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Does anyone know of a company that scrapped their performance review and are doing something else?

My company is considering this, but the sticking points are:
1. How do you pay people?
2. How do you do goal setting w/o perf. reviews?
3. How do you give people feedback w/o perf. reviews?

Jon

rob_bartlett's picture

Jon,

My current company does not do performance reviews for salaried personnel. Coming from a large corporation that tied salary increases to performance via the annual review, it was like being in a foreign country when I came to my current employer.

Here are answers to your questions based on my experience without performance reviews:

1. How do you pay people?

Annual increases are given based primarily on a time-in-salary-grade-level formula. Managers have some discretion to give a little more or less based on performance, but it is not documented, so you really have no way of knowing how well you really are doing versus others.

2. How do you do goal setting w/o perf. reviews?

Goals? What goals? Seriously, we do not have a formal set of goals routinely set as during the traditional performance review process. Projects are assigned as needed. Department goals are established and tied to the annual incentive comp program.

3. How do you give people feedback w/o perf. reviews?

Feedback? What feedback? (Sorry to use the same joke... ;) Let's just say that, in general, you will know if you are doing something wrong. You will not, however, be told specifically if you are doing well. I am implementing routine use of the Feedback Model with my direct reports. The success that I am having is probably tied to the lack of feedback that normally happens in the company.

As I said, I've done it both ways. I much prefer having the annual reviews.

Best of luck,

Rob

US101's picture

Rob,

Alright!! Someone is actually doing this. I can't believe it. I know what you mean about "foreign country," companies think performance reviews are like taxes, everybody has to do them. Bullshit!

What about HR or senior managers arguing it will create an "entitlement" culture and other crap like "we only pay for performance"?

I would really like to talk with you directly about this.

Jon

storm's picture

My manager does them because the company says he has to, but he doesn't agree with them and asks how you can set objectives for people when they've been doing the same job for years.
:?

pneuhardt's picture

The company might "scrap" performance reviews, but I would say that places such a company in the extreme minority. One law of business physics is the rule of paperwork entropy: The business universe, especially near bodies known as HR Departments, is moving towards a state of chaos characterized by increasing amounts of random paperwork nobody ever reads once it is complete. Finding a pocket in the business world where this law does not apply is still quite rare. (I freely admit that this is both cynical and quite possibly a USA-centric point of view. To the first I plead guilty, to the second I would plead ignorance.)

I have heard of companies changing out one review system for another. The end results are usually the same, because the effective impact of a person's performance review on their compensation and career growth are at least as much cultural as they are procedural. The flaws in one formal review system are often not with the system but with the perception of the system in the culture of the company, and a new system is likely to be perceived as no better than the old system. Just different.

Having said that, I believe a good manager does performance reviews on her directs anyway, whether there is a formal policy or not. It's good for the company, the manager and the employee. And I have one answer to your three questions: "The same way you did before, assuming you were effective. If you weren't effective, listen to the Manager Tools podcasts to learn a way to be effective."

Effective performance reviews don't come from the company. They come from the managers.

jhack's picture

Don't throw the baby out with the bathwater.

Reviews are often done poorly, but if they're done well, they provide real value:
- align individual goals with organizational goals
- provide a reasonably fair grounds for promotion and raises
- provide critical information for succession planning
- provide clear guildance for employees

Without standardized performance reviews, salary and promotion decisions become more politicized over time. It's not scalable.

If salary and promotions are not tied to performance (like, say, seniority only) then your organization is at a disadvantage v. organizations that are performance driven.

Good managers set goals and do performance reviews.

allie8983's picture

In a company that has fairly rapidly grown to approx 50 employees and currently has no dedicated HR, we have begun to implement a PR system but it has been a nightmare. The staff are all screaming for reviews and the sense of entitlement and gossip and demands for pay rises are becoming a daily occurance.

I want to scrap them, we do regular performance management using tools such as O3s and regular meetings and we set goals and phased training. 

Im just wondering if anyone has scrapped them successfully? 

when we were a smaller company we didn't have a formal process we managed performance and awarded raises (above CPI) as we saw fit based on continued performance in a less formal way and no one complained. Now we seem to be drowning in a backlog of overdue reviews and unhappy employees :( 

Ariashley's picture

I work for a global Fortune 100 company.  My subsidiary company (which is about 7-10% of the Group) does performance reviews without ratings (i.e., there is no grade or score or scale for ratings).  We did a pilot for two years and employee engagement scores on 7 questions (that I would have expected to drop, such as "I understand how my compensation is linked to my performance") improved by more than 15 points each (out of 100).  Note that the pilot was done in HR, marketing and Accounting (where I am).

1. How do you pay people?

We still pay on performance.  While there is not a rating, we have clear job knowledge expectations and how work is done.  Managers convene and discuss performance and we then use a scale to allocate raises and bonuses - so to some extent, performance is still tiered.  This process happens across mutliple levels and differently on different teams, but in our team of 60, the management team discusses and tiers the team members and allocates pay that way.  This is also communicated to employees, that we still evaluate top performers, performers, and low performers and that top performers will receive higher bonuses and raises.  We are allocated bonuses and raises based on a variety of factors, only part of which the employees performance controls (overall Group performance)

2. How do you do goal setting w/o perf. reviews?

I have a board in my office that has my team's most important goals/milestones on it.  I talk about it with managers who report to me in 1:1s.  Also, our department still has goals and we review those goals at least quarterly.  Lastly, our department is rated and compared to other departments based on the department and company goals in a quarterly review process and that is communicated.  I don't consider a performance review to really matter in the context of completing business objectives.  It's simply the formal documentation of what is the weekly discussion of getting the work done, what my employee needs from me, what I need and feedback/development conversations (i.e., who makes sense to do this work based on development needs, deadline, etc).

3. How do you give people feedback w/o perf. reviews?

All the time.  Whenever there's anything that needs feedback (positive or negative), the feedback happens.  If my employee is only getting feedback once or twice a year during a performance review, I am failing as a manager.  I also have coaching conversations probably 10+ times/day with team members.  Yesterday, a manager came by to ask me how to address an issue happening with one of her team members to get some advice about how to handle it or the best way of giving feedback about it given her relationship with that person and the situation and her own understanding about herself.  A performance review is only the culmination of that collection of feedback and a formally documented way.  

We did this pilot in conjunction with a bunch of training about coaching and feedback for managers.  Thus, managers were given more tools that are consistent with the Manager Tools concepts about feedback and about how to have coaching conversations and what a coaching conversation is.

WritePaper's picture

There was a very emotional discussion, but I believe that this information will be useful to many in the future.