What Organizational Changes Have Companies Experienced upon Eliminating Ratings within their Performance Management System?
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Oakley, Steven; Chen, Dandan
[Excerpt] Over the past decade, organizations have begun to move away from traditional performance management processes (annual reviews, assigned performance ratings, a link to compensation) to remove “performance ratings” based on the perception that traditional PM is not working. As of 2015, more than 55 companies have removed performance ratings. Among those are some high-profile companies such as GE, Microsoft, Accenture, etc. (see Appendix A). According to a study of 244 companies in 2016, almost all companies in the study use ongoing feedback, 52% of companies have adopted ratingless reviews, and 34% of companies use ratingless reviews and ongoing feedback. 80% of participating organizations say that managers make decisions how to allocate rewards without ratings while staying within budget constraints. The perceived impact of these new performance practices is high: 90% of companies that have redesigned performance management see direct improvements in engagement, 96% say processes are more simple, and 83% say they see the quality of conversations between employees and managers increasing. It is noteworthy that the positive impact may not all be attributed to the removal of performance ratings.
Human Resources; performance management; ratings; eliminating ratings; reviews; performance ratings; talent management; rewards; incentives; engagement; employee engagement; conversations
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