Rather than ditch ratings, organisations need to invest in creating new behavioural habits, says Jan Hills
There continues to be a lot of talk about performance ratings, with recent research from insight and technology company CEB suggesting that more than 20 per cent of organisations are either planning to or have already eliminated these from their performance management approach, while another 30 per cent are considering it.
From speaking to businesses it is evident that many are focused on reengineering performance management, even if not all of them are ready to remove ratings altogether. A lot of the hype on this topic has been driven by several high-profile companies publicly sharing how they have done away with ratings.
Certainly what neuroscience tells us about the impact of ratings on the brain makes a case for their removal. Research suggests that ratings create a number of negative responses, which impact on motivation and productivity. These include fear, and the resulting negative effects on reputation; the creation of an elite in-group; negative comparisons; and demotivation.
But this is not the whole story: although these responses might happen, simply removing the cause won’t necessarily help the situation. Eliminating ratings will not solve your performance management problems; in fact, one of CEB’s headline findings is that, when ratings are removed with little or no support to change the behaviour of managers and employees, there is a dropin performance and engagement of up to 10 per cent after the initial euphoria.
While this may not be what ‘the hype’ says, it makes sense. The underlying assumption about removing ratings is that, without managers and employees being pushed to follow a system dominated by an annual review and the allocation of a rating, there will be more frequent formal and informal conversations, and more feedback will improve performance. But, as I’ve said before, that’s unlikely to happen without engaging managers and employees in new behavioural habits.
Without training and support, managers find it hard to explain to employees how they are performing and they don’t use the time freed up for informal performance conversations. Engagement drops because managers are unable to do the very things that are proven to engage employees, such as set expectations on performance standards, hold clear performance and development conversations, and provide appropriate rewards and recognition including the rationale for these.
Another other concern is that ratings are just one area to focus on and possibly not the most important one. Our findings at Head Heart + Brain suggest there may be another, potentially bigger, issue regarding how companies manage performance, and that is the role feedback plays.
Our analysis of both the psychological research – most of which dates back to the 1990s – and neuroscience, suggests that unless there is a major shift in the way feedback is positioned and collected, performance management will not improve to the extent companies need.
Feedback that is negative, and is collected and delivered by the manager without input from the employee, creates as much threat in the brain as ratings do – and still comes with all the negative after-effects. Positive feedback, and what we call ‘employee-initiated feedback’, doesn’t have this threat impact. But introducing this requires a shift in the power structure between managers and employees, and requires training for both.
However, we are beginning to see some organisations shifting their approach to this type of feedback system and they are getting good results. Firms such as Pay Compliment have taken findings from neuroscience and used them to design their software. They provide systems that help employees give and receive feedback in real time, and are working on an algorithm that will allow companies to provide qualitative feedback without resorting to ratings.
There will be an answer to the ratings issue, but organisations need to invest in creating new behavioural habits with managers and employees, and shift the focus of feedback.
Jan Hills is a founding partner of Head Heart + Brain