gerry-ledfordHow can you leverage crowdsourcing to get a better picture of an employee’s performance? What role can social recognition play in humanizing performance management?

Gerry Ledford, senior research scientist at University of Southern California’s Center for Effective Organizations, is keenly interested in these topics and is a nationally recognized authority on aligning human capital practice to business strategy. Gerry is currently leading a study of 244 companies that have adopted cutting edge performance management practices.

We had the opportunity to catch up with Gerry about the results of the study. We wondered which practices are most effective in assessing performance and motivating people? And who typically leads the change in the organization?

Read the full interview below.

 

What is cutting edge performance management? And why is it important we study it?

We define cutting-edge performance management as three practices that are currently the focus of attention by companies that are making changes to their process. These are:

  • ratingless appraisal
  • ongoing feedback
  • crowdsourced feedback

Ratingless appraisal involves providing performance feedback with no rating number, letter, or score. Ongoing feedback involves performance conversations between supervisor and subordinate at least four times a year. Crowdsourced feedback involves the use of corporate social technologies to empower employees to recognize any employee or manager 24-7 over any computing or mobile device.

Companies may adopt one, two, or all three practices. These practices have been covered by almost every major business publication, sometimes multiple times, yet there is not enough research to go on in knowing what works and why. We are conducting a series of studies that are among the first on the topic.

 

What most surprised you about this research?

There have been a number of surprises. First, ratingless appraisal has caught the imagination of the business press, but despite garnering the lion’s share of publicity, it is not the most common practice. In our multi company study of 244 organizations that are using one or more practices, almost every one (all but 8) were using ongoing feedback. Only about half were using ratingless appraisal, while more than one-fourth were using crowdsourced feedback.

Ongoing feedback is the dominant practice and the driver of much that is happening in this area. Given this finding, it makes no sense to talk about ratingless appraisal as a stand-alone practice; it is almost always adopted with ongoing feedback.

Second, crowdsourced feedback was much more important for success than we expected. For a wide range of outcomes, the most effective combination of practices was the use of all three cutting-edge practices or the use of ongoing feedback plus crowdsourced feedback. The complementarity of the three practices is interesting. Each practice has strengths and weaknesses and apparently these practices together overcome some of the problems of each.

 

Who in the organization is typically leading the change in performance management? And why do you think that is?

Quite clearly, the CHRO is most likely to be leading the charge, supported by the CEO and other executives. CHROs see this topic as one in which the HR function can play a role in a highly visible, strategic area that has been a major source of frustration for managers and employees.

 

What is the opposite of cutting edge performance management?

The opposite of cutting-edge performance management is traditional practice, which became commonplace during the 1950s in the U.S. It is an annual process, focusing on the supervisor-subordinate relationship with little input from others, using a very complex rating process (often with multiple scales and subscales that lead to a final summary score, little or no peer feedback, etc.).

 

Based on your research, what are the most effective ways to measure performance and motivate people?

I think it is clear that very complex rating schemes of years gone by are pointless in an era of 3% average increases. It is impossible to provide meaningful differentiation in consequences (salary, bonus, promotion, etc.) for differences in ratings on a scale of five, seven, ten, or 100 points (there are plenty of the latter, for example), much less older practices such as stacked ranking.

Very simple scales, often with just three levels (superior performers, good performers, and failing performers, whatever the labels) is usually better – you can provide clearly superior rewards for superior performance in that case. There is no point in going to the aggravation of detailed measurement if it does not translate into meaningful differences in rewards.

More work is needed on ratingless appraisal to understand employee reactions to it, but so far it appears to be well received. Employees don’t like getting ratings and managers don’t like delivering them. Companies that go ratingless still differentiate rewards based on performance, the process is just a little less mechanical without a rating.

 

Why do you think crowdsourced feedback is now coming to the forefront?

There is no question in my mind that technology has been the major enabler of expanded crowdsourced feedback. Social platforms, including recognition platforms that use social technologies such as that of your company, Globoforce, allow any employee to give positive performance feedback to any other employee, 24/7, over any computing or mobile device. This was not practical in the paper era. These platforms have a huge advantage in that they permit natural language feedback and allow immediate compilation and dissemination of feedback. There is no need to mimic the manager’s rating process using an appraisal form that is usually not relevant for most peer feedback – which is what 360 feedback used to require.

 

As more companies adopt ratingless reviews, how do they manage fairly paying for performance?

This is a major challenge, and we are not enthusiastic about many of the options that are being used. Most of the companies in our sample of 244 – fully 80% – leave the decision up to the immediate supervisor, within budget constraints. There is no shortage of history suggesting that relying on the manager alone invites decisions that make life easier for the manager but create problems for the organization.

Large numbers of companies that use ratingless also use practices that should have disappeared long ago, including forced ranking (24% of our sample of ratingless users) and stacked ranking (20%). Some 22% use “shadow” ratings – in other words, they still use a rating scale, but just don’t tell employees what rating they have received. That is certainly not a transparent process.

The solution we think works best for most companies is calibration, in which pools of 50 or more employees are considered in identifying those needing extra reward for performance or needing to be on a performance improvement plan. That is used by 42% of ratingless users (about the same level of use for companies in general). Calibration helps overcome the limited perspective and biases of individual managers. However, in many cases it is an advisory process for the manager, not the place where the final decisions are made about the distribution of rewards.

 

What role do you see social recognition playing in the new era of performance management?

Crowdsourced feedback is important to the success of cutting-edge practices; it complements ongoing feedback and/or ratingless appraisal. It appears to be especially important for organizations that use team-based designs, which are becoming increasingly prominent.

Organizations that are built around teams need to reinforce the importance of the team in assessing performance and delivering rewards, and crowdsourced feedback is one way to do that. We do not see any bright lines between social recognition and crowdsourced feedback. If social recognition is used to recognize performance and it is used to assess and reward performance, it is crowdsourced feedback. Globoforce was the first recognition company to see the connection between recognition and performance management, and that was an important insight.

 

Can you share any practical next steps for leaders who are considering re-vamping their process?

There is a growing body of research to help inform the adoption and design of cutting-edge practices. The current issue of the WorldatWork Journal, for which I was Guest Editor, includes a report of our study of 244 companies and truly excellent case studies from Microsoft, Adobe, Sears Holdings, and Cardinal Health. Note: it is available free for electronic download for a limited time from WorldatWork; see https://www.worldatwork.org/email/perf-mgt/062816-j4833-cfeo-pm.html?nonav=y . In addition, we have growing set of research papers on cutting-edge performance management that are available for download at:  https://ceo.usc.edu/articles-performance-management/.