Performance Management is not for Firing People

Let’s keep this brief. If you’re using performance management to fire people, you’re doing both of those things wrong. I raise that point because of the explicit mention of performance management being used as a tool in layoffs (firing by a nicer name) over the past few months.

In Wall Street Journal and CNBC articles about Meta and Alphabet, both indicate they’re using performance management to determine who gets laid off.

“Facebook parent?Meta Platforms Inc.?gave thousands of employees subpar ratings in a recently concluded round of performance reviews, a signal that more job cuts may be on the way, people familiar with the matter said.” WSJ, 2/17/23

“More Google employees will be at risk for low performance ratings and fewer are expected to reach high marks under a new performance review system that starts next year, according to internal communications obtained by CNBC.” CNBC, 12/22/22

Why it’s wrong

It seems obvious that it’s wrong to use performance management (PM) as an excuse to lay off masses of employees. But in case anyone’s confused about why it’s wrong, those reasons include:

That’s not what it’s for: Performance management is a process to set goals, coach employees to higher performance and better behaviors and then evaluate their progress. It may turn out that some employees are performing so poorly that they need to be let go. That realization is a by-product of performance management; it’s not caused by it. I’ve never had a client who said that one purpose of performance management is to determine who to fire.

You’re polluting the pool: “Yes, I know we used performance management to fire people last year but trust us, this year it’s all about higher performance. So please set aggressive goals and sharply differentiate your team members.” Once you’ve used PM as the reason to fire people, it will be years before anyone trusts this process again. You will have lost the single most powerful tool HR has actually to elevate performance in the organization.

Related, if you’re in HR, “This was your process and we don’t trust you either. Forever.”

Bad year or wrong person? Great PM should challenge employees to higher performance by setting meaningful stretch in goals. Suzie reached for the stars in this year’s process but faced significant challenges. She got the second-lowest rating despite having performed well previously. Did she have a bad year and now deserves coaching, or is she a lower performer and deserves firing? If you’re using PM to fire people, Suzie should freshen up her resume.

Poor goals were likely set: We’re fortunate to work with the world’s leading companies but even in those companies they struggle to set high-quality goals. If we’re firing people by PM we’re assuming that quality goals were set at a consistent level of stretch across the population. That’s a really, really bad assumption.

A moving bar: One article above says that a company states, “more employees will be at risk of lower performance ratings next year.” This could only be true if more employees will genuinely underperform next year, which seems odd, or if the performance bar is meaningfully raised. In the latter case, everyone might step up to the challenge and perform better, so assuming there will be lower performance ratings is weird.

The only way there will absolutely be lower performance ratings is if the company is forcing a distribution with a larger percentage of people in the lower performance rating. We’re OK with forcing a distribution, but if that’s a moving bar each year then your PM process is not legitimate. Each year will become The Hunger Games with a different number of survivors.

How to Layoff or Fire People

Many of us HR pros have had to do layoffs, so there’s a well-trodden path to doing that well. You determine the future capabilities your organization needs, in what quantity and in which locations. You compare your existing population to those standards. You assess that some people don’t have the capabilities, some likely won’t perform at the level you expect and some won’t move to where they need to be.

This should be an ongoing and proactive process, not one done months after business metrics show the need. ?You might use ratings as an input to that process, but it’s one of many pieces of data you assess. That wasn’t, however, the purpose for which ratings or assessments were done.

Firing people is even easier. Someone isn’t performing or behaving how they need to. You document that and take action (yes, tougher in Europe, we acknowledge). You take those actions concurrent to the problem, however. You don’t sweep all those decisions under the rug until it’s finally time to clean the house.

So, Don’t Do It

Since we in HR create performance management processes, we’re accountable for ensuring they’re used responsibly. If you need to fire people, do it when they need to be fired and for the obvious reasons. If you need to lay people off, do it with thorough and accurate criteria. But don’t use the only process we have in HR to elevate performance as a ham-handed tool to do what you should have done by other means.