Leadership | Performance

Kill Your Performance Ratings: The Next Step

An illustration of two people measuring out a new value on a bar graph

Nearly a decade ago, the NeuroLeadership Institute published an influential article titled “Kill Your Performance Ratings”. In it, we shared an analysis that showed traditional approaches to performance management, including an annual performance rating, trigger a threat state in the brains of both employees and managers. Such a state changes cognitive function, which results in perceptions and behaviors that interfere with the developmental goals of a performance management system.

Our analysis sparked a large-scale shift in the way hundreds of organizations define, assess, and reward performance. Companies across various industries, such as clothing retailer The Gap Inc., software developer Adobe, and consumer products manufacturer Colgate-Palmolive, made significant investments in shifting performance management from an annual, event-driven exercise culminating in a rating to a more continuous process characterized by high-quality conversations throughout the year. This shift to continuous performance management (CPM) often included the elimination of ratings and decoupled performance-related discussions from those focused on compensation and rewards.

Within these early experiences, an exciting pattern emerged: Research showed organizations that made a shift toward CPM, supported by a robust activation strategy, resulted in more engaged employees, more effective development discussions, and higher administrative efficiencies. Today’s efforts to transition to CPM can benefit from modeling these early successes, particularly when bolstered by a change strategy that is optimized to deliver rapid behavior change at scale.

Change at scale

For many companies, the shift to CPM represents a significant organizational change. Such a change can be challenging, but not for reasons most often assumed. While conventional wisdom says change initiatives fail because they are too complex, our research has found the most pervasive reason is employees aren’t set up effectively to change behavior. We find desired behaviors are most likely to emerge when they’re explicitly defined and developed to become habits, tightly aligned with organizational priorities, and reinforced by the established processes and practices of the business. We refer to these three dimensions and the alignment between them as Priorities, Habits, and Systems™ (PHS).

Many of our clients have found PHS to be a powerful guide in their CPM transitions. When used as a diagnostic framework, it can help identify the areas of greatest opportunity to accelerate progress, whether that be improving awareness and commitment to the “why” behind continuous performance management (Priorities), increasing the frequency of behaviors that ask versus give feedback (Habits), or modifying talent development, compensation, and other key process and practices to support a ratings-free philosophy (Systems). Often the greatest opportunity lies in creating tighter alignment between the three dimensions.

PHS in action

The Gap demonstrated a powerful example of establishing CPM as a top organizational priority. A defining feature of their transition was an employee-driven process rebrand. The resulting moniker — Grow, Perform, Succeed, or GPS — succeeded on several levels. First, it was a simple reminder of the three primary goals of the new process. Second, the concept of a GPS-enabled journey, with a predetermined goal and real-time course correction, was a powerful analogy for the performance management journey itself. Finally, the new brand symbol was identical to the stock ticker of the company, GPS, which made the concept both memorable and inherently important to all employees. In addition to their comprehensive rebranding and communication effort, the Gap established the habit of monthly “touch bases,” on a cadence determined by individual departments. They reinforced their priorities and habits by simplifying their compensation system, eliminating annual reviews, ratings, and calibrations, and elevating manager discretion over the allocation of rewards.

A compelling example of activating CPM habits was Colgate-Palmolive’s campaign to facilitate a feedback-friendly culture. The company planned to maximize enterprise-wide uptake of quality feedback conversations using neuroscience as a guide. A comprehensive habit-activation strategy was implemented at scale, simultaneously involving more than 4,000 managers worldwide to tap into the power of positive social pressure. The learning experience introduced one habit at a time, recognizing that learning is best achieved when the brain is not forced to process multiple inputs at once. Time was allowed for practice before the introduction of each new habit, stimulating new neural pathways in the brains of employees and increasing the likelihood of new habit formation. This robust approach led to new patterns of behavior in the organization, with 95% of participants applying the habits of quality conversations at least once per week.

Finally, Adobe demonstrated a particularly effective application of system modifications in support of CPM. Having established continuous two-way feedback as a core organizational priority, activated via their “check-in” methodology, Adobe embedded that methodology at multiple touchpoints. From the first exposure to Adobe as a candidate to the new employee orientation experience to references in senior leader emails and all-hands meetings, employees were continuously informed, instructed, and assessed on the practice of Adobe check-ins. Specific items on the annual employee survey were tracked to identify which departments led the way and where further coaching and support was required.

Looking ahead

These are just a few examples in which careful attention to PHS has helped companies reach the goal of continuous performance management. Recent focus in the fields of regenerative management practices and psychological safety will further improve the quality of performance-related conversations and the successful adoption of CPM. Exploring best practices and lessons learned from those who have gone before is an excellent way to bring the most appropriate version of CPM to your own organization.

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