Traditional Performance management system

(Rating and Ranking)

V. IMP.- http://www.strategy-business.com/article/00275?pg=all
It starts at the beginning of the year with setting measurable goals and specific
objectives.
Because what is achieved in the job is just as important as how it's achieved,
you should highly consider a system that simultaneously rates both Job
Competence (including job responsibilities, skills and goal achievement)
and Behaviors.
Goals and objectives are thus set for the year, and when the annual
performance appraisal comes around, each employee is rated based on the
scale of "does meet expectations" to "exceed expectations."
Sometimes numbered scales are used, such as 1 (low) to 5 (high). These
ratings are generally done by the supervising manager, and as in the case
above, frequently reviewed with the management one level above that.
Then a set organization's managers get together to review everyone's ratings
again, and the ranking begins.
Why Ranking - Soon, many companies discovered that managers tended to
rate everyone in the middle. As one executive from a large food manufacturer
(with a 15 rating system) explained, Anything other than a 3 requires extra
work for a manager. You have to justify it if you give an employee a 1 or 2,
and you have to put the employee in a performance improvement plan if you
rank them 4 or 5.
There came concept of forced ranking.
In this system, known as forced ranking (or rank and yank), a specific
percentage of people had to be ranked at the top and bottom ranges, with their
promotions and bonuses affected accordingly
These ranking sessions, though, can hold the future of each employee in their
hands. It is also the case when the company goes further, and always
eliminates the bottom X percentage (usually 10 percent) of the rankings in
each organization. Yes, there will always be laggards who underperform, and
maybe it is best to simply fire them. However, often, with good management
and some training, these laggards can become good, solid performers. But
beyond that, if you continue to eliminate the bottom 10 percent each year, it is
not long before you are no longer cutting fat; you are now cutting bone. Does
this continue to make sense? I think not.

Issues with traditional performance management system (performance rating based

appraisal system):

Rating is based on the performance review, which is done only once in the year.
It gives a label/tag to an employee that which kind of performer he is

Time Consuming
Employees spent a lot of time to make their self-appraisals stand out. When
employees have only one opportunity to shine and demonstrate how you
contributed to the company during the year
Even exaggerate if your compensation system is linked to the outcome of the
performance appraisals
Managers also have to spend much valuable time (two months approx jan &
feb) for this whole annual process.

Performance review is like a rear-view mirror - it had nothing to do with the

person's progress forward.
Once a year this process pitted person against person.
Ratings detract from the conversation. If an employee is sitting there waiting for
the number to drop, theyre not engaged in the conversation, at best.

High voluntary attrition in the months after the reviews

Rethinking Evaluation

A few firms have begun to experimentally shift away from the conventional PM
approach
Example - Adobe, Cargill, ConAgra, Gap, Intel, Juniper Networks, Medtronic,
and Sears
Microsoft has revamped its entire approach in 2013. It now focuses evaluation on
results that people deliver together, leveraging and contributing to one another,
emphasizing continual learning and growth. The company completely retired
traditional PM tactics, including ratings, distributions, and annual reviews.

Juniper: Some firms that got rid of most numerical ratings have left one type of
rating in place: the determination of whether someone is essentially in or out as a fit
with the companys culture. At Juniper, this is defined as being a J-Player or a
Non-J Player. A J-Player is someone who generally behaves according to Junipers
values and delivers reasonably good performance. Juniper clearly and consistently
explains which types of behavior result in Non-J Player status and helps those
employees fit in if they choose to stay.
Adobe: Adobe made headlines in 2012 when Donna Lewis, senior VP of Global
People Resources, abandoned the yearly performance rankings to adopt frequent
check-ins where the focus is on managers and employees to discuss coaching and

feedback. At the same time, Adobe decided to stop using forced ranking to determine
compensation for each employee.
Imp - Since Adobe has stopped implementing forced ranking through ratings, they
needed a new way to compensate their employees. Once a year, managers make
adjustments in employee compensation. They are given a budget and have discretion
over how they want to allocate it. Managers will take into consideration how well
each employee has met their goals in order to determine compensation. As managers
have more accountability in terms of checking in with their employees and deciding
their compensation, the old excuse you deserve a bigger raise, but HR would not let
me does not work anymore.
Medtronic: Instituted a quarterly performance acceleration process that focuses
entirely on a handful of forward-looking goals, has no numbers or ratings, and
includes a one-page summary sheet.
Medtronic calls its new process Performance Acceleration focused on discussing an
individuals performance against specific business objectives. The process allows for
quarterly feedback and goal setting between managers and employees. Employees are
encouraged and coached on creating objectives that are aligned with critical business
activities. Medtronic also adds a recognition program called eMpower to drive 3
key elements of employee engagement: fostering participation, recognizing
performance, and maximizing employee potential.
http://blog.7geese.com/2013/10/07/eliminating-performance-ratings-learn-howmedtronic-inc-did-it/