I was completely perplexed when the CEO asked me to find a way to get rid of the annual appraisal process in the company…
How can you get away with the central process in HR which has links to Ratings & Rewards, Training & Development, Performance Management …etc. But at the same time if you ask me whether this Annual Appraisal process is effectively serving the purpose, in my 3 decades of experience I would say “NO”. We felt struck with no better alternative. How some big companies like Adobe, GE have announced a few years back on scrapping the annual appraisal process. GE the pioneer of appraisals and the bell curve later found its shortcomings and have abandoned the process. I started my exploration with the Hypothesis:
They must be following some other better way of managing ….
Problems with the Traditional Appraisal Process:
- Too ambitious goals and not knowing where to start – struck in the routine.
- Progress not measured regularly. At the end of the period we get lost.
- Goals are sacrosanct irrespective of changes during the year.
- My Day to day jobs doesn’t lead to the Goals.
- Goals are meaningless as it’s given by my Manager
- No goal at all.
- No clear link between my performance and the rewards.
I’m sure most of you would have experienced at least one of the above mentioned points in your career.
How do we overcome this shortcomings of the traditional appraisals?
Continuous Performance Management (CPM):
The process of CPM consists of 3 key processes:
1. Objective Key Results (OKRs)
2. Continuous Feedback and Recognition (CFRs)
3. Compensation & Evaluation
1. OKRs:
Objectives and Key Results (OKRs) was a process started in Intel and successfully adopted by Google, which later got migrated to many leading companies. It is a simple process of setting goals through:
“I will <objective> as measured by <Key Results>” – Doer’s Goal Formula
Even though the process is simple it has a set of rules to be adhered to while setting the Objectives and key results which are sacrosanct.
We will discuss more about OKRs in the next blog.
2. CFRs:
This is a continuous day to day process wherein the feedback and recognition are given as and when it is observed. The best time to give a feedback is when the activity is just completed. This is where CFR differs from the traditional appraisal systems. If it cannot be given immediately at least it has to be given at the earliest.
For this process to be successful Leaders have to have a one-on-one regular meeting with their team members. Where the span of control is less than 7 (ideal for managers), it is suggested to have a weekly 1-1 meetings with each of their direct reports. This is where feedbacks are shared and employees recognized for their good behaviour.
More about CFRs in the next blogs to come.
3. Compensation & Evaluation
The key to the migration to CPM lies in deciding how do we take care of the employee compensation packages and the annual increments. How do we reward people if we do not have the annual appraisal cycle. How do we create a link between the performance and the rewards.
We need to migrate to the market driven rewards policy. An organisation need to have a Compensation Policy in place which should clearly specify where does the organisation wants to benchmark itself with the market.
For this to happen organisations must adopt the Job evaluation process and subscribe to the market research data of one of the top agencies which does such surveys annually. Once this process is completed then it becomes very clear to the employees how their salary movements will happen in line with the market corrections. More about this in the coming blogs.
“The Way we have been taught to manage people is suited to business environments that no longer exist. We need to CHANGE”
