 "Round-the-clock performance review")
How do you separate the high performers in an organisation from the average Joes? How do you ensure the high performers continue to perform better and the non-performers do not end up becoming a drag on the bottom line?
Traditionally, companies have used the annual performance review system to keep employees accountable, rewarding those that excel, and tracking performance over time. But many companies are realising that performance reviews cause as many problems as they try to solve. Instead of guiding managers to offer honest feedback to their teams and coach employees, companies are actually training them to "make the most of available resources" or "cover their bases". Some have discovered that traditional incentive systems are failing to propel the best employees forward. A survey report by Deloitte says, "Today's widespread ranking- and ratings-based performance management is damaging employee engagement, alienating high performers, and costing managers valuable time... Leading organisations are scrapping the annual evaluation cycle and replacing it with ongoing feedback and coaching designed to promote continuous employee development."
Organisations such as Accenture, Delloite and Cisco are among a handful of companies that have jettisoned the bell curve-based annual appraisal system and have opted for an always-on appraisal system which is ongoing and real time. These companies would be joining the likes of Microsoft and Adobe, which have also realised that the traditional way of conducting performance reviews is ineffective.
But is the new system any better? What are the new tools the human resources department has at its disposal to review people's performances? More importantly, how are organisations linking performance to rewards?
Take Infosys, which has created a new system for performance evaluation and goal management that stresses on continuous feedback culminating in the annual rating. The iCount process helps the company in identifying the best performers against standards of performance as opposed to relative comparison of individuals. "Under the new process, evaluation is done against well-defined goals and it is transparent to the employee. This has eliminated some of the angst associated with the forced ranking under the bell-curve system," says Richard Lobo, senior vice-president and head, HR, Infosys. The company has baked into it a mechanism to keep goals and tasks relevant at all times with a focus on continuous feedback and a review once the goals are achieved.
According to Sanjay Vats, general manager, HR, Insecticides India Limited, the formal yearly performance assessment system is time-consuming, involves a lot of paperwork and creates friction between employees and managers. The system is often rigid and doesn't involve timely feedback.
It is precisely for these reasons that the company moved away from the annual review and now does weekly evaluation of employee performance. The HR team has developed a feedback network comprising online-offline and casual-formal meetings for managers which allow timely feedback on goals set for their teams. Equal emphasis is laid on self-assessment by employees to avoid any unpleasant surprises at the end of the year. Rohan Gupta, chief operating officer, Attero, says, "To achieve and sustain fast-paced growth, organisations need to measure good and bad performance instantly, instead of waiting for the year to end. Quick feedback is important for helping an individual improve her performance on a regular basis."
"Now companies are trying to get more accountability in place for employee rating. That means individual contribution is relevant rather than just relative performance," adds Sagar Das, co-founder, Autoportal. The need to attract and keep talent is also pushing organisations to remove the annual ratings system.
"There is a need for organisations to get managers talk to each employee about their development more than once or twice a year. This is truer in the case of a millennial workforce that craves for learning and career growth," explains Das.
Frequent communication helps improve engagement, and makes the whole process fairer and transparent, as managers better understand how their people are doing.
Here's a note of caution. Kamalika Mitra, engagement manager, TATA Strategic Management Group, says organisations eager to sound the death knell for the annual review should analyse if the new alternatives are able to assess and differentiate performance objectively. Most importantly, doing away with the bell curve may lead to reward neutralisation. For instance, if the rewards budget is pre-fixed, it may be spread too thin among employees.
Richard Cowley, founder, WorkAmmo, stresses on the importance of getting the rewards and recognition right as part of any new HR process. "At the end of the day you need a way to share. Either all get the same or you find a process to reward different levels of contribution. Any comparison or calibration demands that you do similar actions to similar people. This can, of course, really demotivate high performers."
Cowley believes that as organisations replace the traditional systems they need to be clear on the evaluation metrics that will drive individual, team, and company success. "Don't miss the collective calibration element. Leaders are human, and come with their own set of biases. These biases will need to be challenged to ensure a consistent way of looking at performance."
Even as organisations gradually move away from traditional assessment and customise it, the basic principles of fair pay for performance and objectivity need to be respected.
Das of Autoportal suggests that with the disappearance of the bell curve system, identification of critical positions for future leaders through workforce projection or demographic analysis will be critical. With continuous evaluation of performance, HR managers will have to develop skills and expertise to spot and nurture future leaders by identifying relevant qualifications and behavioural and technical competencies required to perform particular tasks.
The success of any new idea lies in its effective execution and implementation. As organisations do away with the traditional systems of assessment, HR heads will face the challenge of quantitatively and qualitatively measuring the impact of the newly introduced processes. It will also be critical for the HR teams to communicate effectively within the organisation - to explain why established or familiar processes are being overhauled and how the new processes could help.
Prepare the ground: Suresh Raina
nConstant communication: The regularity of the review is paramount; ideally there should be at least four face-to-face discussions for accomplishing the requirement of continuous feedback and open conversation and managing confrontation, if required
nAccountability: The continuous performance review needs a much higher degree of accountability and ownership, where managers hold full responsibility.
nTraining: The new system - of constant communication - will need a systematic change-management for the managerial cadre. Managers will need coaching and other interventions to help them have "difficult conversations". Without these interventions, the quality of feedback from manager to employee risks is likely to become sub-optimal.
nAcceptability: After decades of using the bell curve, there is a need for countering the initial resistance to this change, as sceptics question the process, such as how to make pay decisions without rankings. People need to be convinced that the new system will actually work
nSetting up the employee for success: How does the corporation ensure that the employee is in a role that plays to their strengths? Most job roles get identified with the hard, that is, functional skills. However, employers will need to now "tag" individual roles with the specific competencies required to succeed in that role. Therefore, it is incumbent upon the employer to use various interventions to ensure employees are in job roles where the competencies match their profile
Traditionally, companies have used the annual performance review system to keep employees accountable, rewarding those that excel, and tracking performance over time. But many companies are realising that performance reviews cause as many problems as they try to solve. Instead of guiding managers to offer honest feedback to their teams and coach employees, companies are actually training them to "make the most of available resources" or "cover their bases". Some have discovered that traditional incentive systems are failing to propel the best employees forward. A survey report by Deloitte says, "Today's widespread ranking- and ratings-based performance management is damaging employee engagement, alienating high performers, and costing managers valuable time... Leading organisations are scrapping the annual evaluation cycle and replacing it with ongoing feedback and coaching designed to promote continuous employee development."
Organisations such as Accenture, Delloite and Cisco are among a handful of companies that have jettisoned the bell curve-based annual appraisal system and have opted for an always-on appraisal system which is ongoing and real time. These companies would be joining the likes of Microsoft and Adobe, which have also realised that the traditional way of conducting performance reviews is ineffective.
But is the new system any better? What are the new tools the human resources department has at its disposal to review people's performances? More importantly, how are organisations linking performance to rewards?
Take Infosys, which has created a new system for performance evaluation and goal management that stresses on continuous feedback culminating in the annual rating. The iCount process helps the company in identifying the best performers against standards of performance as opposed to relative comparison of individuals. "Under the new process, evaluation is done against well-defined goals and it is transparent to the employee. This has eliminated some of the angst associated with the forced ranking under the bell-curve system," says Richard Lobo, senior vice-president and head, HR, Infosys. The company has baked into it a mechanism to keep goals and tasks relevant at all times with a focus on continuous feedback and a review once the goals are achieved.
According to Sanjay Vats, general manager, HR, Insecticides India Limited, the formal yearly performance assessment system is time-consuming, involves a lot of paperwork and creates friction between employees and managers. The system is often rigid and doesn't involve timely feedback.
It is precisely for these reasons that the company moved away from the annual review and now does weekly evaluation of employee performance. The HR team has developed a feedback network comprising online-offline and casual-formal meetings for managers which allow timely feedback on goals set for their teams. Equal emphasis is laid on self-assessment by employees to avoid any unpleasant surprises at the end of the year. Rohan Gupta, chief operating officer, Attero, says, "To achieve and sustain fast-paced growth, organisations need to measure good and bad performance instantly, instead of waiting for the year to end. Quick feedback is important for helping an individual improve her performance on a regular basis."
"Now companies are trying to get more accountability in place for employee rating. That means individual contribution is relevant rather than just relative performance," adds Sagar Das, co-founder, Autoportal. The need to attract and keep talent is also pushing organisations to remove the annual ratings system.
"There is a need for organisations to get managers talk to each employee about their development more than once or twice a year. This is truer in the case of a millennial workforce that craves for learning and career growth," explains Das.
Frequent communication helps improve engagement, and makes the whole process fairer and transparent, as managers better understand how their people are doing.
Here's a note of caution. Kamalika Mitra, engagement manager, TATA Strategic Management Group, says organisations eager to sound the death knell for the annual review should analyse if the new alternatives are able to assess and differentiate performance objectively. Most importantly, doing away with the bell curve may lead to reward neutralisation. For instance, if the rewards budget is pre-fixed, it may be spread too thin among employees.
Richard Cowley, founder, WorkAmmo, stresses on the importance of getting the rewards and recognition right as part of any new HR process. "At the end of the day you need a way to share. Either all get the same or you find a process to reward different levels of contribution. Any comparison or calibration demands that you do similar actions to similar people. This can, of course, really demotivate high performers."
Cowley believes that as organisations replace the traditional systems they need to be clear on the evaluation metrics that will drive individual, team, and company success. "Don't miss the collective calibration element. Leaders are human, and come with their own set of biases. These biases will need to be challenged to ensure a consistent way of looking at performance."
Even as organisations gradually move away from traditional assessment and customise it, the basic principles of fair pay for performance and objectivity need to be respected.
Das of Autoportal suggests that with the disappearance of the bell curve system, identification of critical positions for future leaders through workforce projection or demographic analysis will be critical. With continuous evaluation of performance, HR managers will have to develop skills and expertise to spot and nurture future leaders by identifying relevant qualifications and behavioural and technical competencies required to perform particular tasks.
The success of any new idea lies in its effective execution and implementation. As organisations do away with the traditional systems of assessment, HR heads will face the challenge of quantitatively and qualitatively measuring the impact of the newly introduced processes. It will also be critical for the HR teams to communicate effectively within the organisation - to explain why established or familiar processes are being overhauled and how the new processes could help.
Prepare the ground: Suresh Raina
nConstant communication: The regularity of the review is paramount; ideally there should be at least four face-to-face discussions for accomplishing the requirement of continuous feedback and open conversation and managing confrontation, if required
nAccountability: The continuous performance review needs a much higher degree of accountability and ownership, where managers hold full responsibility.
nTraining: The new system - of constant communication - will need a systematic change-management for the managerial cadre. Managers will need coaching and other interventions to help them have "difficult conversations". Without these interventions, the quality of feedback from manager to employee risks is likely to become sub-optimal.
nAcceptability: After decades of using the bell curve, there is a need for countering the initial resistance to this change, as sceptics question the process, such as how to make pay decisions without rankings. People need to be convinced that the new system will actually work
nSetting up the employee for success: How does the corporation ensure that the employee is in a role that plays to their strengths? Most job roles get identified with the hard, that is, functional skills. However, employers will need to now "tag" individual roles with the specific competencies required to succeed in that role. Therefore, it is incumbent upon the employer to use various interventions to ensure employees are in job roles where the competencies match their profile
Suresh Raina
Managing partner, Hunt Partners
Managing partner, Hunt Partners