If you are like most business owners, from time to time you find an article that catches your eye. One that makes you stop and think, “Should I be doing this for my company?” It is easy to read an article, get an idea, and think to yourself “Ok, let’s go with it!” However, sometimes it is best to ensure you have the right foundation in place before you make the jump.
Once such topic that is getting a lot of press lately is the topic of the formal written review and, frankly, is it even necessary anymore? In this day and age when businesses need to be able to change on a dime, to be able to adapt to new pressures and new ways of doing business it is not easy to maintain that formal, dreaded review process. Yet, our employees seek clarity. They want to know what are the expectations and what do they need to do to succeed? Truth is most of our employees hate the formal review as much as we do!
I am sure you have heard of several big companies (GE, Adobe, Deloitte) that have done away with written reviews altogether. In these companies, they instead have regular, informal feedback sessions or check in meetings between managers and employees. This allows for goals and objectives to adjust and adapt to changes in business needs. It allows for employees and managers to develop better communication and to have a two-sided feedback relationship that drives employee engagement. Yet, it is not as easy as just flipping a switch. To succeed you must have the right foundations in place.
So, what is the right formula to ensure success when switching from a formal written review process to these more frequent, informal touch base meetings?
Manager Training: The number one indicator of success or failure in moving to this process is whether the managers have the skills and training necessary to succeed. While managers will no longer have to spend hours writing that once per year formal review, they will instead need to have face-to-face, frequent meetings with their employees to discuss goals and objectives, employee satisfaction, and employee development. Failure to provide feedback will lead to failure in this new process.
Common Review: In the formal review process, managers could rely on performance ratings to help them determine the merit increase they would provide to their employee(s). Once you remove the ratings and the formal review, the best way to ensure your managers stay on budget is to have a common review where all employees are reviewed at the same time. Doing this allows you to better remain on budget and allows you to differentiate employee rewards based on performance. Remember, just because you are getting rid of reviews and ratings does not mean you want to have a “peanut butter” approach to awarding merit increases. You still want the highest rewards to go to the highest performing employees who are lowest in their salary range.
Differentiation: Managers need to be able to differentiate between employees. Not all employees produce equally; therefore they should not all receive the same rewards. In addition, as stated above, you want the highest rewards to go to the highest performing employees who are low in their salary range. If you do not have salary ranges or a compensation structure you can still implement this new system, but by understanding the market pay for each of your jobs and how your employees are paid in comparison you will be better able to distribute merit awards to make the most of what is typically an already small merit budget.
If you do not have all of these factors in place it will reduce the chances of success in implementing an informal, no review/no rating performance management process. However, in my experience, if your culture and your organization have these factors successfully ingrained in your culture then moving to this system can increase employee engagement and satisfaction.