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The Performance Review (PR) Debate

It is no wonder that the large majority of workers and managers are cynical about traditional performance review processes. More often than not it is a once a year discussion where the focus is on the negatives (what you didn’t do or did wrong) and the end result is that you don’t get the salary raise you expect or were hoping for. One of my first performance – stroke salary reviews was at a law firm where the message was ‘sorry, there isn’t any money’. I was wondering if the next line was ‘that we were going to have to sell you for scientific experiments’. Certainly not a way to develop trust with an employee where certain expectations were in place.

The Performance Review

We are now seeing a groundswell, created by Accenture and Deloitte, and latterly spruiked by NAB, towards a reinvention of the performance management process. Before I discuss that, I wanted to briefly lay out our objectives for our performance management system, noting we are a far smaller business than the ones advocating change, which enables us to do processes like this a little quicker than the big boys. In our view, performance management systems should drive engagement and performance. At Proclaim we do that through two main processes as part of the PR system – development and reward. While we strive to ensure development discussions are regular conversations through the course of year, a horizon of one year is a reasonable time frame for getting some outcomes on development. We think there is merit in having a point in time at which you look forward, but also that same point where you afford yourself a look back. Where am I going? Where did I come from? Equally, consistency in rewarding hard work is important. Without a process that is reasonably robust, there isn’t consistency. Without consistency there isn’t equity, perceived or real, and that leads to murmurs in the corridors. We do all our reviews at or around June 30, and yes it is busy as a result, but we find it better than the process being spread throughout the year, and with everyone being reviewed at the same time we can check (through our Remuneration Committee) that there is equity and consistency across the business.

The alternative to a point in time is an ongoing ad hoc system like Zappos has where you progress and are promoted and rewarded as you achieve key milestones. Discussions on progress are regular and ongoing. A good system, no question, but only as good as the prescription and adherence to progress and the milestones, and many companies find that a challenge. In which case the lack of discipline around time frames can allow extended time frames between reviews. Certainly our leaders are encouraged to have regular development discussions against key milestones as a critical piece of the performance management program.

So do we enjoy the intensity of the June PR process? I can’t admit to that, although some aspects of reflection are rewarding. Does ours achieve its objectives? Largely, although people and their managers aren’t perfect, so it doesn’t always go swimmingly. We can’t always align expectation and reward, particularly when views on performance differ. At the end of the day, the PR process is in place to reward and inspire performance. Good performance creates happy clients, and ensures a healthy business. So we assess performance on behaviours aligned to our values and strategies, but also on KPIs like client satisfaction. That isn’t a once a year conversation.

But is there a better way? What are Deloitte advocating in their reinvention of the process? I think all companies agree the idea of a performance management system is to engage and inspire performance. But Deloitte and others argue they need to be more forward looking and change is needed. Why?

  • Well, it’s a red queen world. If you’re not careful you’ll be running on the spot. Things move fast, and once a year is not nimble enough in this real time, rapidly changing world.
  • Idiosyncratic rater factors means the review often says more about the rater than the ratee.
  • The PR process wasnt necessarily encouraging people to work in teams using their strengths.

So Deloitte wanted 3 things in their system: Recognise performance through variable compensation. See the performance clearly. And fuel performance. The last part comes from constant checking in – weekly at least – against priorities and expectations that need to be specific.

The interesting thing from my perspective, and where it does differ from our process, is in the second part. To see performance clearly Deloitte claim they went away from rater bias questions and asked these 4 questions:

  1. On the basis of what I see of the performance – and if it were my money – I would give this person highest possible salary increase.
  2. From what I see of the performance, I would always want him or her on my team
  3. This person is at risk for low performance
  4. This person is ready for promotion.

So how do they assess that? The first two, ironically enough, on a 1 to 5 scale from strongly agree to strongly disagree. The third is a risk factor, the last a yes or no. Looks to me like there is still some room for rater bias and subjectivity in this approach.

So for Deloitte it is all about three things – an annual compensation decision (sounds familiar), quarterly or per project performance snapshots and weekly check ins. So I suppose the questions I am considering is whether they have really reinvented performance management, and are the elements essentially the same or similar to what most progressive smaller or more modern businesses are already doing?

While I applaud their approach, it seems to me to contain striking similarities to a solid, working performance review system which has at its heart development and growth as the cornerstones of performance. The departure point is it is no longer a process run by solely managing people. What Deloitte, Proclaim and many other businesses are looking for is a performance review process where leaders develop people. It calls for greater transparency, communication and commitment. It requires traits of a leader to be successfully executed.

Dan Pink talks about three things that workers need in the modern world – Purpose, autonomy and mastery. This seems totally consistent with the new proposed performance management systems being designed to develop people.

So maybe what we are talking about here is the modern divergence of the leader and manager. That the new performance management systems are about leadership, getting the best out of and developing your people, rather than just managing and coordinating resources.

The information on Deloitte was taken from an HBR article.

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