Performance Management System (PMS) revisited : Are Annual Appraisals and Ratings outdated ?

Annual appraisals, ratings, forced rankings et al have been hotly debated in recent years. In our last one and half decades of management consulting exposure, we have faced numerous instances of rational resistance to the way PMS was being done. Mind you, not all resistance to "change" or objections against "new management processes (like PMS)" are reactionary or mindless.

We didn't admit it all the time, but some of the objections were rational, valid and based on empirical evidence on the ground. But in the cruel world of corporate turn-arounds, gruelling green-field project schedules and entrepreneurial risk perceptions, we ruthlessly drove PMS all the same! The liberalised Indian economy of the last 2 decades, demanded fast paced performance delivery and the cost of failure was scary.

However the Indian economy is in deep trouble again since the last few "achhe din" years and the immediately preceding period. And conventional PMS ain't helping ! Companies, particularly in the core sector (mining, steel, power et al), manufacturing sector, export driven firms and green-fields are struggling. What will be the future of BPOs and the low-value-add IT sector? Their employees and vendors are insecure and jittery. Owners, bankers and other stake holders are shaken up. So how can their HR departments and consultants pitch in with an effective PMS that will:

• Ensure better and planned performance deliveries.
• Keep employees engaged and improve retention.
• Develop competencies.
• Keep customers happy.

If we look at global benchmarks and thought leaders in this field, we will notice a small but significant paradigm shift in PMS. Some companies like GE, Deloitte, Cargill, Adobe and Accenture have begun viewing employee performance management differently and doing things in a radically different way. They are in fact at the cutting edge of a management trend amongst Fortune 500 companies, many of whom are contemplating a major shift away from the stereotyped annual performance review system.

Can you imagine GE (General Electric) dumping its trend setting "Forced Ranking" based PMS !? As late as 2013, the legendary Jack Welch, the "manager of the century" (as per Fortune Magazine:1999), who was the pioneer in the so called "Rank and Yank" Forced Ranking System, defended his brain child. He refused to condone the labelling of the Bell Curve based ranking system as rank and yank. He said that it was more of an objective "differentiation" amongst different grades of performers. According to him "adults" performing in task driven delivery situations NEEDED to be apprised about where they stood and what they had actually contributed.

However with the turn of the millennium, human approach to the workplace has changed. The cut throat, cost-cutting-above-all work place of the 80s and 90s is giving way to more sustainable and development focused organisations. People now need to "belong" once more. Organisations now are seeing the value in investing in people and keeping them engaged over a period of time.

If we study the changes brought in by the sample of firms mentioned above, we see the following trends in the New Look PMS:

• Regular, round the year "Check-ins" and "Continuous Feedback" processes.
• Check-In with peers and team members in a lateral mode and not just vertical feedback in a hierarchical mode. Subordinates and peers are allowed to initiate the process rather than the "bosses" all the time.
• Traditional "360 degree" feedback, based on "What do you think about so and so" is being replaced with "How do you want to connect with so and so in the future and What do you want to achieve".
• In some instances, like with GE's system of "Touchpoints", the process of regular conversation and feedback between superiors, subordinates and peers is still complemented by an annual assessment after all! However during these assessments, the data generated by the regular Touchpoints are used. So employees don't feel any disconnect between their evaluation and what has been discussed with them about their performance round the year. Incidentally, GE has introduced an App for managing and tracking the Touchpoint based PMS !
• Shift of focus from post mortem analyses of past data to future possibilities and aspirations....This approach is opening the doors towards unlocking latent potential in the Human Resource pool. People are now engaged by their bosses on what needs to be done tomorrow and what role the juniors would like to play in that scheme of things.

In the case of Cargill, their "Everyday Performance Management System" is based on the following features:

1. Managers and their teams were given the KRA of successfully practicing the "Everyday PMS" and successful managers and teams rewarded.

2. Shared learning and benchmarking of successful performers.

3. Enablers like process and skill training, were provided to the teams for making Everyday PMS successful.

Ultimately no HR System is the final solution ! The context changes, business imperatives change, social values evolve. What worked yesterday may not solve today's problems. It is advisable for Corporate Owners, Top Management, HR practitioners and Consultants to stay in touch with current reality and what's happening on the ground rather than getting stuck with magic solutions from yesteryears which worked well in a different context and time.