Over the past year, the news has been filled with anecdotes and examples of companies shunning performance ratings and moving to a more evolved approach to performance management. Some examples of first movers include Adobe, Deloitte, Goldman Sachs, Accenture, and Cargill—companies with long-standing presence (some from the mid-19th century) and strong reputations around the world. HR practitioners across economies, sectors, and industries are taking this as a sign of things to come, but is it really time to drop traditional performance ratings?
Which companies are moving away?
From our observation, only mature and evolved companies appear to be moving away from traditional performance ratings. This is because companies at protracted maturity stage have witnessed several business and macro-economic cycles, leadership changes, and restructuring.
They have a wealth of experience, advanced HR governance, and high levels of people manager capability, which means they are able to effectively implement the concept of ‘continuous listening’ (as we call it at Aon Hewitt). This means performance discussions and reviews happen through ongoing, everyday conversations between manager and employee, instead of at once or twice-yearly intervals.
What does Asia look like?
Asia will contribute close to 50% of the global growth and 75% of the global workforce. This growth will be shared among large MNCs betting on big economies such as India and China and the homegrown companies in these economies, as well as in high-growth markets such as Malaysia. For MNCs that have already implemented new performance management processes, their biggest challenge will be to communicate to employees, train managers, and govern execution of the process in diverse cultures and operating environments.
On the other hand, local companies in markets like Malaysia are mostly entrepreneur- or promoter-led and are not likely to have the same proportion of professional managers to successfully adopt the continuous listening approach. Therefore, traditional performance ratings remain an effective tool for determining rewards, recognition, and career progression opportunities.
What’s on the horizon?
Aon’s 2016 Workforce Mindset Study reveals that only 46% of employees feel that the way their company measures performance is effective, yet 64% believe that a performance review should involve a rating. This number is significantly higher for high performers and millennials, with 88% and 64% of employees respectively expressing a desire to be rated.
In the haste of burying the dreaded bell curve, performance indicators should not be taken to the grave as well. On the contrary, these should be made more measurable, and in real time, so as to enable higher productivity and better performance conversations all year round. An objective assessment of people manager capability is also critical before taking a call on transforming existing performance ratings and systems.
In the Southeast Asian talent market, where rewards and careers are key engagement drivers, we believe ratings will continue to weigh in heavily on performance pay, identification of high-potential employees, and development—so, while moving away from performance ratings may be a great idea, its time is yet to come!
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