Are we done with Bell Curve? Is forced distribution a thing of past? What next - how do we measure performances in dynamic business environment? These are the voices of one hears when you take a walk in the corridors of any corporation today. Performance management is a tool that has been fully utilized or may I say exploited by the HR managers in an organization. We in India have been faithful followers of Bell Curve (GE Model) for last atleast 3 decades. Before we go to the future, lets look at how we got here.
History of PMS
Economic environment and Historical context has played a significant role in the evolution of Performance Management over the last Century when there were excess people, the focus of PMS was on which people to retain and which people to reward. For such purposes, historical appraisals with emphasis on individual contribution were useful. But when the scenario changed and the talents became scares, developing employee became a greater importance.
Let's look at how PMS evolved
It all started with World War I & II where the U.S. military created merit-rating system to flag and dismiss poor performers. In 1950s Douglas McGregor argued for engaging employees in assessments and goal setting. It further moved when in 60s & 70s, Inflation rates shot up, and organizations felt pressure to award merit pay more objectively, so accountability again became the priority in the appraisal process. When 1980s arrived Jack Welch championed forced ranking at GE to reward top performers, accommodate those in the middle, and get rid of those at the bottom. By end of the century, organizations got flatter, which dramatically increased the number of direct reports each manager had, making it harder to invest time in developing each one of them. In 2011 Kelly Services was the first big professional services firm to drop appraisals, and other major firms followed suit, emphasizing frequent, informal feedback. Recently Adobe ended annual performance reviews, with the notion that annual targets were irrelevant to the way its business operated. Now even Deloitte, PwC, Accenture and others have followed suit.
The recent trends have indicated that many large corporations mostly in the western hemisphere and many large consulting companies are already moving away from traditional PMS. In 2014, Deloitte survey found that 60% of companies survived did not think that PMS was an effective tool anymore. In fact in 2015 many GE, Accenture and Adobe junked their old and traditional Bell Curve driven PMS Process in favor of more continuous feedback systems.
In the traditional system where goals are set at the beginning of the year and are reviewed at the end of the year. Typically employee does self assessment and then sits with his boss, reviews his / her performance against the goals set many months ago. Boss then writes the summary and assigns the ratings to the employee. The ratings are part of forced distributions where most employees fall in the middle, while a small minority fall at the bottom and small minority at the top.
The biggest grouse against this system is the illusion that boss feedback to employees will be helpful in driving their performance. Whereas many feel the current system is really designed to justify a ranking/ rating that is linked to a compensation increase.
The critics believe that a one-size-fits-all approach to managing performance does not take into account what drives employee.
The Future of Performance Management
Where do we go from here? The organizations where changes to PMS are taking place believe that future of performance management will be where there are more continuous conversations between the boss and their subordinates, rather than ritual of annual event. Future PMS will become more personal, more real times, open in terms of updating individual goals and their alignment to the rate of change in the organizations. Future objective will be more fluid and changeable than current Annual KRAs. There will be frequent & ongoing feedback discussions rather than typical annual once a year conversation. There will be more emphasis on coaching for individual development rather than ratings and forced distribution. Teams will be a central focal point than individuals.
Some experts believe for developing future PMS in organization, HR Leaders should take into account following major factors
- Stamp out unconscious bias
- Look at the future and not the past
- Involve everyone & create growth mindset
- Make feed back & coaching central to PMS process
- Separate rewards from development dialogue
We are anyways in exciting times in the history of mankind. Future of PMS is going to make it more exciting & hopefully meaningful.