The performance management revolution

Abstract

Hated by bosses and subordinates alike, traditional performance appraisals have been abandoned by more than a third of U.S. companies. The annual review’s biggest limitation, the authors argue, is its emphasis on holding employees accountable for what they did last year, at the expense of improving performance now and in the future. That’s why many organizations are moving to more-frequent, development-focused conversations between managers and employees. The authors explain how performance management has evolved over the decades and why current thinking has shifted: (1) Today’s tight labor market creates pressure to keep employees happy and groom them for advancement. (2) The rapidly changing business environment requires agility, which argues for regular check-ins with employees. (3) Prioritizing improvement over accountability promotes teamwork. Some companies worry that going numberless may make it harder to align individual and organizational goals, award merit raises, identify poor performers, and counter claims of discrimination—though traditional appraisals haven’t solved those problems, either. Other firms are trying hybrid approaches—for example, giving employees performance ratings on multiple dimensions, coupled with regular development feedback. INSET: CAN YOU TAKE COGNITIVE BIAS OUT OF ASSESSMENTS?. [ABSTRACT FROM AUTHOR]