Why Performance Reviews Make Companies Worse (And What Actually Works)…

[00:04]
Jimmy: Hello, I’m Jimmy.
James: And I’m James. Welcome to A Job Done Well, the podcast that helps you improve your performance and enjoyment at work.
[00:16]
James: What are we talking about today?
[00:18]
Jimmy: Today we’re going to talk about one of your favourite subjects.
James: What’s that?
[00:25]
Jimmy: Performance management.
James: Yes.
[00:27]
Jimmy: Hold that thought. The reason we’re talking about it is organisations talk about the importance of performance, then build systems that make improving performance almost impossible. You’ve got ratings that are all political, feedback that’s about justifying a poor rating, and these validation or calibration meetings—like gladiatorial battles.
James: You want to scoop your eyeballs out with a teaspoon.
[00:51]
Jimmy: Anyhow, the system takes over, and the actual job—helping people do better work, helping people improve performance—gets completely lost. We were challenged by one of our audience to say, “All right, you bash it. Tell us what you’d do then.” So today we’re going to do two things. First, what would we do with a blank piece of paper if we had free rein to change performance management systems? And secondly, if you don’t own the system, how do you manage your people inside it?
[01:36]
James: All right. Looking forward to it. The trick for me is to not start frothing at the mouth, particularly as this is a video. I’ll look like a rabid dog, wouldn’t I?
Jimmy: Don’t worry, I’ll edit it.
[01:54]
James: So go on then, why do performance management systems frustrate everybody?
[02:02]
Jimmy: I think they’re designed from an organisational perspective. They’re designed to cover a whole load of bases about how people manage performance and how you get consistency. They’re done from the organisation and systems perspective, not the individual.
[02:22]
James: Which, yeah. But sorry to pile in, what really surprises me is these things come out of HR, so you’d think they’d understand people, but they don’t. They have a very process-driven bent, and the human seems to be ignored in the whole process.
[02:41]
Jimmy: They do. Without going down too much of a rabbit hole, therein lies one of the problems: organisations allow HR teams to go off and design stuff and own stuff. They own the culture, they own performance management, they own the people. That’s wrong. Fundamentally, the organisation owns it, and the people and the leaders should own it. We abdicate responsibility to the wrong people.
[03:11]
James: And the other question for me is, why do they always seem to create worse behaviour? Performance seems to get worse off the back of these systems than better.
[03:24]
Jimmy: One of my favourite examples is the rating in the middle. In some organisations, it’s “good” or “strong,” and everybody takes it to mean average.
James: It is.
Jimmy: It takes some effort to make being called good into a negative.
James: It does.
Jimmy: “You’re a strong performer, James, and you—”
James: Oh, it should be very strong.
[03:55]
Jimmy: It’s flawed. And one of the things we’ve both seen many times is it’s easier to pay someone off, write a cheque, pay off someone who’s not performing well than manage their performance fairly through a process. The reality in most organisations is, rather than waste years of your life trying to manage performance, you just write a cheque.
[04:27]
James: And the other thing is it’s just a sort of once-every-six-months or once-a-year exercise in seeing if you can piss off everybody in the organisation in one fell swoop.
Jimmy: Yeah. You give some people a really high rating, and they’re happy for about ten minutes, and then everyone else who didn’t get the high rating—which is 95% of your people—are pissed off for the next six months.
James: And we wonder why we’ve got a motivation problem.
[04:54]
Jimmy: Do you think performance management systems are ineffective, James?
[04:59]
James: I would argue there are two parts to any organisation: you’ve got the people and the system. The system being everything that’s not the people. Performance management is all about trying to improve the people—goals, incentives, “we must have the best people,” yada yada. Frankly, it’s just lazy management. Unless you’re Manchester United and can afford to pay for the best people, everybody wants the best people. But in Nottingham, where we live, there are two or three big corporates. It’s just a roundabout of people going from one to the next. So if you think it’s going to get you the best people, you’re sadly mistaken.
[05:40]
The second thing is, it’s in an employee’s interest to look good, but that’s not the same as being good. You get this whole thing about performance being subjective. Show me what you’re measuring, and I’ll show you how I’ll behave. We all know stories about people cheating on their targets and finding workarounds. The other thing is it just kills cooperation between people. It drives sub-optimisation. Focusing on people, I think, is the wrong thing.
[06:23]
Jimmy: Just on that—you can look good and be good. The challenge is it’s easier not to worry about being good and just look good.
James: Yes.
Jimmy: Therein lies the problem. You don’t have to do all the hard work to be a top performer. You just need to be able to look good.
[06:50]
James: And to be honest, if everybody else is cheating, it takes a big person not to cheat.
[07:27]
Jimmy: And I think you’re right on the McDonald’s point. They don’t have the best people, but their food’s okay. It’s consistent. They maintain that standard immaculately wherever you go in the world. That’s what you get.
James: So yeah, the system.
[07:51]
Jimmy: I’m very impressed, James, by your level of maturity discussing the negative side of performance management without absolutely losing your shit.
[07:55]
James: Not frothing yet.
[08:00]
Jimmy: The reality is, you do need to do something. Organisations need some way of consistently managing their people and attempting to get better performance out of them. Bias does exist, and you need to find ways of managing consistently and getting bias out of how your people are managed, especially when you’re in a big organisation trying to do that at scale.
[08:53]
James: Yeah, but what is it that you actually need to do? What would you argue improves performance?
[09:05]
Jimmy: I think there are certain things that improve performance. Regular, honest conversations. Being really specific about the feedback—not “You’ve done really well last week, James,” but “When you did this, that was really helpful.” Frequent conversations with specifics. Clarity on what people are here for. We talk a lot about purpose, but are you clear on what good looks like for your people? What are the priorities? Why are we here? What are the trade-offs we’re willing to make? Often, we leave an amount of ambiguity, so people aren’t clear what they’re trying to achieve.
[09:56]
James: I’d agree.
[09:57]
Jimmy: Have an environment where stuff can go wrong, and then get on it really quickly.
James: Yeah, and then pivot. Don’t just carry on flogging the same dead horses.
[10:03]
Jimmy: Encouraging people to make mistakes. Is your culture one where people feel psychologically safe, where they feel comfortable admitting problems and not just ignoring them and burying them? Can they take accountability for things without fear of retribution?
James: That one’s really powerful. If you can’t admit you’ve got a problem, you’re never going to get any better.
[10:32]
Jimmy: And you’ve got to have the capability. The manager’s capability matters in many ways more than a process. A good manager can outperform a poor system when it comes to having performance conversations. So how do you make sure that capability is there? And where you can, separate the punishment and the development. I went through most of my career thinking coaching was a remedial thing. You coach elite athletes to improve, not for punishment.
[11:21]
James: Okay, but let’s see—if I’ve counted these right, you’ve got about six things that improve performance: honest conversations, frequent honest conversations, clarity, fast course correction, psychological safety, and managers having the right conversations, focusing on coaching as a good thing rather than a remedial thing. I agree with all of that. The problem I have is that in a lot of these big corporates, they have rank stacking, individual bonuses, annual reviews, vitality curves, cross-calibration—all of that crap. And actually, that has got nothing whatsoever to do with those six things.
[12:27]
Jimmy: That’s very true. So let’s tackle the challenge, James. What would we actually do if we had a blank piece of paper and we were there to improve performance?
[12:36]
James: Well, okay. I think we’ve got different cards on this one. You’re a man who’s actually done this—you took it out in an organisation. I’m Mr. Process and System, so I’ll go at it systematically. As a man who has actually done it, what did you do, what happened, and what did you learn from it?
[12:55]
Jimmy: A bit of background: I worked in one organisation where the chief people officer and I were very aligned in our attitudes toward performance management. We removed a lot of the old-fashioned processes. Not everything worked perfectly—one of the mantras we picked up was progress, not perfection. Some of the things that worked well: having a loop between hiring and performance. Once you’ve recruited someone, the people who did the recruitment push them out into the business. You don’t look back and say, “Are the recruitment methods I’m following actually being successful?” When you get a high performer, how did you get them? Where’d you get them from? What was the process that identified them?
[13:56]
James: So it’s that feedback loop, so you know whether what works or not.
[14:01]
Jimmy: The second bit was incentivising the overall. We incentivised on how the organisation was performing, not the individual. That’s how bonuses were paid. Funny enough, all of a sudden, everyone got very interested in how the organisation was performing. Before, they were all bothered about their little bits and what they were doing, and they were pretty indifferent to the overall. That completely transformed when we changed how people were incentivised.
[14:32]
James: And I think that’s really important because you’re getting away from sub-optimisation. Some idiot worrying about their handle time or whatever the hell it might be, which is totally irrelevant.
[14:40]
Jimmy: The other thing linked into that was making sure people thought about how they were impacting the outcomes. It’s a bit of a cliché, but we talked about, “You’re either serving the customer or you’re serving someone who is serving the customer.” Just think—it doesn’t matter what job you’re doing, but have line of sight between what you do and the end result you’re trying to get.
[15:03]
James: Yeah.
[15:06]
Jimmy: A couple of other things: really focusing on the capability of your managers. They need to be invested in to have the right conversations. It’s not as straightforward as we may all think to have regular performance conversations in a way that’s motivational for people. Have you invested in that capability? That’s not about a whole load of structure, processes, guidelines, and forms that stop you from thinking. It’s about the ability to have that conversation.
[15:38]
James: And that comes back to what we spoke about the other day—the Pygmalion effect. If you tell people they’re good, they’ll be good. If you keep telling people they’re bad, they’re bad. Where is the emphasis of that conversation going? Are you picking on the good stuff or the bad stuff?
[15:53]
Jimmy: And accepting that in any organisation there will be good and bad stuff. You have to have an environment that nurtures imperfection because that’s the real world. As soon as your environment or culture is not accepting of imperfection, that’s it—you’re gone. Because people will focus on just telling the spun-out story rather than the reality.
[16:20]
James: But did it actually work? Did it improve the performance of the business?
[16:25]
Jimmy: The organisation performed well. It wasn’t without challenges. Any system or approach is going to have some downsides. You just have to keep looking at them and improving.
[16:42]
James: And what happened in the end?
[16:45]
Jimmy: I left the organisation, as did my colleague in HR. I doubt it had the support from above. I did hear on the grapevine that they changed things back again.
[17:00]
James: There is a little bit of, “It’s a crutch. Everybody else does it, therefore we should do it.”
Jimmy: It takes a bit of bravery to say, “No, I’m not going to carry on flogging the dead horse.”
[17:12]
James: I’m a wee bit more analytical. How would I actually go about doing it? The first problem with a lot of performance management systems is they try to do everything in one go. You’ve got, “We want to make pay decisions on it. We want to do development conversations on it. We want to promote people on it. We want to get rid of people on it.” You’ve ended up with this huge, unwieldy beast. The first question is to be very clear about what all the outcomes you want are and write them down. Then, when you’ve written those down, you can start to challenge: Is that what I’m getting? Get some data. If you can’t get data, just have some focus groups, but get real feedback on how well this process is working for you and whether it’s actually improving performance. If it’s not, don’t do it.
[18:10]
Then, split your processes up. If you want a development process, have a development process. If you want a pay process, have a pay process. If you want to roll out your strategic objectives through your objective-setting process, have one of those. The problem is you’ve got this Swiss Army knife of a process when what you want is a bunch of scalpels. Split it up, and it’s much easier and less unwieldy. Then, one by one, redesign it. What do I do now? Does it work? Do I like it? What am I going to do differently? But the most important thing is to test it. Roll it out, see if it works. Don’t get suckered into this “best practice” nonsense—best practice only works for an individual organisation. No two organisations are the same, so best practice isn’t the same.
[19:00]
Finally, after you’ve tested it, run it for a year, see if it works, and have another go. A lot of these things, people stake their reputation on them, but redesign and redesign. There’s a reason the iPhone is on 17 now—they just keep improving it.
[19:25]
Jimmy: Just to pick up on a couple of points, James: your point about creating the Swiss Army knife of processes that are going to solve all these problems—the reality is they can’t. One size fits no one. Progress, not perfection. Keep trying to change and evolve what you’re doing. If you wait for the perfect universal answer, you’ll be waiting a long fucking time.
[20:03]
James: The problem is, it’s all very easy to talk about this. In my experience, in my last job, I was a reasonably senior manager. I got this performance management system shoved down my throat. I said to the HR lady, “How about we run a test and try something else?” I got a flat no. “You are doing this whether you like it or not, James.” So the question is, if you’re having this rammed down your throat and you have no choice, what’s the best way to do it?
[20:34]
Jimmy: I think there are things you can do. Don’t wait for the formal cycle. Have regular conversations with your team about how they’re doing—not just how the work’s going, but how they’re doing, how they’re improving, what they’re struggling with, how they’re developing. Do it regularly. That might mean you’re effectively removing surprises. When you’re sitting down and talking to someone about their end-of-year review, nothing in that should be a surprise. If you ever write down a review and think, “These are words that James will not have heard from me before,” that’s when you know you’ve got a problem.
[21:20]
Sometimes you have to translate corporate language into normal language. There’s a whole lexicon of stuff where you talk about “stakeholder management opportunities.”
James: I’ve had a lot of those.
[21:53]
Jimmy: “Good for your development.”
James: I’ve had a lot of that as well.
[22:00]
Jimmy: Just talk straight to people. Be honest. Another thing: a lot of performance management happens in waves. You’re asked for 360 feedback at one point in the year. Keep notes throughout the year. We get hit by recency bias, and I can only remember what you did in the month before, so that’s what I put down as the examples. Keep notes on things throughout the year.
[22:31]
James: Sorry, you’re absolutely right. There always seem to be a lot of people presenting and doing stuff in the last month of the year. Do you remember that?
Jimmy: There was, as everyone tries to get their stuff in.
[22:43]
Jimmy: The other thing I found, James, in one organisation I worked in, the first year I got a load of feedback requests. It’s a bit like doing the washing up—if you do it really well, you keep getting asked to do it. I gave lots of really good, specific, high-quality feedback, and the next year I had even more requests. You get a reputation for being important, helpful, and giving good feedback. Don’t do that.
James: Don’t do that.
[23:13]
Jimmy: That way lies madness.
[23:16]
James: All right. So keep your own evidence and avoid the whole recency bias thing.
[23:23]
Jimmy: Reward honesty. If some of your team talk to you about problems and stuff that goes wrong, treat that as a positive. Talk about their openness, their curiosity, their desire to improve, their innovation, rather than “they made a mistake.”
[23:44]
James: Yeah.
[23:45]
Jimmy: I think you have to get your head right. Don’t just become cynical. We’ve both been cynical at certain points in our careers.
James: I’ve never been cynical in my entire career.
Jimmy: You have.
James: This is where we’re going to edit this bit out.
[24:01]
Jimmy: But the point is, if you get really cynical and pissed off about it, the only person it impacts is you and your ability to do your job. It’s not going to change the system, so find ways of thinking as positively as you can about it without it impacting you too much.
[24:15]
People become really entitled to their performance. “I got a very good rating last year. Next year, I’ll turn up and do the same again, and I’ll get another very good rating. That’s my right every year.” You have those people, don’t you?
James: Yeah.
[24:36]
Jimmy: Make sure people have to earn it. If it becomes their entitlement, they stop performing. Then your results go down, and you’re wondering why.
[24:47]
James: Yeah.
[24:49]
Jimmy: Think about showing your appreciation for people outside of performance reviews. A simple “thank you” will work wonders.
James: Oh, yeah, absolutely.
[24:58]
Jimmy: The bar for good performance isn’t always perfection. Quite often, in hindsight, I’ve seen your performance, I know now what perfect would have been, and I apply that hindsight lens to your performance and say, “If you did that, that would’ve been great.” You’re not perfect, and you didn’t know that at the outset.
[25:20]
Ultimately, when you have the discussion with your team members, own the message. If you’re sitting there going, “Well, I thought you were very good, but they all made me give you a good rating,” that is not going to be motivational for that person at all. There’s a bit of short-term pain for long-term gain in some of that.
[25:49]
James: This is good Jimmy and bad James on this one. My honest view is it’s toxic. It’s absolute bollocks. The first thing you’ve got to do is make a decision: Is it, am I going to stick with this job or not? Second thing: if you’ve decided you’re going to stick with it, then you’ve got to suck it up. Find ways to make it work for you. If it’s the full-on 10% rank stack, the whole nine yards, if you’ve got 100 people working for you, you are going to tell 10 people they are useless at the end of the year. You’ve got no choice about it. So I’m all for finding ways to cheat the system. Everybody who leaves—make sure you’ve dropped a word in HR’s ear about how bad they were before they left, just so you can give them the boot after the event. Everybody who gets promoted—well, they’re below standard, aren’t they? Because they’ve just been promoted. There are ways to circumvent the system. Everybody else is cheating. It creates cheating. If you’re going to stay, you might as well go with it.
[27:03]
Jimmy: I think both are legitimate. My advice was more pragmatic versus… Actually, yeah, I agree. If you have to work in that system, then finding ways to circumvent it is perfectly legitimate. We’ve both done it. I remember one of the experiences we had: just the presenting of your people’s performance. Observe what works. Practice how you’re going to deliver it. Even something straightforward like that can make a difference between getting one rating and getting another. It shouldn’t be that way, but the reality is. Just get good at delivering the message to whatever senior group you have to deliver to. That’s not about cheating the system. That’s playing the system.
[28:01]
James: Is that right? Play the system.
[28:02]
Jimmy: Smart.
[28:17]
James: So let’s summarise. We talked about two things: If you can change the system, these are the things we should be doing or thinking about. If you can’t, those are the ways to play the system rather than cheat it.
[28:41]
Jimmy: And you’ve got to be realistic. People don’t go into their end-of-year performance review and think, “This was a great growing experience for me. Wasn’t it wonderful?” Just be realistic. They form an opinion of you, and you want to make sure that opinion is personal to you rather than letting the system influence how people think about you.
[29:07]
James: The other thing that’s really important is there are things which improve performance: frequent conversations, clarity, all of that good stuff. Your HR system probably does not mandate that, but those are the things you should be doing during the year. Frankly, people will realise you’re not a bad boss if you’re doing those things. You just have to work within the system that’s there.
[29:20]
Jimmy: So hopefully we’ve answered both questions: If you had a blank piece of paper, what would you do? and If you haven’t got a blank piece of paper and you have to work within a system, are there ways you can find to bend the system a little bit?
[29:30]
James: Okay. Super. I’m not frothing yet. Are we all right?
Jimmy: You’ve done well, James. You have grown as a person.
James: Yeah. Thank you very much.
[29:32]
Jimmy: Well done.
James: Talking to you. I’ll speak to you next week.
Jimmy: Speak soon.
James: Ta-ra.
[29:34]
Speaker: We cover a whole host of topics on this podcast, from purpose to corporate jargon, but always focused on one thing: getting the job done well. Easier said than done. So if you’ve got unhappy customers or employees, bosses or regulators breathing down your neck, if your backlogs are out of control and your costs are spiralling, and that big IT transformation project that you’ve been promised just keeps failing to deliver, we can help. If you need to improve your performance, your team’s performance, or your organisation’s, get in touch at jimmy@ajobdonewell.com or james@ajobdonewell.com.