic now that the tide has shifted to an acknowledgement that old-school performance management simply doesn’t work.

The intent of traditional performance management is to drive organizational performance and support individual development.  But I firmly believe that review programs destroy trust between management and employees. They also do little to advance either the development of employees or of the organization as a whole.

I’m not alone: A 2014 study by Deloitte showed that only 8 percent of companies feel their performance management processes drive a high level of value. And a recent Corporate Executive Board survey showed that 95 percent of managers aren’t satisfied with their organizations’ performance management processes. The same survey showed that 90 percent of HR professionals don’t believe their companies’ performance reviews provide accurate information. It also reported that 66 percent of employees say the performance review process interferes with their productivity. I could keep going, but I think you get my point.

The problem is that our basic ideas of what performance management should look like were developed in the 1950s, and they haven’t changed to reflect how differently we work today. This disconnect has led to some serious problems with our old way of handling performance management.

I call them the Eight Fatal Flaws.

Fatal Flaw #1: A theory without evidence is just a (bad) theory.  Nobody has been able to show that the way we’ve handled performance management for decades actually leads to improved performance. In fact, because it tends to disengage people, it could be seen to actually have a harmful effect on the organization. This is because evidence does show that an engaged workforce is a key driver of organizational performance.

Fatal Flaw #2: Nobody really opens up with the person who pokes them in the eye. There is no way employees can have an open and honest conversation about their performance, hopes, fears and goals with a person who is going to judge them. Even more so if her judgment affects such important aspects of their life as salary, recognition and promotion. Instead, we want to find ways to have an open, ongoing dialogue that isn’t tied to a performance review. This will help our feedback hit fertile soil.

Fatal Flaw #3: Nobody remembers the good work. Managers find it very difficult to remember the good work an employee did earlier in the year, but the (usually) rare bad moments stand out. That’s human nature. This means that even employees who receive “good” ratings often leave performance discussions feeling disappointed because there was too much weight placed on areas of improvement, and too little on their strengths, contributions and potential. Any system that focuses on past performance instead of future development is going to be skewed in this way.

Fatal Flaw #4: No man (or woman) is an island. It’s often impossible to separate the performance of individual employees from the performance of their group, team or the organization as a whole. Remember, the system and environment employees work under has a large influence on their performance. Unfortunately, a performance review and/or an employee ranking puts the focus solely on the employee, not the environment.

Fatal Flaw #5: We are not machines. We’re all human, and therefore biased and inaccurate—even the best of us. Can we really make ratings decisions down to a decimal point? Nope. There’s no way a human can achieve that level of standardization—nor do we want to! Humans have an appreciation of nuance that’s really important if we want to have a fruitful dialogues with our employees.

Fatal Flaw #6: We are not machines, redux.  Since we are not machines (see above), we shouldn’t rely on the output of non-scientific performance appraisals to make decisions on important business functions such as compensation management, succession planning, development goals and employee performance reporting. Unfortunately, we routinely do make those important business decisions based on biased performance data.

Fatal Flaw #7: Let me introduce you to your competition—now play nice together! We want creative, agile organizations in which people with different skills, backgrounds and perspectives can collaborate in a low-risk environment, right? This means that we need to reduce those areas that foster competition unnaturally, such as stack-ranking or ratings brackets. How is it possible to achieve great teamwork when you routinely compare your employees to one another?

Fatal Flaw #8: We are not Pavlov’s dog. Old-school performance management is based on the assumption that extrinsic motivators (things we do to avoid punishment or get a reward) are the best way to get employees to work harder. Unfortunately, current research shows us that people are much more motivated by doing things they find personally rewarding. This means that paying people for high performance and neglecting other aspects for their work life—like culture and connection to our mission—won’t get you where you need to go.

This list of fatal flaws brings up the million-dollar question: What should we all be doing instead? Although one standard answer to the performance management riddle would be nice, a one-size-fits all approach won’t work in today’s fast-changing, chaotic world. Instead, we need to be brave enough to build something that doesn’t look like our neighbor’s performance management.

My advice? Keep a firm grip on your strategic vision, focus on your end goals, remember everything we’ve learned about motivation and engagement over the last 70 years, avoid the Eight Fatal Flaws and build something that is custom designed to help your organization excel in today’s world of work.

Tamra Chandler is the author of How Performance Management is Killing Performance — and What to Do About It (Berrett-Koehler, 2016) and a bona fide people maven. Her career is built on researching how people are motivated and developing effective ways for organizations to drive inspired performance. She’s also CEO and co-founder of a thriving, Seattle-based consultancy, PeopleFirm, one of Washington State’s fastest-growing businesses. Consulting Magazine twice has named her one of the top consultants in the U.S.