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Reinventing Performance Management

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At the best of times, performance management tends to be a sticky business. Whatever the method used, some employees are likely to be disgruntled and some likely to feel they did not receive a fair deal. Contrary to popular understanding, most ratings reveal more about the rater than they do about the ratee. Mount, Scullen, and Goff (2000) refer to this phenomenon as the "idiosyncratic rater effect." This effect accounts for nearly two-thirds of the variance in ratings while actual performance accounts for only one-fifth of the variance. A recent survey of executives found that 58% believed that their current performance management approach drives neither employee engagement nor high performance. It should come as no surprise, therefore, that many organizations have said goodbye to multiple objectives, backward-looking assessments, yearly reviews, and even 360-degree feedback tools.




It is one thing to find that existing systems are no longer useful in a fast-changing world.…