Reviewing the review7 min read . Updated: 27 Oct 2015, 05:18 PM IST
Why some companies are ditching the annual appraisals and employee ranking systems
Why some companies are ditching the annual appraisals and employee ranking systems
In 2014, Deloitte University Press, an imprint of people strategies company Deloitte Development Llc, called out the elephant in the room: “Performance management is broken". In its annual “Global Human Capital Trends: Engaging The 21st-Century Workforce" report, it highlighted three findings: First, ranking- and ratings-based performance management actually damages employee engagement. Second, most people think their performance evaluation process does not add “high value". Third, it pointed to a growing trend of organizations “scrapping the annual evaluation cycle and replacing it with ongoing feedback and coaching".
More companies in India are starting to ditch the bell curve and annual review in favour of approaches where they look at the employees’ strengths and individual contributions. They are trying to devise ways to use the evaluation process to keep talented workers motivated.
A recent example is e-commerce firm Snapdeal, which adopted a “trimester" system starting April. The idea is to align the goals of the individual employee with the goals of the organization; and to make the whole set-up more nimble so that it can respond to the fast-changing business environment.
We spoke to human resource (HR) managers across industries, to find out how they have tweaked their evaluation processes and why.
Learning what to say
The “biggest issue" Sandip Grover, president (human capital and corporate social responsibility), at multinational company Welspun Group, uncovered when he started to rethink the group’s employee evaluation systems was that “managers were afraid to give feedback to employees to their face". Mumbai-based Grover says part of the reason was that managers wanted to avoid confrontation. Another reason was that they just didn’t know how to give feedback.
Grover hit upon two unconventional training methods for managers: a 10-minute movie called Heavenly Appraisals, which was developed at a production house for internal viewing, and a theatre workshop at the end of which managers had to put up a stage show.
The storyline of Heavenly Appraisals goes something like this: A manager dies and goes to heaven. At the gates of heaven, he is asked why he should be let in. The manager says he was a real people’s person and did a great job empathizing with his reportees, helping them do well in their jobs. The gatekeeper of heaven then shows him a reel of what employees really felt about him and his style of management, and gives him a chance to go back to earth and fix everything or go to hell.
The training methods are unusual, and might seem gimmicky. But they are interesting precisely because they make it possible to give feedback to managers without hurting their egos and without making the session dreary and uncomfortable—the same things managers are expected to learn from the programme.
Grover says one of the more interesting theatre productions to come out of the training for managers looked at the popular Hindi film Sholay. “That team looked at Kaalia’s performance as a member of Gabbar’s gang. Kaalia was a good worker, faithful and efficient on most days. Yet on the one day he slipped up, he was shot dead."
The “plays" were followed by a discussion on the nuances of how to give feedback without figuratively shooting someone in the head for making mistakes.
Make it about the employee’s strengths
Rajeev Bhadauria, director, group HR, Jindal Steel and Power Ltd, sees “forced ratings" and plotting performance along a bell curve as a kind of Procrustean Bed—the term comes from a Greek myth about a bandit who stretched or cut off people’s limbs to fit them on to an iron bed—or arbitrary standard.
The company, which follows an annual review process, has done away with the bell curve system. Bhadauria says that given the company’s size and the number of hours in a year that senior leadership already spends on evaluation, it is impractical for the firm to do the formal review process more frequently. Also, given the nature of the industry, it takes some time for any new business initiative to show concrete results. And a more frequent review process might only capture small, incremental developments, he says.
Doing away with the bell curve system, however, has made it possible for the company to look at individual performances more closely, and appreciate good work on an ongoing basis. The focus is not on making employees fit a certain mould or follow the lead of someone who is known to be a top performer.
Each person has their own strengths, and the idea is to identify and hone those. You are as good as you are, says Bhadauria, and are not evaluated on how you compare with someone else in the organization.
Bhadauria says this new system of evaluation has made it important to train managers in balanced evaluation, setting targets realistically and getting employee buy-in by letting them have a say in how they would like to contribute to the organization’s goals. “When employees set their own goals, they take ownership of them and stay motivated through the year, as opposed to when the organization imposes a goal on them," he says.
Don’t just evaluate performance, manage it
Chaitrali Singh, director of HR (India), at sales and marketing consultancy ZS Associates, says each employee at her firm is assigned a “performance development (PD) manager who is at least two levels their senior". ZS follows a bi-annual performance evaluation system, but is particular about reviews at the end of each project, Singh explains.
“In six months, an employee can work on two-three different projects," she says. The projects may be led by different team leaders, who may or may not be an employee’s reporting manager. To streamline the evaluation process, and maintain a degree of transparency, the PD manager is kept in the loop on all review discussions. It is part of the PD manager’s job to “synthesize" all the feedback and suggestions an employee receives at the end of a project through the six-month review cycle. The PD manager can also keep track of whether the employee is making an effort to incorporate the feedback from a previous review, and help out in case the employee needs training or mentorship to master a skill.
“The PD manager is responsible for the employee’s long-term success in the organization, not just project deliverables," says Singh.
Make it less dreary and more regular
Performance evaluation, so-called consensus meetings where the manager and employee discuss the rating an employee has received, and sometimes even feedback sessions with the manager, can be one-sided. To encourage employees and their managers to have more free, and meaningful, conversations, digital outreach agency MindShift Interactive foots the bill for team members to go out for lunch and drinks once a month on a Wednesday.
MindShift’s chief executive officer Zafar Rais says the company’s employees are typically in the 24-30 age group. Stepping out of the office on a Wednesday afternoon dispels some of the formality around the review discussion. The objective of this type of review/feedback session is to “understand a person’s capabilities as well as training and development needs". “At this age, everyone wants to learn and earn," says Rais.
Technology company Sapient India’s vice-president (people strategy) Kameshwari Rao says, “You can’t have a cookie-cutter approach to performance evaluation." Rao explains that in the past, managers would only look at deliverables and financial contribution metrics. But now they also need to ask, “What are your learning goals? How do you want to contribute to the organization’s revenue goals?"
To this end, she says, it’s important to communicate to employees the outcome of their work and tell them how you think they are progressing on their learning goals through the year. Clearly, by having continual conversations with employees, managers also set reasonable expectations, and monitor and help the employee progress. This kind of transparency works well with the millennials, who comprise 80% of Sapient’s workforce in India, says Rao.
Snapdeal moved from an annual performance evaluation system with a mid-year review to a trimester evaluation cycle starting April. So at the end of every four months, three times a year, managers and employees will stop to reset goals and priorities. Saurabh Nigam, vice-president (HR), Snapdeal, says the change was implemented to align individual performance with enterprise goals that need to be updated often to stay competitive. “We are in a hyper-growth industry," he says.
What that means is that things can change very quickly for e-commerce companies, with new technologies and e-business ideas being introduced in the market as well as a pitched battle to carve out the online retail space with promotions and advertising campaigns. So the idea is to stay nimble, revisit strategy regularly and figure out how each employee can contribute to the revised enterprise goal.
The company has also—significantly—divorced the performance review from the conversation around compensation, which still happens annually. “We have bifurcated it," says Nigam.
If this seems counter-intuitive, consider that the management literature is now focusing on strategies for employee engagement and productivity as separate from rewarding workers with better remuneration for better performance.
“The link between performance management and compensation is weakening," according to the 2015 “Global Human Capital Trends" report by Deloitte University Press. The report, in a chapter titled “Performance Management: The Secret Ingredient", says: “Traditionally, organizations directly linked raises to performance ratings, making these ratings even more threatening and disruptive to employees. Today, the compensation process is being broadened. Companies are starting to base compensation decisions on the competitive value of an employee and real-world market conditions."
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