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Been listening to the recent podcasts around annual reviews (shot across the bow, unofficial review, etc) and I am wondering - is there a better way?
What is a better way or better alternative to this? Is there an effective model for performance management that is linked in some way to an individual's compensation?
Thanks, Anandha
Alternative for *what* purpose?
One of the things that I've only recently come to realise (thanks to the "unofficial review" and/or "SOTB review" casts) is that annual reviews are *not* performance management tools (which is bad for me, since I've just rolled out quarterly reviews as a part of performance management...) Annual reviews are, instead, about succession planning -- who's good, who's not, who's ready to go up, across, down, or out.
Companies don't always use them as succession planning tools, and they have a variety of uses at different companies. So, what exactly are *you* using reviews for, that you'd like to replace with something else? I see two possibilities from your question: "performance management" and "compensation management". I'll try to address both possibilities, but if you've got something else in mind, please let me know.
If you use annual reviews as your only tool for performance management, you're going to be ineffective. People need frequent (as in, daily) adjustment and affirmation of their behaviour. This is what MT "feedback" is all about -- tiny, frequent adjustments to behaviour to ensure people are moving in the right direction. I'm using reviews as a "capstone" on top of frequent feedback, and even then they're happening quarterly, not annually, to keep people in touch with the "in the large" view of their performance. I don't have any useful data on how well it works (we've only had one review period so far) but it hasn't been a train wreck so far...
As far as annual reviews for compensation management... I see it as a big risk. I don't believe you can have a single tool that is both effective as a tool for performance management *and* compensation management. People get far too emotional about money, and asking them to be both dispassionate about their salary *and* their performance at the same time... I don't think anyone's that coldly rational. I think the salary discussion needs to be separated out as much as possible from the performance management discussion. I know that salary is derived (in part) from performance, but it would be better to keep the two at arms length.
Alternatives? I like structured salary ladders, where salary is determined by objective factors, but making them work in practice isn't a trivial undertaking. A fun (if moderately terrifying) idea is that people get to name their own salary -- but everyone's chosen salary is listed for everyone else in the company to see. I'm still not sure if that would cause a riot or not, but I'd love to see it tried... perhaps one of my competitors would like to give it a go?