Nutshell: From ‘rank and yank’ to continuous performance development

Today’s performance management revolves around a cycle of informal check-ins, continuous feedback and carefully aligned goals.

Back in the caring, sharing 1980s, General Electric (GE) — headed by management icon Jack Welch — popularised a performance assessment practice named ‘the vitality curve’. Dubbed "rank and yank", this gladiatorial process involved an annual review for employees, who were then ranked against their peers and divided into three categories: the top-performing 20%, the middle 70% — and the bottom 10%, who were unceremoniously fired.

Stack ranking reflected the ‘command-and-control’ era, and the vitality curve was much emulated by other organisations. However, by 2005, GE had dropped the practice and in 2016, spurred by its millennial workforce, the company was managing a shift from formal annual reviews to a system of continuous, real-time feedback from multiple sources.

Supported by its PD@GE (Performance management at GE) app, its current process is designed to foster ongoing dialogue, to encourage agility and align to strategic, departmental and personal objectives.

GE’s change of tack provides a tangible example of the evolution from performance appraisal to performance management which can be witnessed across many organisations. Today’s best practice replaces a single annual review with regular formal and informal check-ins, and feedback that follows the natural cycle of work. It swaps fixed plans for agile goals, and shifts the ‘rear-view mirror’ focus on past accountability to a future-focused emphasis on coaching and development. It makes rating systems defunct or peripheral rather than central.

For example, when overhauling its process in 2018, Accenture vowed to “eliminate the traditional closed-door ratings meeting where we talk about people. Instead, we’ll talk with people in frequent coaching conversations,” pledged Ellyn Shook, its chief leadership & HR officer.

The reinvention of performance management has been fuelled by advance­ments in the fields of psy­chol­o­gy and moti­va­tion and driven by business needs, including an imperative to engage, grow and retain people in a competitive labour market, and to inject flexibility into goals and development. A year is a very long time in today’s volatile and complex marketplace. In addition, there’s the move towards team-based working, which isn’t reflected in assessments that major on individual accountability and forced rankings.

Under the old ‘rules’ of performance management, appraisals could be rare and intimidating events that sparked defensiveness which was not conducive to learning or innovation. Feedback was often tinged with recency bias as managers focused disproportionately on an employee’s performance over the past couple of months, and our tendency towards idiosyncratic rater effect makes the idea that we able to rate people consistently and fairly seem somewhat hollow.

Meanwhile business needs might have shifted dramatically since the last appraisal, leaving old goals defunct and an individual’s development needs unmet. Without signposting of poor performance along the way, negative appraisals came out of the blue for some workers — demotivating them further.

Combative annual appraisals were also largely unpopular with staff and the managers who had to conduct them. Since introducing its new process, GE has seen a significant boost in morale among managers and employees, and higher employee retention.

Support and engagement

By contrast, today’s performance management is more humanised and holistic — designed to ensure people know what’s expected of them and are supported to achieve their goals. The process is as much about what the com­pa­ny can do for the employ­ee as the other way round and involves meaningful, two-way feedback and ongoing conversations.

Because these conversations happen frequently, we are able to monitor (and reward) progress and productivity, address performance issues before they become critical, tweak or refocus goals and tune into team members’ general wellbeing and engagement. We can also identify areas for immediate development.

“A performance review process without regular development conversations is like capping a rotten tooth,” warns Kim Scott, author of the bestselling book Radical Candor.

Microsoft, for example, holds bi-monthly structured performance conversations between managers and direct reports in which they discuss goal progress and skills development so that employees know whether they’re moving in the right direction while they still have time to adjust their course.

At Meta, semi-annual reviews focus on peer-to-peer and employee-to-manager feedback, and are bolstered by continuous real-time feedback in between review cycles via internal software.  

Notably, Adobe tried scrapping all its “labour-intensive” formal appraisals — an approach which failed. It reintroduced performance management, but in the form of a culture of continuous feedback, role-modelled from the top. This move cut voluntary turnover of employees by around a third.

According to Deloitte (which has reimagined its own system), 90% of companies that have redesigned performance management see direct improvements in engagement, 96% say the processes are simpler, and 83% say they see the quality of conversations between employees and managers going up.

Creating a virtuous cycle

To optimise healthy productivity in our own organisations, we must view performance management as a continuous cycle rather than as a static process. Within this sequence of events, goals are set and reviewed, but also constantly evolve and are updated.

When we look at Torrington and Hall’s model (below), we see that performance is never at a standstill; once a set of expectations has been reviewed, more targets are set, based on the employee’s level of performance.

At every stage of the cycle, we must know when and how to check in and offer guidance and support, when to intervene and when to tackle poor performance. We need to be mindful of many of the skills and techniques we’ve already encountered, such as giving effective feedback and coaching, so we establish a process that develops and motivates people to do and be their best rather than setting them up to fail. 

Setting goals and objectives

Personal goals must have the right balance of challenge and achievability, be aligned to wider team and organisational targets and sufficiently flexible to adapt to changing circumstances.

After years of research into goal setting and motivation, Edwin Locke and Gary Latham published their seminal 1990 work, A Theory of Goal Setting & Task Performance. Their Goal Setting Theory argues that effective goals have the following five characteristics:

Clarity

Vague targets such as “generate more social media engagement” or “work as part of the team” fail to boost performance. Clear goals are SMART goals, meaning that they are:

• Specific and precise with a single focus.

• Measurable so that we know when we’ve hit them (and how we are measuring them).

• Achievable and possible to attain, even though they might stretch us.

• Relevant and aligned with team and organisational goals.

• Time-bound, involving a specific deadline.

For example, a SMART version of “generate more social media engagement” might be “increase Twitter followers by 20% over the next quarter”. Rather than “work as part of the team”, we might ask a colleague to “brief colleagues weekly” on the project they are running, sharing all relevant information.

Challenge 

An effective goal is challenging — but not unrealistic; there is a sweet spot between the two. Asking a person to “increase Twitter followers by 400% in the next two weeks” is likely to demotivate rather than inspire them. The aim is to stretch people — not decimate their morale.

Commitment

Where we gain commitment to a goal from an employee (ideally by determining and agreeing targets together), they are far more likely to pursue and meet it. We should discuss the reasons behind particular objectives, linking them specifically to the goals of the individual, team and wider organisation, and consider any reasonable concerns or suggestions. Tying some goals to rewards can help to gain buy-in in certain cases.

Feedback

Feedback on specific goals must be frequent (without micromanagement) and constructive, whether positive or negative. Regular check-ins will help us to monitor progress and update our team member on any changes of strategy or focus. When we set someone a goal and then forget about it until the next formal appraisal, we may find that it has slipped off their ‘to-do’ list or gone off-piste. By then, it may be too late to get things back on course.

Task complexity

Just as vague goals can be demotivating, so can those that are highly complex. Where possible, it’s important to break down multi-layered objectives into sub-targets, ensuring our team member understands them and does not feel overwhelmed. Where people are set several goals of similar importance, we should also ensure they know which to prioritise when.

The downside of goals

While goals may help to motivate people, enhancing focus and productivity, a fixation with goalsetting can be damaging. Researchers from Harvard Business School warn that unintended side effects may include a narrow focus that neglects non-goal areas, a rise in unethical behaviour, distorted risk preferences, corrosion of organisational culture and reduced intrinsic motivation.

If, for instance, we are intent on reaching a prescribed goal, tunnel vision may cause us to overlook issues that come to light along the way. In our commitment to achieving a specific outcome, we might behave in a way that does not align with our team or organisational culture. If we are focused on extrinsic rewards this may undermine our inner drive to meet our objective.

“Rather than dispensing goal setting as a benign, over-the-counter treatment for motivation, managers and scholars need to conceptualize goal setting as a prescription-strength medication that requires careful dosing, consideration of harmful side effects, and close supervision,” the authors advise.

In Atomic Habits, author James Clear advocates focusing on systems rather than outcomes in order to improve performance for the long term. By ‘system’, he means something we do on a regular basis that helps us to reach a desired objective. For example, a coach’s goal might be to win a football championship; their system is the way they recruit players, manage their assistant coaches, and conduct practice.

Clear points out that while goals are good for setting a direction, systems are best for making progress: if we completely ignored our goal and focused only on our system, we would still succeed, he argues.

Goals can be distracting because they create an ‘either-or’ conflict — either we achieve our goal and are successful or we fail and are a disappointment. They are also at odds with long-term progress: when we solve problems at the results level, we only solve them temporarily. If, for instance, our goal is to put in our monthly expenses by the deadline — and we manage to do it (albeit in a panic at the last moment) — we have reached our goal.

However, we have not addressed the underlying problem, which is that leave all our expense claims to the last minute rather than recording and submitting them as we go along.

In order to improve for good, we therefore need to solve problems at the systems level, adopting a systems-first mentality, urges Clear: “Fix the inputs and the outputs will fix themselves.”

Supporting performance with regular check-ins

To help ‘fix the inputs’, we must support people every step of the way. There may only be two or three formal performance management meetings throughout the year, but there should be many more informal catch-ups, during which we can adjust targets or priorities, provide staff with timely training, and generally check that people are doing what we need them to be doing and have the skills and resources to do so.

This is not about micromanagement, but about creating a channel of communication that maintains productive relationships. Through frequent two-way conversations, our aim is to find out what’s happened since the last check-in, to solve problems before they escalate, and to offer timely guidance and feedback on performance and projects. Knowing we will request regular updates motivates staff to keep on top of their goals.

However, to elicit honest progress reports and constructive exchanges, check-ins should be positive encounters that take place in a spirit of openness and psychological safety, and in a space where both parties feel comfortable. The employee should lead the meeting, though (open question) prompts may include:

• How are you getting on with X project?
  
  
• Are there any problems or blockers — and what could I do to help?
  
  
• What are you finding particularly stressful or challenging?
  
  
• Could you summarise what needs to be achieved by our next check-in (and whether this is feasible)?
  
  
• What further support or development would you like?

For Kim Scott, these discussions are opportunities for coaching and should be largely impromptu and driven by intrinsic motivations: the employee’s intrinsic desire to perform well and their manager’s altruistic wish to support them to do so — for their own good and that of the team. Such development conversations are distinct from the formal review meetings with which they are often conflated.

Giving guidance that’s kind, clear, specific and sincere is Scott’s cornerstone of performance development, involving feedback that’s ‘radically candid’ and an approach that’s ‘HIP’:

• Humble: We are curious rather than superior — and open to the possibility that we might be wrong.

• Helpful: We may not have all the answers, but we can at least be as clear and pleasant as possible.

• Immediate: Giving feedback immediately provides context and means the details are still fresh in our mind. 

• In person: When talking in person, we can make adjustments based on the person’s body language and emotions.

• Private criticism/Public praise: Public criticism tends to trigger a defensive reaction and makes it much harder for a person to learn from it. Public praise tends to make the recipient feel great, and encourages others to emulate whatever they did.

• Not about Personality: We should make our feedback about the work the person has done, rather than about the individual. 
  

Conducting a performance review

Adopting an holistic performance development style does not eliminate the need for more formal performance management. This takes place in the scheduled review meetings we hold quarterly or bi-annually, during which we follow a more structured agenda.

Reviews require careful planning and facilitating and may involve both parties submitting written feedback in advance — though we should be fairly familiar with an employee’s progress and engagement due to our ongoing check-ins. Where a staff member has updated their personal development plan (PDP) they should also share this before the meeting.

On the day, our meeting may include the following steps:

We explain the purpose of the meeting

To get the best out of a review meeting, we should begin by putting our employee at ease, explaining the format and outlining the purpose and benefits of the process. Essentially, this is ringfenced time set aside to discuss the individual’s performance, development, strengths and aspirations, and how to work together more effectively.

We review the employee’s overall performance and invite self-appraisal

We comment on the employee’s overall performance (and specific aspects of it) to give a general overview of their contribution to the team and wider organisation. We then invite the individual to reflect on their own performance since their last formal review meeting, asking open questions to prompt disclosures. For example:

• What have you been focusing on over the past X months?

• What have been your key successes and main challenges?

• How have you overcome these challenges?

• What tasks or projects have you found most enjoyable or rewarding?

• What has been most frustrating or disappointing?

• What barriers to performance do you feel you are facing?

We jointly review the employee’s personal objectives

This involves addressing the objectives agreed in the employee’s most recent performance review one by one, highlighting any that have changed or been superseded, and balancing discussion of successes and frustrations. The employee’s self-appraisal should come first, followed by our feedback (and any relevant comments provided by third parties via 360-degree feedback). Under the principles of ‘Radical Candor’, our approach is rooted in ‘caring personally about our colleague while challenging them directly’. 

We jointly review the employee's PDP

This is our chance to discuss the training and development activities in which the employee has participated since the last review, and how it has impacted on their performance.

Prompts may include:

• How useful was the training you received?

• How did you put it to use in your role?

• How appropriate was the training method for you?

• Do you need any further support in this area?

We will also want to map out future upskilling or development activities that may support our employee in their current role and to progress within the organisation.

We request upward feedback

We invite our employee to give us feedback about how we manage them, and any changes that could be made to organisational systems and processes that would help them in their role. Elements to cover include how well we communicate with the team, appropriate levels of supervision and ways in which they can work more effectively together.

We jointly agree next steps and conclude the meeting

Future objectives may be agreed at this stage and we should summarise the key themes from the meeting, confirming the areas for improvement and development. To conclude, we should thank the individual for their contribution to the team and wider organisation and answer any additional questions they may have. Notes should be written up shortly after the review and shared with the employee to check that it reflect what was discussed.

Reviewing an underperforming employee

While these meetings should go smoothly with an employee who is performing well, it can be more challenging to review someone for whom there is substantial room for improvement.

There are two main factors in underperformance — capability and motivation — and it’s important to diagnose which is at play. The underlying factors will need addressing throughout the performance management cycle (not just at the formal review) in order for us to help the employee to contribute and reach their full potential.

For those who may lack the capability to fulfil their role, it’s important to ascertain that they have the necessary equipment and resources — and to find out whether any reasonable adjustments to the workplace might help.

For example, they may struggle with background noise and require a desk in a quieter part of the office; they might lack confidence, which could be  boosted by support from a dedicated mentor. Check their knowledge and skills gaps and provide relevant training to upskill or reskill them.

If a person continues to struggle, we may look at delegating aspects of their role, redesigning it to better fit their capabilities, or reassigning them to a more suitable position within the organisation, if this is an option.

Where an underperforming employee clearly has the knowledge and skills to do their job, a lack of motivation might be inhibiting their performance — or they may not be sure about what’s expected of them. We can address this by setting clear performance objectives aligned, where possible, with the individual’s personal goals and intrinsic motivations, and by explaining precisely what they need to do to improve. If their performance doesn’t get any better, it may be time to question their ongoing employment with the organisation.

The key thing is to manage underperformance before the situation becomes critical, which is where our ongoing check-ins and feedback come into their own. This may include 360-degree feedback (involving upward feedback from direct reports and peer feedback from close colleagues) to gain a rounded picture, and to increase the recipient’s self-awareness and accountability. Through dedicated apps, we are now able to gather real-time commentary — and thus to give timely praise and (constructive) criticism. 

It’s a tool, however, that should be used with care; 360-degree feedback can also be used by some to ‘play politics’ or air toxic negativity. For example, in 2015, Amazon’s ‘Anytime Feedback Tool’ (which allowed workers to submit anonymous peer evaluations using the company’s internal directory) became known for facilitating “a river of intrigue and scheming”. In the New York Times, users described “making quiet pacts with colleagues to bury the same person at once, or to praise one another lavishly”.

The importance of culture

This is clearly at odds with establishing a high-performance environment — which must be founded on a culture of collaboration and trust, framed around development and designed as a cycle of continuous feedback and support. It requires buy-in from senior managers, role-modelling from the top-down, and training for those conducting the formal aspects of the review process.

Performance management is never easy — today’s particular challenges include a dispersed, global workforce, and up to five generations co-existing within our organisations. But with an agile and future-focused process, we can play our part in developing skilled, resilient and adaptable workers fit for the challenges of the 21st century.

Test your understanding

• List three of the ‘new rules’ of performance management and the equivalent ‘old rules’ they replace.

• Describe the key stages of a formal performance review meeting.

What does it mean for you? 

• Organise a performance check-in with a team member and elicit a progress report, offering support and guidance.

• Consider how you might replace some goals with ‘systems’ that promote improvements.