[Excerpt] Over the past decade, organizations have begun to move away from traditional performance management processes (annual reviews, assigned performance ratings, a link to compensation) to remove “performance ratings” based on the perception that traditional PM is not working.
- As of 2015, more than 55 companies have removed performance ratings. Among those are some high-profile companies such as GE, Microsoft, Accenture, etc. (see Appendix A).
- According to a study of 244 companies in 2016, almost all companies in the study use ongoing feedback, 52% of companies have adopted ratingless reviews, and 34% of companies use ratingless reviews and ongoing feedback.
- 80% of participating organizations say that managers make decisions how to allocate rewards without ratings while staying within budget constraints.
The perceived impact of these new performance practices is high: 90% of companies that have redesigned performance management see direct improvements in engagement, 96% say processes are more simple, and 83% say they see the quality of conversations between employees and managers increasing. It is noteworthy that the positive impact may not all be attributed to the removal of performance ratings.