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Is it really time to scrap the performance review?

This was the question posed at Threshold’s most recent open event in March. And it...

Is it really time to scrap the performance review?

This was the question posed at Threshold’s most recent open event in March. And it seems that the answer is ‘not so fast!’

For the event, we drew on a wealth of research and brought typical scenarios to life through theatre. The conclusion is… don’t lose it, improve it! Recently we have been helping clients to make the switch from conventional reviews to ‘non-numerical reviews.’

The thinking behind the switch-over appears to be sound and well backed up by evidence. There’s a wealth of research published about the problems with numerical reviews. We did come across some dissenting opinions. One article that stood out was by Lori Gale and Janelle Gale of Facebook… yes, Facebook! But in our view the article undermines its own case with a number of flaws in its argument. Here’s an example:

The reality is, even when companies get rid of performance evaluations, ratings still exist. Employees just can’t see them. Ratings are done subjectively, behind the scenes, and without input from the people being evaluated.

This highlights a common flaw in logic. The assumption is, that if something has a number attached it is objective. Our minds readily conflate numerical with objective. In reality, if manager X is rated ‘4’for say ‘Strategic Thinking, she is not objectively a ‘4’ on this parameter, it still comes down to subjective opinion.

Here’s another example of questionable logic:
Managers sit together and discuss their reports… Here the goal is to minimize the “idiosyncratic rater effect”—also known as personal opinion.

Of course this process does not eliminate personal opinion, if it does anything, it simply moves people towards a convergence of opinion.
Indeed, at Threshold, we argue that the attempt to remove subjective opinion from the performance review is misguided. If you are not paying your leaders for their personal opinion, then what on earth are you paying them for?

Subjective opinion is an essential aspect of leadership. It only becomes toxic when there is an attempt to disguise it as something objective.

We are grateful for our clients at Intercontinental Hotels Group for introducing us to Deloitte and the work that they are doing with strengths guru, Marcus Buckingham. Like Threshold, Buckingham solves the problem by turning it on its head. In the scheme currently being piloted at Deloitte, line-mangers are not asked to scale their reports on a number of arcane parameters. Instead they are asked to respond to agree-disagree questions about how the feel about their employees. To many this may seem like heresy, but there’s a watertight logic under pinning it. As Buckingham puts it:

“People may rate other people’s skills inconsistently but they are highly consistent when rating their own feelings and judgments.”
In other words, as a line-manager I’m not sure I can really evaluate your strategic thinking skills, but I’m usually pretty sure about how much I would want you on my team. In setting remuneration, it’s the latter that the organization really needs to know.

The numerical performance review does a remarkably poor job in predicting future performance. One study indicates performance ratings predict just 21% of actual performance overtime. (Manual London, How people evaluate others in organizations.) On the other hand, the Deloitte pilot indicates the four agree-disagree questions correlate closely with other parameters associated with performance.
Of course, Buckingham also points out that feedback that drives performance primarily comes down to quality, frequent conversations between line-managers and direct reports:

"We have found a direct and measurable correlation between the frequency of these [performance] conversations and the engagement of team members. Very frequent check-ins are the team leaders killer app.”

We couldn’t have put it better.

The ability to adapt, innovate and collaborate separates top performers from the rest.