Worker reviews undergo changes

Some decide old evaluations weren’t so bad

There’s a revolution going on in corporate human resources departments, and the much-hated annual performance review is in the crossfire.

Over the past few years, a fast-growing number of high-profile companies have been blowing up this annual rite of corporate life, replacing the traditional yearly review with something more frequent, less formal and, they hope — less reviled. According to a March survey of more than 250 companies by the research and consulting firm Brandon Hall Group, about 16 percent said they had recently eliminated the use of a rating scale.

The rebellion is taking different forms. Some, such as Accenture and Microsoft, have ditched “forced rankings” that use a bell curve to distribute employee performance, among other things. Others, such as Adobe and General Electric, have either dumped the rating scale that labels employees’ performance with, say, a “3” or “meets expectations,” or are testing the idea with groups of employees. Big banks like Goldman Sachs and Morgan Stanley have made changes to the way they rate and review workers in recent weeks.

But as the uprising gains steam, a big question remains: How good are the systems replacing them? As companies revamp reviews, what’s working and what’s not?

New survey data shared with The Washington Post by the advisory firm CEB reveals that one of the big changes employees have cheered may not

remain so popular over time. It finds that companies that eliminate ratings altogether — replacing the “grades” workers get, whether in the form of a numerical scale or descriptive terms like “excellent” or “meets expectations” — could be in for some complaints.

CEB surveyed more than 9,000 managers and employees across 18 countries and found that those who worked for organizations that had scrapped ratings from the review process actually scored the performance conversations they had with their managers 14 percent lower. Employees who’d gotten a top score under the old ratings system missed them most, with satisfaction scores dropping even further. And among the group that had no ratings, the number of employees who believe their organization differentiates pay by performance dropped eight percent, the survey found.

“For organizations that have abandoned some sort of categorical rating-type feedback, what we actually find is that experience is pretty negative,” said Brian Kropp, CEB’s human resources practice leader. Without a rating to focus on in the conversation, Kropp said, managers may feel it’s harder for them to deliver a clear message. The survey also showed that when companies drop ratings, managers spend less time on performance management.

Finally, employees appear to have a harder time seeing the link between pay raises and performance. When there wasn’t as clear of a link between a score they got on their performance review and the size of the merit increase they received, employees’ “perceptions of pay differentiation fell,” Kropp said. In focus groups, “they tended to say, ‘my manager’s just going to give more money to the person he likes.’ ’’

While these new results may spark caution in companies thinking of jumping on the trend, it also seems too soon to say eliminating ratings is a bad idea. After all, years of research have pointed out the challenges of grading employee performance — how ratings can lead to manager bias, demotivate workers and, especially if forced onto a curve, prompt the kind of internal competition that isn’t helpful in a teamdriven workplace.

In addition, some companies that have dropped the ratings appear encouraged by the results. Microsoft’s director of global performance programs, for instance, told The Wall Street Journal in October that “the lack of rating, we have heard back from our people, mitigates the threat, distraction and internal competition.”