I know that’s a blanket statement, and heck, I don’t even actually know what system YOU are using, right? But this is one of the areas in organizations where everyone does it the way everyone else does it, DESPITE significant research suggesting what we’re doing isn’t working. And because it’s tied to salary and bonuses (which we treat as a huge secret) and firing people (which has legal risks), we don’t dare mess with the system. Even if it’s horrible.
So I dare you to start doing it right. Take a look at the White Paper that I wrote a few years ago. It lays out a framework for a new approach. Then scrap your current system. Believe me, your employees will probably rejoice. Starting from scratch is probably going to give you a better shot at success. Then build a new one. There isn’t a cookie-cutter template for this, but here are some places to start.
Clarify your culture. Performance management systems should be focused on increasing the behaviors that are valuable to the organization. Your culture should make that clear. If it doesn’t, you need to work on that first.
Make it frequent. We’ve been saying this for years, but most companies seem to still rely mostly on the big annual review. You can still have an annual component, but it has to be more frequent (your Millennial employees in particular will expect that). And with technology, I don’t see why we can’t. Take a look, for example, at iRevü, an online/mobile feedback tool I discovered recently. There should be nothing stopping us from giving good feedback on a continuous basis.
Sharpen your compensation strategy. You’ll have to take compensation and bonuses out of the performance reviews for them to work properly. This will only put more pressure on you to clarify what your compensation and bonus strategy actually is. And please read up on the research about motivation for humans doing complex work before you decide on a strategy.
The companies that we researched for When Millennials Take Over tended to do their reviews very differently. And they had amazing cultures, with amazing results. I don’t think it’s a coincidence.