As we near the end of 2013, many companies are organizing their annual employee performance reviews. Microsoft and Yahoo have been making significant changes in their performance review processes, each moving in a different direction. Microsoft has chosen to move from a forced curve, or employee stacking, approach, which requires that some employees receive lower rankings – and perhaps face termination – to a more collaborative, individual-focused process. In contrast, Yahoo is adopting an evaluation system with a forced curve, and employees and managers are publicly voicing confusion and fear. IT Business Edge’s Kachina Shaw spoke with David Lewis, president and CEO of OperationsInc., a human resources outsourcing and consulting firm, about the effects of performance review systems that force managers to “grade on a curve.”
Shaw: What are the effects on employee morale and productivity of employee stacking in performance reviews?
Lewis: The main problem is that employees don’t understand the system because their managers don’t understand it either. The managers can’t explain it, and employees’ expectations aren’t matching what they’re seeing. They wonder, why am I getting this low ranking?
Shaw: Is that series of misunderstandings because the system is inherently flawed or because managers are not trained correctly to deploy it? Or both?
Lewis: It’s both: The system is flawed AND managers are not trained to communicate the system effectively. Forced ranking takes away control from managers, who otherwise tend to be nicer and rank higher. The system forces a more thoughtful process on managers, but the whole system is problematic.
Shaw: How do you get value out of an employee stacking approach? Can you find a happy medium between allowing managers to always be the good guy and give good ratings and forcing them to deliver a range of performance reviews from great to not so great?
Lewis: The answer is to deal with the root issue, not the symptoms of the root issue. Managers overinflate ratings. The root cause is that they don’t understand how to appraise effectively and use appraisals as a motivational tool.
Companies need to invest more time in training in how performance reviews should go, how to thoughtfully compile and strategically communicate them. With proper training, this translates to a five-person department of people who are all superstars, all getting great ratings. And there’s nothing wrong with that.
Shaw: What do you think are the reasons behind Yahoo’s institution of the stacking system?
Lewis: I think this is a logical progression of an earlier decision by Marissa Mayer in the last 18 months— to eliminate working remotely for all employees. This decision is partnered with that one. Again, this is dealing with symptoms vs. causes. They’re saying that managers do a lousy job of managing people who work remotely, and of assessing performance levels. Rather than fix those two issues, they will artificially alter the results of poor management.
Shaw: In Yahoo’s new ranking system, do you see positive value in the use of quarterly performance reviews, instead of annual reviews, or any other potentially positive changes within the larger evaluation structure change that you would keep, while getting rid of stacking?
Lewis: The strength of this approach is that it forces managers to be more thoughtful in reviews. It’s too easy and common to default to above-average to great reviews, instead of giving a significant evaluation. A forced system doesn’t allow managers to take the easy road. That’s a positive. I know because I’ve been there, I’ve drunk the Koolaid. I’ve even passed the Koolaid around. There is value in finding the good in it. Absent of a forced curve, reviews overwhelmingly will be positive, despite a situation in which the organization’s performance is not positive.
Shaw: At Microsoft, after years of stacking, do you predict that the managers and employees will be able to make the cultural change to a more collaborative, less competitive, evaluation system? What would be the keys to making this change successfully?
Lewis: That really remains to be seen. A radical shift in how to execute reviews includes a lot of moving parts: getting the system implemented, training managers, all of the appropriate communication pieces for employees. A company is going to have to provide appropriate support through HR to help managers do everything properly. Send managers to complete an entirely new process, and they will need help or they will ignore the new system. They will do it wrong. Then, will HR correct it and help them? Will HR return the work to the student, so to speak, and make them redo it? Or just let it slide? This is asking a lot of the management team and the HR team.
In an organization with 200 people, if reviews are to be done in December, I would start this in July. You need time to get buy-in, and it would be nice if people felt like they were invested in it.
We’re talking about one of the largest organizations in the world. It doesn’t feel like they’ve given themselves enough time for this system to work for everyone.
Shaw: So, have you seen companies attempt this type of shift in employee evaluations, not do the proper planning, see it fail, and then just swing back to the original system?
Lewis: Absolutely. That is the biggest risk. When you throw this out there, when you make this radical shift, if you put it on the managers’ desks without getting behind it, it’s suicide. The way to do it correctly is to address the changes with management. Say it will be a pain in the butt. Hold a focus group style, working meeting, where managers will raise concerns and questions. Figure out how to address those concerns, and how to move forward in a positive way. They may not be happy, but they’ll feel they helped develop the system. If you throw it out to them without planning, managers will find it easy to rebel. They will say “I can’t use this form, I don’t agree with this.” You’ve created an easier path to mutiny, and you will revert back to the old system vs. create support for the new one.